Update on the Netherlands Work Cost Ruling Scheme

The updated WCRS rules require employers to carefully manage employee benefits within the defined discretionary scope. Proper documentation and adherence to exemptions can help maximise tax-free allocations and avoid unnecessary levies.

Key Changes

The Work Cost Ruling Scheme (WCRS/WKR) outlines the tax-free allowances and reimbursements employers can provide to employees. The deadline for payment and submission of the WCRS is 28 February where it is required.

Below are the key changes and provisions for 2025

Adjustments to the Free Space

The free space allocated within the WCRS is 1.92% of the fiscal wage bill up to €400,000. For amounts exceeding €400,000, the percentage remains fixed at 1.18%.

Tax-Free Allowances Under WCRS

Employers can allocate part of their taxable wage bill toward tax-free benefits, including:

• Untaxed reimbursements: such as compensation for personal expenses (e.g. haircuts).
• Benefits in kind: includes gifts like Christmas or birthday presents.
• Provisions: such as company bicycles.

Allowances of up to €2,400 per person per year are permitted (if the wage bill allows).

Mechanism of the WCRS

• Employers do not pay wage tax on benefits within the discretionary scope.
• The discretionary scope is reassessed annually.
• If expenses exceed the discretionary scope, a final levy is applied, which is exempt from national insurance and employer health insurance contributions.

Specific Exemptions and Zero Valuations

Certain reimbursements and provisions fall outside the discretionary scope and remain tax-free under specific exemptions and zero valuations.

Specific exemptions include:

• remote work reimbursements
• travel allowances
• meals and accommodations for work-related events
• costs related to professional certifications (e.g., certificate of good conduct).

Zero valuations apply to wages in kind, such as:

• work clothing
• workplace refreshments.

Compliance and Reference Materials

Employers must ensure proper categorisation of benefits to optimize tax efficiency. Additional details on calculations and exemptions can be found in the Dutch Payroll Taxes Handbook (Chapter 10 and Chapter 22). Payroll taxes: for employers and payroll administrators

For further information on WCRS please contact Richard Austin or Azeem Zafar.