02 January 2015 Add expertise tag Add service tag Add country tag

Per 1 January 2011 the Work-Related Expense Scheme, or in Dutch the “Werkkostenregeling” or “WKR” was introduced as part of the Dutch wage tax legislation.

The WKR provides a new mechanism to determine the taxable element of cost reimbursements, fringe benefits and other costs related to personnel. Instead of an itemized division of taxable and non-taxable elements per employee, the WKR provides for a maximum amount of tax fee aggregate personnel costs stated as a fixed percentage of total salary sum.      

Until 31 December 2014 Dutch withholding agents had the option to apply the old rules of free reimbursements and provisions or the new WKR rules. As of 1 January 2015 this choice does no longer exist and all withholding agents will need to apply the WKR rules.

The impact of the WKR for employers can be severe, as the employer will be taxed against a tax rate of 80% over the amount of qualifying personnel costs in excess of the maximum amount. Also, the employer has the obligation to administer the proper execution of the WKR, which can cause a significant administrative burden.

The introduction of the WKR can also have an impact for employees, as employers may decide to change primary or secondary employment conditions, and/or be forced to withhold payroll taxes of previously tax exempt reimbursements and benefits.

We can advise you on the impact which the WKR will have on your company and assist you with the implementation of the WKR rules. 

As a professional payroll provider, we can also assist with the potential need to restructure the (payroll) administration and monitor the available discretionary scope for tax compliance (and if possible tax optimizing) purposes.

Below we will elaborate on the key elements of this new regime.

Starting point: everything is considered wage

Under the WKR, the term “wage” is extended. In principle, all that is reimbursed or provided under the employment is qualified as wage, even if the reimbursement or provision is not regarded as a remuneration as part of the salary package, and regardless whether or not it will give an individual employee any benefit.

However, the extension of the concept of “wage” is not applicable to everything received by the employee from the withholding agent. There has to be a link between the wage and the employment. For instance the provision of a fruit basket when an employee is ill will not qualify as wage since this is not provided on the basis of the relationship between the withholding agent and the employee, but is provided out of compassion or sympathy.

In view of the basic principle, there are a few exceptions defined under the WKR which are described below.


The law provides for a number of exceptions i.e. amounts which do not have to be qualified as wage for application of the WKR. This concerns the following items:

Intermediate costs: reimbursements for so-called “intermediate costs” will not qualify as wage for Dutch wage tax purposes. Intermediate costs are expenditures made by an employee for goods or services on behalf of his/her employer.

Exempt wage: certain provisions or reimbursements by an employer are explicitly excluded from application of the WKR. Examples are exempt entitlements such as for a pension. These entitlements will stay tax free under the WKR and the pay out of these entitlements will be taxable.

Specific exemptions: a number of specific reimbursements and provisions are also tax free under the WKR. These are the so-called specific exemptions. These specific exemptions are linked to costs which have a dominating business nature. Amongst these specific exemptions are travel costs (up to a maximum of € 0.19 tax free), temporary costs of stay for business purposes, extra-territorial costs (under which the 30%-ruling is defined) and products from own company.

For tools, computers, mobile communication equipment and other similar hardware that are necessary for business purposes also a specific exemption is applicable. In principle, the withholding agent will need to determine whether these kind of provisions are necessary (“cannot do without”?) for the employee to properly perform his duties. This can be different in case the employee is also a director or supervisory board member of the company.

Zero valuations: a number of provisions that are used at the work place will be valued to zero. This category of provisions will be part of the discretionary scope (see below), but is allowed to be valued at zero. As a result, these provisions can still be provided tax free to the employees without using the tax free possibility of the discretionary scope.

Discretionary scope of 1.2%

The amount of reimbursements and provisions after application of the above mentioned exceptions will qualify as taxable wages to the extent this amount exceeds 1.2% of the total taxable wage of all employees (discretionary scope).

To make use of the discretionary scope the employee does not need to make advance payments himself and no receipts or other proof of payment need to be kept which is in line with the nature of the discretionary scope.

Conventionality test

The so-called “conventionality test” is introduced as an anti-abuse rule.

In case the Dutch tax authorities can state and evidence that a reimbursement or provision is to an significant extent (30% or more) higher than what is in similar cases conventional, then the WKR rules cannot be applied to this reimbursement or provision and it must be taxed as regular wage. Please note that the conventionality test is only applicable to reimbursements and provisions of which the annual amount per employee exceeds € 2,400.

Group company regulation

With the introduction of the so-called group company regulation as of 1 January 2015, it is made possible to take into account the combined group company reimbursements and provisions.

As a result, it is not required for a qualifying group of companies to differentiate between the reimbursements and provisions to employees for each separate group company within the group.

For applying this group treatment, a company of which the shares for 95% or more are held by the mother company will qualify as group company.

The 80% final levy

In case the discretionary scope will be exceeded, the excess part of the reimbursements and provisions will qualify as taxable wage on which the 80% final levy needs to be applied.

The application of the final levy is mandatory, unless the employer has an upfront agreement with the employees that specific reimbursements and provisions will be taxable as regular wage. If this option is chosen, the taxable benefit of the reimbursements and provisions should then be taken into account in the payroll with application of the individual applicable tax rate which will need to be reported on the monthly pay slip of the employee.

Existing agreements with the Dutch tax authorities

In case separate agreements with the Dutch tax authorities exist with respect to reimbursements and provisions, these will be automatically revoked as of 1 January 2015. Only agreements with respect to reimbursements and provisions that will qualify as specific exemptions under the WKR can be continued.

Way forward – action required/recommendable

With the introduction of the WKR actions need to be taken by the withholding agent.

The following actions are legally required:

  • Making an inventory of all reimbursements and provisions for employees within the company (remember the basic principle: everything is considered wage);
  • Categorize the different kinds of reimbursements and provisions: intermediate costs, exempt wage, specific exemptions, zero valuation etc.;
  • Determination of total taxable wage of the company. This will at least need to be done at the end of each tax year to determine the amount available as discretionary scope and to determine which amount exceeding the discretionary scope will be taxable against the 80% final levy. It is recommended to monitor this via the (payroll) administration periodically;
  • Restructure the financial administration and payroll administration in line with the WKR requirements and/or changes made to the reimbursements and provisions given to employees.

The following actions are recommended:

  • Based on categorizing all reimbursements and provisions for employees within the company, an analysis can be made of the impact of the WKR with potentially tax optimizing the position of the company;
  • Investigate whether based on the impact of the WKR, the employee’s reimbursements and provisions (as laid down in the employees’ handbook and/or individual employment agreements) need to and can be amended;
  • When hiring new employees, take into consideration the impact of the WKR when putting together the remuneration package;
  • Inform the employees on the impact of the WKR.