Now that the summer (holidays) are just behind us, with a third of the year still to go, is a good time to assess – or have assessed – whether the allowances and benefits in kind provided to your employees for 2016 are proceeding as planned. Perhaps the WKR still offers you the opportunity to give your employees a nice tax-free bonus.
Work-related Expenses Scheme (WKR)
The backbone of the WKR is the lump-sum allowance for work-related expenses. Employers may provide tax-free allowances and benefits in kind to their employees up to 1.2% of the total wage bill. On the amount by which the total of these allowances and benefits in kind exceeds the work-related expenses allowance, the employer is liable for 80% payroll tax in the form of a final levy. A final levy means that the tax is borne entirely by the employer. Employees are not affected by this.
The employer may choose whether to include a cash allowance or a benefit in kind in the WKR flat-rate allowance. If they do not do so, they must calculate payroll taxes on it, which they must deduct from the employee’s regular salary.
An allowance or benefit in kind may not be included in the WKR lump sum if that allowance or benefit in kind is, to a significant extent (30% or more), unusual. Furthermore, the private use of a car, a company-provided residence (excluding security measures), weapons/ammunition, dangerous animals and fines may never be included in the work-related expenses allowance.
Not all allowances and benefits in kind need to be included in full in the work-related expenses allowance, as allowances and benefits in kind:
- are exempt (targeted exemptions);
- be valued at zero;
- are valued on a flat-rate basis.
Optimise
Optimising the WKR naturally involves checking how much of the work-related expenses allowance has already been used in the first nine months of 2016 and extrapolating this to the end of the year. This will show whether the allowance has been fully utilised. If this is not the case, a tax-free bonus for employees may be possible.
Optimisation may also involve examining whether, by adopting a different method of reimbursement or provision, you can ensure that fewer items are included in the work-related expenses allowance. This involves making use of targeted exemptions, zero valuations and flat-rate valuations.
VWGNijhof We would be happy to help you optimise the tax treatment of the allowances and benefits in kind provided to your employees.
The Future of the WKR
Rumours are already circulating that the WKR may be undergoing a major overhaul or may even be scrapped altogether. These rumours appear to be based on suggestions These were carried out in response to a request from the government for ways to simplify tax legislation. Whether the work-related expenses scheme will be amended will become clear from the 2017 tax plans, which will be published on Prinsjesdag.