The Inland Revenue in a knowledge group position explained how the efficiency limit works in the WKR.
Free space
The working expenses scheme (WKR) has a so-called free space. Wage components designated by the employer for this free margin are not subject to payroll tax. To the extent that the total of the wage components designated in a year exceeds the free margin, the excess is taxed with 80% payroll tax and this tax is for the account of the employer (final levy).
The free allowance for 2025 is: 1.18% of the wage bill, except that the free allowance over the first €400,000 of the wage bill is somewhat higher: 2% of the wage bill.
The work-related costs scheme also includes a number of so-called targeted exemptions. These are wage components that are not subject to payroll tax, but are also not included in the tax-free allowance. There are also a number of flat-rate (lower) valuations, as well as a number of nil valuations.
Usual?
The employer may designate a wage component for the free space, provided the reimbursement or provision is not substantially unusual. Significantly means: for 30% or more. This is the customary criterion.
Since 2014, the Payroll Tax Handbook has included a “safe harbour” for this usability test. That is the effectiveness limit. The Payroll Taxes Manual 2025 defines the effectiveness limit as follows: We consider allowances, benefits in kind or provisions totalling up to €2,400 per person per year to be usual. The derogation from 30% does not apply to this amount.
Note: The amount of €2,400 applies in all reasonableness. This amount does not apply, for example, insofar as the employee's salary is lower than the amounts to which he is entitled under the Minimum Wage and Minimum Holiday Allowance Act, or as a trainee.”
The knowledge group opinion shows that the effectiveness test does not apply insofar as the reimbursement or provision already meets the customary use criterion. This is explained with a number of examples.
For example, an employee who receives a commuting allowance of €1,500 and a bonus of €2,000 can use the efficiency criterion for the bonus because the commuting allowance qualifies for a targeted exemption.
With this knowledge point of view, after 10(!) years, the Inland Revenue makes a bit clearer how the efficiency criterion works.