The 2023 working expenses scheme must be settled by employers no later than the second return period of 2024.
Free space
These are the allowances and benefits in kind allocated to the so-called free space. For 2023, the free margin is: 1.18% of the taxable wage bill, with the understanding that over the first €400,000 of the taxable wage bill, the free margin is 3% (in 2024, this is reduced to 1.92%). To the extent that the total of allowances and the total value of benefits in kind exceeds the free margin, payroll tax is due, levied in the form of final taxation at a rate of 80%. This tax must be declared and paid no later than the second tax return period following the year to which the tax relates.
Group scheme
In the tax return period in which the working expenses scheme is settled, a choice can be made to apply the group scheme. This choice may be repeated annually. The labour costs scheme is then applied to the group as a whole. The group includes all (small) subsidiaries in which a participation of 95% or more is held during the entire calendar year.
The advantage of the group scheme is that the free space not used by a company can be utilised. But the disadvantage is that the step-up of €400,000, over which the free space is 3%, is taken into account only once.
Rating
Benefits in kind (pay in kind) must be valued. Of cash allowances, the value is of course equal to the amount of the allowance. The main rule is that a provision is valued at the invoice value (INCLUDING VAT). That is the amount paid by the employer to a third party for what was provided to the employee.
If there is no invoice value, the provision must be valued at fair value (INCLUDING VAT).
A flat-rate valuation is used for some types of benefits in kind. And several types of benefits in kind are valued at nil.
Not in free space
Under the law, a number of wage components may not be placed in the free space and must therefore be paid as “ordinary” wages. These include:
- the private benefit of the company car;
- the provision of a home (with a few exceptions);
- fines (and the like);
- interest and charges on a loan provided by the employer.
Targeted exemptions
There are also allowances and benefits in kind that are specifically exempt. These items do not fall into the free space, but are also not subject to payroll tax. The same applies to intermediate costs.