WKR Netherlands Explained: Insights Work-Related Costs Scheme

WKR Netherlands Insights: gain more knowledge about the Dutch Work Related Cost Scheme for employers, HR professionals, and Works Councils.

The Work-Related Costs Scheme: WKR [Werkkostenregeling], by the Tax and Customs administration of the Netherlands, allows employers to spend part of their total taxable wage (Discretionary Scope) without tax liability, on reimbursements, and benefits in kind.

This article is written to give an overview of the Dutch Work-Related Costs Scheme; WKR, including its purpose, benefits, limitations, and the role of HR and the Works Council.

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What Is the WKR?

The WKR is a Dutch tax scheme that allows employers to provide tax-free allowances, benefits in kind, and provisions to employees. It has been mandatory since 2015 for all employers in the Netherlands.

The scheme is based on the principle that everything provided to employees is taxable, unless it is defined under specific exemptions or within the Discretionary Scope / budget in Dutch referred to as Vrije Ruimte.

Introduction of the Work-Related Costs Scheme

The Dutch government introduced the Work-Related Costs Scheme to:

Replace a fragmented system of individual exemptions.
Simplify the administration of employee benefits.
Encourage employers to offer perks without increasing taxable income for employees.
Provide flexibility in rewarding employees.
Apply the tax-free status within limits.
Create a uniform, transparent framework to ensure fair treatment.

What Is the Discretionary Scope [Vrije Ruimte]?

The Discretionary Scope [Vrije ruimte], under the Work-Related Costs Scheme: WKR, is for employers to reward their employees up to a maximum percentage of their company’s entire wage costs in the Netherlands, without tax liability.

Discretionary Scope WKR 2025

The Discretionary Scope 2025 of the Work Related Costs Scheme; WKR is calculated as follows:

2.00% of the taxable wage sum up to EUR 400,000
1.18% on the amount exceeding EUR 400,000

Within this budget, employers can provide certain allowances and benefits, such as travel reimbursements, meals, and small expenses tax-free, provided they meet the conditions set by the Dutch Tax and Customs administration.

WKR Examples Tax-Free Benefits & Allowances

The following examples illustrate types of employee benefits, allowed to be provided tax-free by employers, under the Work-Related Costs Scheme: WKR. This list of examples of tax-free benefits are non-exhaustive and intended to offer a general overview.

Examples WKR Discretionary Scope [Vrije Ruimte]

The employee benefits in the Discretionary Scope are tax-free only, if they fit within the available budget of the company.

Employee Christmas gifts or birthday gifts
Team events held outside the workplace
Fitness and wellbeing benefits, such as gym subscriptions (external)
Parking fees and tolls
Company Bike Scheme
Meals and small expenses not related to business travel

Examples WKR Targeted Exemptions [Gerichte Vrijstellingen]

The targeted exemptions [Gerichte Vrijstellingen] are costs, always tax-free and do not count against the Discretionary Scope if properly designated:

Mileage allowance
Costs for education and training
Fee for an employee Certificate of Conduct [VOG]
Employee relocation expenses
Meals and small expenses during business travel
Company laptop
Company mobile phone
Home office equipment and ergonomic tools

Examples WKR Nil Valuations [Nihilwaarderingen]

The employee benefits in the Nil Valuations [Nihilwaarderingen] are valued at zero euro, and are always tax-free if provided at the workplace:

Office work clothing with company logo
Coffee and tea at the office

Note: Each benefit must be correctly classified and documented in the financial and payroll administration. If the total value of designated benefits exceeds the Discretionary Scope, the excess amount is not tax-free. Instead, the employer must pay a final tax [Eindheffing] of 80% on the amount that goes over the limit.

In summary the WKR costs-categories include:

Tax-free reimbursements within the Discretionary Scope.
Fully exempt costs: Targeted Exemptions.
Workplace provisions labelled in the Nil Valuations.

Work-Related Costs Scheme WKR: Pros & Cons for Employers

Advantages of the WKR

1. Tax-Efficient Employee Benefits

The WKR allows employers to offer employee benefits and reimbursements tax-free, reducing payroll tax liabilities.

2. Flexible Budget Allocation

Employers can use the Discretionary Scope to cover a wide range of employee-related costs. For the year 2025, this is the budget of 2.00% of the taxable wage sum up to EUR 400,000 and 1.18% above this amount.

3. Boosts Employee Morale

Offering tax-free extras like reimbursements, meals, or small gifts could enhance employee morale and retention.

4. Simplifies Administration

The administration of costs like coffee and snacks can be handled without complex adjustments.

Challenges of the WKR

1. Strict Compliance Requirements

All employee benefits must be properly documented and designated in payroll records. Misclassification could lead to penalties.

2. Penalty for Overspending

Exceeding the WKR budget triggers an 80% tax on the excess amount.

3. VAT Deductibility Limits

VAT on employee-related costs is only deductible up to a certain amount per employee per year.

4. Cross-Departmental Coordination Needed

HR, finance, and payroll teams must align to ensure correct application and tracking of these employee benefits.

Compliance WKR

The Tax and Customs administration of the Netherlands, actively monitors whether employers correctly apply the Work-Related Costs Scheme.

They will review the payroll administration during and audit and could use sampling methods. For example, if one restaurant receipt is incorrectly processed, they may extrapolate the error across similar cases.

How to Ensure Compliance

Create a clear designation document listing all reimbursements, benefits and their tax treatment.
Maintain a structured WKR administration.
Label all benefits correctly (e.g. the discretionary scope, targeted exemptions and nil valuations).
Conduct an annual cost analysis for fixed allowances to proof the provided amounts.
Document the process of these elements in the financial and payroll administration.

Common Mistakes Leading to Penalties

Missing WKR administration and documentation.
Incorrect classification or labelling.
Missing designation documents.
Incorrect ledger entries.
Avoiding an annual review or assessment of actual incurred costs to proof the fixed daily allowances provided.

Work-Related Costs Scheme Calculator & Tools

Managing the Discretionary Scope effectively is crucial to avoid unexpected tax liabilities and to optimise employee benefits. A WKR tool will support organisations to:

Track and categorise expenses related to employee benefits.
Calculate the Discretionary Scope based on total taxable wages.
Monitor usage against the available budget.
Identify potential tax liabilities if the budget is exceeded.
Ensure compliance with Dutch tax regulations.

Many accounting firms and financial advisors have the proper calculators and tools to support your organisation in compliance and tracking the available budget / Discretionary Scope.

Finance & HR Department Responsibilities

The finance and HR department are playing a central role in managing WKR-related benefits. They are responsible for:

Ensuring benefits are properly administered.
Classifying reimbursements and provisions to ensure that all WKR benefits meet the conditions set by the government.
Writing proper documentation and designation in the payroll records.
Collaborating with various teams to maintain a compliant and efficient WKR administration.
Informing employees about available tax-free benefits, eligibility criteria, and how to claim them, fostering transparency and trust.

WKR: The Role of the Works Council

The Works Council may be involved in advising or approving certain employee-related benefits and can provide input on how the Discretionary Scope is allocated, especially when it affects employee welfare.

Furthermore, they need to be informed about the transparency of the distribution of employee benefits and may influence decisions on fixed allowances, team events, and other perks that fall under the WKR.

Note: Article 27 of the Dutch Works Councils Act (WOR); Right for Consent by the Works Council is applicable, when changes to employee compensation or benefits are introduced. Employers must ensure that any involvement of the Works Council is documented, aligned with internal governance procedures and Works Council consultation process.