Netherlands Work-Related Costs Scheme: what employers need to know for 2026

The Netherlands Work-Related Costs Scheme (WKR) allows employers to provide certain benefits and reimburse expenses for employees without these becoming subject to Dutch wage tax.

For employers with employees in the Netherlands, understanding how the WKR applies is important. Careful management of the available tax-free allowance, together with the appropriate use of specific exemptions, can help employers provide benefits tax efficiently while avoiding an additional employer tax charge.

For 2026, the main WKR percentages remain unchanged from 2025, although there are some important developments employers should be aware of, including an increase in the tax-free mileage allowance.

What is the Work-Related Costs Scheme?

Under the WKR, employers have a tax-free discretionary allowance known as the ‘free space’ (vrije ruimte). Certain employee benefits can be allocated to this free space rather than being treated as taxable pay for the employee.

For 2026, the available free space is:

• 2.00% of the employer's fiscal wage bill up to and including €400,000
• 1.18% of the fiscal wage bill above €400,000.

These percentages are unchanged from 2025. Any unused free space cannot be carried forward to a subsequent year. 

For example, an employer with an annual fiscal wage bill of €1 million would have total free space of €15,080:

• €400,000 × 2.00% = €8,000
• €600,000 × 1.18% = €7,080.

What can employers include within the free space?

Employers can use the free space for various employee benefits that would otherwise represent taxable remuneration.

Depending on the circumstances, this could include items such as Christmas gifts, gift vouchers and other employee benefits that do not qualify for a separate exemption.

It is important that benefits are correctly designated under the WKR and that employers consider the relevant conditions, including the customary-use test (gebruikelijkheidstoets).

What happens if the free space is exceeded?

Where benefits allocated to the WKR exceed the available free space, the excess is subject to an 80% final levy, payable by the employer.

For example, if an employer has free space of €15,080 but allocates €20,000 of benefits to the WKR, the excess of €4,920 would result in an employer tax charge of €3,936.

This makes monitoring the WKR position throughout the year particularly important, especially for employers providing significant employee benefits.

Specific exemptions

Not all tax-free benefits need to be included within the free space.

Dutch legislation provides specific exemptions (gerichte vrijstellingen) for certain employment-related costs. Where the relevant conditions are satisfied, these can be provided tax-free without reducing the employer's available free space.

Examples include qualifying:

• business travel and transport costs
• temporary accommodation and meals for business travel
• courses, conferences and professional literature
• professional registrations
• training and education
• work-related relocation costs
• extraterritorial costs
• necessary computers, mobile communication equipment and other tools
• occupational health and safety facilities.

Employers should therefore consider whether a specific exemption applies before allocating expenditure to the free space.

Tax-free mileage allowance increases in 2026

One important change for 2026 concerns business travel.

The maximum tax-free mileage allowance increased during 2026 from €0.23 to €0.25 per kilometre, with retrospective effect from 1 January 2026. The Dutch Tax Administration confirms that employers can reimburse the additional €0.02 per kilometre retrospectively. 

Employers should therefore review their travel and expense policies as well as payroll arrangements to determine whether any retrospective adjustment is appropriate.

Home-working and occupational health facilities

Home-working arrangements continue to be an important consideration under the WKR.

Qualifying occupational health and safety facilities can be exempt where the relevant conditions are met. In guidance published in July 2026, the Dutch Tax Administration considered arrangements under which employees are given budgets to purchase occupational health and safety equipment for their home workplace.

The guidance confirms that an exemption can apply where the equipment meets the applicable occupational health requirements and the employer bears the cost. It also highlights potential issues where an employer operates a capped budget that does not cover the full cost of the qualifying equipment.

Employers offering home-office budgets should therefore ensure their policies and reimbursement arrangements continue to meet the requirements for the exemption.

What should employers consider?

The WKR can provide employers with considerable flexibility when designing employee reward and benefit arrangements, but this flexibility needs to be balanced with appropriate monitoring and record keeping.

Employers should consider:

• reviewing their use of the WKR free space during the year
• identifying costs that qualify for specific exemptions before using the free space
• reviewing travel policies following the increase in the tax-free mileage allowance
• checking that home-working and occupational health arrangements meet the relevant exemption conditionsmaintaining appropriate documentation to support the tax treatment applied.

Where expenditure exceeds the available free space, employers should also ensure that the resulting 80% final levy is correctly identified and reported.

How Crowe UK can help

The Work-Related Costs Scheme provides useful opportunities for employers to provide benefits tax efficiently, but the rules can be complex, particularly for internationally active businesses managing Dutch payroll alongside arrangements in other countries.

Crowe UK can support employers with reviewing their WKR position, assessing the tax treatment of employee benefits and expenses, and ensuring the appropriate treatment is reflected through payroll.

If you would like to discuss the application of the WKR to your employees in the Netherlands, please contact your usual Crowe UK adviser.