As of January 1, 2015 all Dutch employers fall under the obligatory work related costs scheme. This scheme provides to employees tax free expense reimbursements and allowances if the total yearly payments remains under 1.2% of the payroll costs of the company.
Not only is the 1.2 percentage a rather low amount, the impression you could get is that this is a generous gesture from the Dutch tax office. It is not.
Your desk, toilet use, chair, workroom is regarded a cost, but these are exempted. I believe that none of the employees in the Netherlands have ever experienced these costs as a reimbursement to them. But they are exempted, as are a limited number of other costs.
Work realted costs scheme – tax free reimbursements
What does apply? Christmas gifts, any gifts (Easter, Sinterklaas) for instance. This is part of the salary and you can decide to issue this under the 1.2%, so no wage tax due. Should presenting the gifts to employees (and possible children of the employees) be done in the company canteen, then the party is not a salary, as this is part of the regular company activities. If the party is given at another place (party centre, restaurant), then these costs are regarded a salary.
Will you then be charging the employees for the fact that you invited them for a party and have them pay wage tax for the gifts presented. Yes and no. Yes in the end it is wage tax. But no, the tax is calculated outside the salary specification of the employees, so the employees will not learn about the tax on their presents. The tax is 80%. You might think this is a lot, and it is a lot, but if done in the salary specification, the net value is grossed up to a percentage of around 108% wage tax.
Does this make the Netherlands expensive for employers? No, I do not think so. Other EU countries have their own rules that make employees costly. In the case of the work related costs the employer needs to understand the rules, be clever, maybe take some tax advise and work with the rules. Then this is doable.