Work-related costs scheme (“Werkkostenregeling”)

Under the Work-related costs scheme (“werkkostenregeling”) the employer can reimburse work related costs tax-free to employees. This scheme can be used for pretty much anything. For instance presents with Christmas, staff outings but also bonuses. In 2021 the total allowances under this scheme cannot be more than 3% of the first EUR 400,000 of the wage sum and 1.18% of the remainder. Amounts exceeding this free space will be taxed at a staggering rate of 80%.

An important condition is that the allowance is less than 30% deviating from what is usual. The latter can be determined by looking at other employees or comparable functions of the same but also other employer. The Dutch tax authorities assume that the allowance is usual if the amount is no more than EUR 2,400 per person annually.

Some allowances can be provided tax-free without using aforementioned free space of the Work-related costs scheme. These are assigned exemptions (“gerichte vrijstellingen”), for instance:

• for business trips max 21 cent per km or the actual travel expenses;
• what is obtained under the 30% ruling or what is obtained as reimbursement for actual extraterritorial costs if the 30% ruling is not available;
• phones, computers et cetera
• expenses of stay elsewhere for business purposes.
• business related lunches and meals during overtime
• courses, seminars, literature

Allowances in kind provided on the working place can also be provided tax-free. These so-called nil valuations (“nihilwaarderingen”) are for instance:

• provisions on the working place, like a desk
• consumptions on the workplace that are not part of a meal, for instance coffee
• work clothing (under conditions)
• public transportation used for work
• provisions in the working space at home (under conditions)
• provisions that stay at the working space, e.g. computers
• mobile phones

If an allowance to an employee does not fit in the free space of the Work-related costs scheme or the exceptions (i.e., the assigned exemptions or nil valuations) then it will be treated as taxable wage. The 80% levy for allowances exceeding the aforementioned free space of the Work-related costs scheme can be prevented. For that the employer should treat the expenses as taxed wage of the applicable employee (and hence keep it out of aforementioned scheme for the Work-related costs scheme).

Administrative obligations Work-related costs scheme

When applying the Work-related costs scheme amongst other things the following must be recorded:

• The allowances and benefits in kind assigned to the free space. There is no need to record at employees’ level.
• The allowances and benefit in kind not assigned to the free space are treated as individual wage of the employee. Those need to be recorded at employee’s level.
• Assigned exemptions must be entered in the records at employee’s level.