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Written by:
Sean-Paul Smit


Work Related Costs Scheme

The Work Related Costs Scheme (Dutch acronym: WKR) for wage-related allowances and benefits was introduced on 1 January 2011 and will have compulsory status from 2015 onwards, when the choice in favour of the old regime of free allowances and benefits will no longer be available. The WKR scheme has been set up with the aim of streamlining the multitude of regulations. The following five amendments aimed at sorting out certain bottlenecks by which the WKR scheme had been shown to be marred were publicised at an earlier stage, involving the introduction of:

  • the “necessity criterion”,
  • the annual set-off mechanism,
  • a scheme for groups of companies,
  • exemption for proprietary products,
  • the abolition of the distinction between allowances and benefits.

Necessity criterion
The essence of the “necessity criterion” is that an employer may reimburse the employee for, or provide the employee with, particular facilities considered necessary in the context of business operations without having to make allowances fiscally for the associated gains – if any – enjoyed by the employee privately. In order to stop the scheme being abused, the necessity criterion has been confined to tools, computers, mobile telecommunication resources and similar equipment/appliances. The fulfilment of the necessity criterion is to be assessed with due consideration of the circumstances of the case. The existing “test of reasonableness” is to be used in objectifying the necessity on the part of the employer.

Set-off mechanism
Rather than having to monitor per reporting period whether the free margin has been exceeded, as they used to have to, employers in future will only be having to carry out a single check at calendar year-end to establish whether or not the free margin for the year as a whole has or has not been exceeded. Any taxes they may be shown to owe may be accounted for in their tax return for the next calendar year’s initial reporting period. The entrepreneur may settle up the payroll tax charge in advance instalments if he so prefers.

Scheme for groups of companies
The introduction of the scheme for groups of companies will make it possible to apply the WKR scheme at group level, on condition that the parent company should have been the holder of a 95% or greater stake in the subsidiary or subsidiaries, or the subsidiaries thereof, throughout the entire calendar year.

Exemption for proprietary products
The old staff discount scheme has been bolted on to the WKR scheme with effect from 1 January 2015 as a designated exemption.

Distinction between allowances and benefits
Nil valuation currently applies to certain work place-related provisions that are made available by the employer. As some employers prefer reimbursement where these provisions are concerned or are under a CLA-imposed duty to see to the reimbursement thereof, the nil valuation that currently applies to the relevant benefits is to be replaced by a designated exemption set up for work place-related provisions. The exemption applies to benefits and reimbursements and to any paid provisions being made available. The downside is that the administrative requirements will be tightened up.

Free margin
The aforementioned amendments will be paid for by shrinking the free margin – as the amount within which the designated allowances and benefits may be made free of tax – from 1.5% to 1.2% of the wage bill for tax purposes.

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