What is the Work-Related Expenses Scheme (WKR)?
All employers have to deal with the so-called Work-related Expenses Scheme (WKR), which determines how to levy payroll tax on allowances and benefits in kind offered to employees. In principle, all allowances and benefits in kind that you give your employees are considered wages. However, you can choose to whether to designate individual allowances or benefits in kind as either a wage component or a work expense. For this purpose, there is a flat-rate exemption of 1.2% of the total taxable wage bill, also known as the work-related expenses budget. Anything paid in addition to this 1.2% of the total taxable wage bill is subject to an 80% final tax, known as the employer’s levy.
What are targeted exemptions?
Targeted exemptions are a number of specific allowances and benefits in kind.
Wages in kind are valued based on market value, which amounts to the invoice amount including VAT. Several types of wages in kind, however, are zeroed out (a so-called ‘nil valuation’), specifically those benefits that are used in whole or in part in the workplace. As a result, these benefits do not count towards the work-related expenses budget. If an allowance or benefit is treated as part of an employee’s wages, the employee must pay tax, which is to be levied by the employer and remitted to the Tax Authorities.