🎄 December is approaching... and with it, the annual WKR puzzle

[DUTCH VERSION HERE]

It’s almost time for Christmas gifts, staff parties, and drinks. Fun, but processing all this in the financial and payroll administration often leads to a financial hangover. The work-related costs scheme (WKR) determines which items you can offer your employees tax-free. Many employers miss out on this benefit or run the risk of a hefty final levy. What a shame!

The WKR in a nutshell

The work-related costs scheme (WKR) is a useful tool for providing allowances and benefits to employees in a tax-friendly way. Think of Christmas gifts, staff outings and parties, or a working from home allowance. Many employers find the scheme complex. In this article, we explain:

• How the WKR works

• What the discretionary scope is

• Which costs fall within this scope

• What happens if you exceed this scope

What is the work-related costs scheme?

The WKR determines which allowances, benefits in kind, and provisions you, as an employer, can offer your employees without them having to pay tax on these. Certain items are always tax-free:

1. Specific exemptions, such as travel allowances up to € 0.23 per kilometer
2. Zero valuations, such as coffee or tea in the workplace
3. Intermediary costs: costs advanced by the employee for the business
4. Necessity criterion: items required for the proper performance of the employment, such as a carpenter’s toolbox
5. Gifts unrelated to the employment relationship with a value of up to € 25 in VAT in a form other than money. Think of a fruit basket for a sick employee.

Does something not fall into one of these categories? Then it is taxable wage and should be included on the pay slip, resulting in higher wage tax. Within the WKR, you as an employer can choose to designate some taxable items as final levy wages. This means that you, as the employer, bear the costs and employees do not pay tax on them. These costs are tax-free for you as an employer up to a threshold amount. This is called the discretionary scope.

How does the discretionary scope work?

The discretionary scope is the maximum amount that you, as an employer, can spend tax-free on allowances, benefits in kind, and provisions for your employees. You do this by allocating taxable elements such as final levy wages to the discretionary scope. The discretionary scope is accrued in a calendar year by means of an accrual percentage on the taxable wage bill of the personnel. The higher your salary costs, the higher the discretionary scope. Unspent discretionary scope expires at the end of the calendar year, so it is not possible to save it up over several years.

For 2025, an accrual of 2.00% applies to the first € 400,000 of the total taxable wage sum and 1.18% to the excess. This accrual will remain the same in 2026.

Please note that the designation of final levy wages cannot be retroactive. At the time of giving or paying, you must make a choice for taxable items (pay gross, gross up, add/pass on or charge to the discretionary scope). This choice may differ per employee, so even for the same elements, a different tax treatment may be chosen for each employee. Keeping a close eye on your expenses, the discretionary scope, and planning accordingly prevents financial setbacks.

What if you exceed the discretionary scope?

Everything you give or pay to your employees from the discretionary scope in a calendar year counts towards the total expenses in the discretionary scope. Do the expenses exceed the maximum discretionary scope? Then, as an employer, you pay 80% final levy (tax) on the excess. That may seem like a lot, but sometimes it can still be more advantageous than grossing up the employee’s salary.

What falls within the discretionary scope?

Examples of items that always fall within the discretionary scope:

• Christmas gifts to employees
• Staff parties if these take place outside the workplace
• External dinners, staff outings, or drinks with a recreational character
• Flowers or gifts for service anniversaries
• Gift vouchers or gift cards
• Lunches at the office if these are not charged to employees

The WKR pitfalls in December

The WKR is particularly relevant around the holidays. A few examples:

• Christmas gifts or gift cards for employees fall within the discretionary scope
• External Christmas parties or drinks fall entirely within the discretionary scope
• Christmas parties at the office fall outside the discretionary scope
• Christmas drinks at the office generally fall entirely outside the discretionary scope because soft drinks and snacks do not affect the discretionary scope
• Christmas dinners and meals always fall within the discretionary scope

Tailoring the WKR to your needs

You may also have incorrectly included items in the discretionary scope that are not taxable. Did you know, for example, that:

1. The costs of external events of a business nature are not included in the discretionary scope for that business part?
2. As a director and major shareholder, you can pay yourself up to € 2,400 of the accumulated discretionary scope?
3. For company Christmas dinners, € 3.95 per employee is charged to the discretionary scope, and for external Christmas dinners, the full invoice value including VAT?
4. Provisions to third parties fall outside the discretionary scope? Think, for example, of Christmas gifts to your freelancers or the costs of partners participating in Christmas drinks.

Thinking ahead and knowing the rules prevents unexpected or even unjustified (high) final levies. With up-to-date WKR administration, you can avoid surprises.

Why guidance is important

The rules of the WKR seem clear, but in practice we see that many employers apply the rules incorrectly. Correctly identifying costs, optimizing your discretionary scope, and avoiding the 80% final levy requires knowledge and planning.

At RS Finance, we help employers, HR managers, and finance managers with:

• Annual WKR checks, scans, and monitoring;
• Advice on untaxed items that can remain outside the discretionary scope;
• Setting up clear WKR administration;
• Academies in Dutch and English to make the content and implementation understandable;
• Strategic choices regarding allowances and personnel costs.

RS Finance solves the WKR puzzle for you

The work-related expenses scheme offers employers a lot of fiscal leeway, provided you know how to make the most of it. By using the discretionary scope wisely, you can reward your employees and save on taxes as an employer.

Would you like to know whether your organization is making good use of the discretionary scope? Contact RS Finance for a no-obligation WKR scan or tailored advice.