The Ministry of Finance has announced this welcome development in a press release. The increase will take effect on 1 January 2020 and is limited to (at most) the first €400,000 of the wage bill.
WKR flat-rate allowance
The abbreviation WKR stands for the work-related expenses scheme. This scheme ensures that allowances and benefits in kind provided by employers to their employees can be paid partly free of payroll tax.
The WKR provides for a number of specific exemptions. Allowances and benefits in kind that do not fall within these exemptions may be designated by the employer for the WKR flat-rate allowance. Provided that the total of these costs does not exceed the WKR flat-rate allowance in a calendar year, no payroll tax is payable. On the amount by which the WKR flat-rate is exceeded, the employer pays payroll tax at a fixed rate of 80%.
Extra free space
The WKR flat-rate allowance (also known as the “discretionary allowance”) currently amounts to 1.2% of the total wage bill. An employer with a total wage bill of €1,000,000 has a WKR flat-rate allowance of €12,000. From 1 January 2020, this will be €14,000 (1.7% * €400,000 + 1.2% * €600,000).
The increase is aimed at small employers. Consequently, it applies only to the first €400,000 of the total wage bill.
Employers can use this additional tax-free allowance to organise fun activities for their staff at no cost to them. For example, Christmas hampers and staff outings are exempt from tax under the WKR flat-rate scheme.
Optimise
Even with the higher WKR flat-rate allowance, it remains important to optimise allowances and benefits in kind for employees from a tax perspective. Research shows that many employers are far from making full use of their tax allowance.
The more use is made of targeted exemptions, the more scope there is for enjoyable activities. And it is important to structure benefits in kind in such a way that they are assigned a low or zero value.
Administration
VWG is happy to help you optimise the WKR scheme. We will set up your financial records in such a way that the necessary information can be easily extracted from them. And we will look at how you can structure the allowances and benefits in kind provided to your employees so that as little payroll tax as possible is payable.
WKR statement for 2018
The WKR settlement is included in the payroll tax return for the first period following the year to which the settlement relates. The WKR for 2018 is therefore settled in the payroll tax return for January 2019. That return must be submitted in February 2019.