The Dutch work-related costs scheme (WKR) 

The Dutch “work-related costs scheme” (WKR) is obligatory for all employers in the Netherlands. Adhering to this scheme correctly is crucial to meet legal obligations and prevent tax penalties. However, the WKR is not solely a mandatory regulation; employing it correctly can incentivize employees, yield tax advantages, and simultaneously enhance operational efficiency. With guidance from Crowe Peak, your organization can optimize the benefits of the WKR. 

What is the Dutch work-related costs scheme (WKR)? 

The WKR encompasses tax regulations enabling employers to provide untaxed allowances and in-kind benefits to their employees. One of the most recognizable components is the “free space,” (vrije ruimte) an annual allocation determined for each organization as a percentage of the total taxable wage bill. If untaxed allowances surpass the allocated free space, employers incur an 80% final tax liability on the excess. Strategically planning and allocating the use of the free space is therefore crucial for every employer, not only to avoid retrospective taxes but also to create a compensation package that aligns with both employee needs and organizational goals. 

The Dutch work-related costs scheme (WKR) can benefit your organization(‘s employees) in several ways:  

• Tax advantages: Proper utilization of the WKR can yield tax benefits and lead to tax savings. 
• Employee motivation: Employers can use the WKR to reward and motivate employees with additional benefits, enhancing staff engagement and satisfaction. 
• Attracting talent: Offering attractive benefits can serve as a pivotal factor in attracting and retaining employees. 
• Streamlined administration: The WKR simplifies administrative tasks, making it easier to manage allowances and in-kind benefits for employees. However, setting this up correctly in advance is essential. 
• Compliance: Applying the WKR accurately ensures your organization complies with legal requirements, minimizing legal risks. 

What components constitute the WKR? 

1. “Free space” (vrije ruimte): This represents the amount an employer can allocate to untaxed compensations and allowances for employees. Up to a wage bill of €400,000, the free space is 2% of the wage bill; for amounts exceeding €400,000, an additional 1.18% free space accumulates over the excess. Costs falling within this free space are not classified as wages and therefore remain untaxed. 
2. Targeted exemptions (gerichte vrijstellingen): Certain allowances and in-kind benefits fall under “targeted exemptions” and are consistently untaxed, regardless of the available free space. Examples include travel expenses, business meals, and workplace health and safety provisions. 
3. Nil valuations (nihilwaarderingen): Specific in-kind benefits are valued at zero and thus remain effectively untaxed. This is applicable, for instance, to business telephones and provided computers. 
4. Reimbursable intermediate costs (intermediaire kosten): Expenses initially covered by employees and later reimbursed by the employer typically fall outside the scope of the WKR and remain untaxed. 
5. Miscellaneous allowances and in-kind benefits (overige vergoedingen en verstrekkingen): Allowances and in-kind benefits not covered by targeted exemptions or nil valuations are accounted for within the WKR’s free space. 
6. Final levy (eindheffing): Should the total costs for allowances and in-kind benefits surpass the free space limit, the excess costs are considered as wages and are taxed at a final rate of 80%. 

Crowe Peak and WKR

Crowe Peak is poised to address your inquiries and offer valuable guidance in the field of WKR. Recognizing the distinct nature of each organization, we are delighted to provide support in the following areas: 

• Establishing an efficient WKR policy tailored to your organization. 

• Providing advice on allowances and in-kind benefits applicable within the WKR. 
• Assisting in fulfilling administrative obligations and reporting requirements. 
• Aiding in achieving tax optimization within the framework of the WKR. 

Kindly use the contact form to inform us of your needs. We aim to contact you within one business day.