Employers applying the working costs scheme (WKR) are allowed to provide their employees with tax-free allowances and benefits in kind, without any conditions other than the habitual use criterion (see below), so long as the total of those allowances and benefits in kind does not exceed the so-called free space.
The free allowance is 1.5% of the wage bill. If the 2015 Tax Plan is adopted unchanged, every employer will be obliged to apply the WKR from 1 January 2015 and the free margin will be reduced to 1.2% of the wage bill. On the other hand, some types of allowances and benefits in kind can be reimbursed or provided tax-free outside the free space.
Employers who already apply the WKR will be aware that (year-end) bonuses can also be paid tax-free in the free margin (or, if the free margin is exceeded, taxed at the final tax rate of 80%). However, it must be assessed whether the wage component does not deviate by more than 30% from what is customary in similar circumstances (the customary criterion).
In the latest version of the Payroll Taxes Manual, the Tax Authorities indicated that, for reasons of efficiency, they do not consider allowances or benefits in kind of up to €2,400 per employee per year to be unusual. This means that a bonus or fixed expense allowance in the free space of the WKR up to that amount is definitely possible. Incidentally, it does not mean that higher bonuses cannot be placed in the free space, but then opposition from the Tax Authorities cannot be ruled out. Incidentally, the Tax Office has the duty to state and the burden of proof that and allowance or provision more than 30% is unusual. If that is the case, the reimbursement or provision up to 30% may remain in the free space, but the excess will be taxed as employee wages.
You can download the Payroll Tax Handbook (edition 1 October 2014) from the Tax and Customs Administration's website. You will find the section on the usability test on page 39.
VWGNijhof has developed a number of tools to make the transition to the WKR, which is likely to be compulsory from 1 January 2015, as smooth as possible. Speed is of the essence as the turn of the year is fast approaching.