In the complex world of employment benefits and taxes, the Work-Related Expenses Scheme (WKR) plays a central role. Understanding it is not only crucial for financial implications within businesses, but also has direct consequences for employees, ranging from traditional Christmas hampers to company outings that are often taken for granted. Jorina van Sintruije is here to help you understand this complex tax scheme.
Jorina shares: ‘the WKR essentially regulates the way employers pay taxes on the extras they provide to their staff. It’s not just about financial implications for companies; it directly impacts employees. Certain payments, claims, and benefits fall outside of taxable income, making them ‘tax-free.”
Employers have five options when reimbursing employees:
- Intermediary costs: Employers can reimburse costs employees advance for items directly related to business operations, like purchasing business supplies. However, there are clear limits and rules, including ‘specific exemptions’ such as reimbursements for travel expenses and courses.
- Within the free space: If employers want to show appreciation through extras like gift vouchers, gym memberships, or Christmas hampers, the ‘free space’ comes into play. This is the amount employers can spend tax-free on such extras for employees. This free space varies annually; in 2023, it’s 3.0% of taxable wages up to €400,000. From 2024, the free space in WKR increases from 1.7% to 1.92% up to a salary of €400,000.
- Outside the free space: For salaries above €400,000, a lower percentage (1.18%) applies. It becomes complicated if expenditures exceed this amount, as 80% tax must be paid on the excess part. For the part that falls under the 80% levy, no national insurance or employee insurance contributions are due. Also, the premium for the Health Insurance Act does not apply.
- Specific exemptions: These are considered taxable income but can be provided tax-free without affecting the free space. Examples include:
- Public transportation subscriptions
- Travel expenses up to €0.21 per kilometer (Note: This increases to €0.23 per kilometer from January 2024.)
- Work-related moving costs
- Meals during overtime
- Applying for a Certificate of Good Conduct (VOG)
- Staff gatherings at the office are exempt, but if they occur elsewhere, they fall under WKR.
- Other items falling under this exemption are tools, tablets, and smartphones. The necessity criterion applies. These items can be provided tax-free if they are necessary for work.
5. Zero valuation: Certain provisions in the workplace have a value of €0.00. Employers can provide these provisions to employees without tax consequences. Examples include:
- Workspace furnishings: All equipment and supplies specific to the workspace and not commonly used elsewhere. This includes desks, desktop computers, copiers, pens, and paper.
- Equipment: This includes devices such as laptops and tablets that can be used both on and off the workplace, as long as they are at least 90% business-related.
- Consumables: This includes loose consumables that do not form a full meal, such as coffee, fruit, cookies, and soup.
- Company clothing: Uniforms and corporate clothing with a company logo, primarily worn during working hours, also fall under this regulation.
- Smartphones: Smartphones used at least 10% for business purposes and deployed in the workplace.
- Health and safety facilities: These are facilities mandatory according to the Working Conditions Act and (partially) used in the workplace.
- Company fitness: If the fitness facility is located on the workplace itself, this also falls under zero valuation. However, a subscription to an external gym falls under the free space.
- Housing: If the employee does not officially reside at the workplace, housing and lodging at the workplace are also considered zero valuation.
Usability Test of the Work-Related Expenses Scheme
To prevent costs for specific products or services from being excessive, there is the ‘usability test’ under the Work-Related Expenses Scheme (WKR). This test ensures that the expenditure for a service or product does not deviate more than 30% from the customary costs within the industry. Any amount that exceeds this limit must be treated as regular income. The test only applies to the free space and the final levy.
Within a group of multiple employers, applying the group regulation under the Work-Related Expenses Scheme (WKR) can be interesting. In this case, all companies within the group can combine their individual free spaces into a collective free space. If an employer within the group has a shortage of free space, this deficit can be compensated with the surplus of free space from another affiliated employer. However, the use of the group regulation is subject to specific conditions and requires that the parent company owns at least 95% of the shares of the subsidiary companies for a full year.
Do you have questions about the Work-Related Expenses Scheme (WKR) or need clarity on how this scheme specifically applies to your situation? Don’t hesitate to contact us. We’re here to answer all your questions and provide the necessary information. We’re here to help you understand how the WKR works for your organization.