As from 2015 all employers in the Netherlands are subject to the Werkkostenregeling (WKR or Labour Cost Ruling). The introduction of the WKR forces a dramatic change in the way you deal with your employee benefits and allowances. The new scheme has advantages and disadvantages for you. In both cases, you need to prepare well.
The scheme means that you, as an employer, may provide your staff with allowances or benefits in kind tax free up to 1.2% of your total taxable payroll amount. In other words, you have a ‘fixed allocation for tax free allowances’ to compensate your employees. If your allowances and benefits exceed the 1.2% budget, the excess is considered a salary and taxed at source at a rate of 80%, which you as an employer must pay. A number of expenses remain outside this budget because they are either zero-rated or exempt from tax.
Even in the labour costs scheme, some items will remain exceptions to the definition of wage.
– Specific labour cost ruling exemptions: e.g.
o Actual costs public transport;
o Travel expenses at € 0.19 km;
o Congresses, seminars, study costs, outplacement, business literature,
registration in a professional association.
– Zero valuations e.g.
o Facilities in the work space;
o Arbo facilities (working conditions);
o Refreshments at the work space that are not part of a meal;
o Clothing provided (under certain conditions).
– Intermediate costs e.g.
o Costs that are specifically related to the business operations rather than
your employee’s performance;
o Items that are part of your company’s assets and that you provided to your
employee for his/her use.
Advantages and disadvantages
The (new) WKR can bring you many benefits:
• you reduce your administrative burden
• you can use any tax-free reimbursement budget left over to create new or improve current terms and conditions (staff retention).
Of course, the WKR also brings with it a few disadvantages:
• all allowances and benefits needs to be processed in the payroll administration
• allowances and benefits are more expensive if you exceed your budget
• existing agreements with the tax authorities expire
Source: Laura Boon payroll provider Orange Tax Services