What is the Work-Related Costs Scheme?

The Working Cost Regulation (WKR) has been mandatory for all employers since January 1, 2015, but it remains a complex regulation. There are many different types of employee benefits and provisions that you, as an employer, can provide. Which are taxable and which are tax-free? What about parking passes, gifts, courses and staff parties? It takes a lot of effort to make sure all of these are allocated correctly within the WKR. In this blog, we will take a closer look at the WKR. We will explain the rules and how we as a firm can provide insight into our clients’ WKR reporting.

Table of Contents

1. What does the Work-Related Costs Scheme entail?
   • 1.1. Free space (vrije ruimte) under the WKR
   • 1.2. Work-Related Costs Scheme 2025: Key developments
2. Intermediary costs within the WKR
3. Specific exemptions under the WKR
   • 3.1. Actual car travel costs
   • 3.2. Meals
   • 3.3. Knowledge and skills
   • 3.4. Staff parties
   • 3.5. Travel
   • 3.6. Necessary provisions
   • 3.7. Occupational health and safety (Arbo) provisions
4. Zero valuation
   • 4.1. Work clothing
   • 4.2. Home workplace provisions
5. Free space
6. The Work-Related Costs Scheme (WKR) and your administration within Practical
   • 6.1. WKR reporting

1. What does the Work-Related Costs Scheme entail?

The WKR essentially covers everything that you, as an employer, provide or reimburse to an employee that is considered taxable income. Fortunately, there are many exceptions within the WKR – not all reimbursements and benefits are taxable.

1.1 Free space under the WKR (2025)

At the core of the WKR is the so-called free space. In 2025, the free space amounts to 2% of the fiscal wage bill up to €400,000, plus 1.18% of the remaining part of that wage bill. This percentage remains unchanged from 2024. You may use the amount of the free space for tax-free allowances and benefits for your employees. Therefore, you do not pay wage tax on this amount. If you exceed the free space, an 80% final levy is due on the excess amount.

However, do all reimbursements and benefits count towards the free space? No – there are other categories available. When you, as an employer, provide or reimburse something to your employee, there are four possible classifications within the WKR:

1. Intermediary expenses;
2. Specific exemptions (gerichte vrijstellingen);
3. Zero valuation;
4. Expenses allocated to free space. If the free space is exceeded, 80% final tax is due.

1.2. Work-Related Costs Scheme 2025: Key developments

In 2025, a few small but relevant adjustments will apply within the WKR:

• The maximum untaxed home working allowance increases to €2.40 per day (previously €2.35). This allowance remains intended to cover costs such as coffee, water and electricity consumption, heating, and minor household expenses while working from home.
• Employers must still choose either the untaxed home working allowance or the untaxed commuting allowance per working day. Both allowances cannot be applied on the same day for the same employee.
• A combination remains permitted when an employee travels to another work location (e.g., a client site) during the day and works part of the day from home.
• The Dutch Tax Administration (Belastingdienst) has announced increased supervision of fixed expense allowances in 2025. Employers are therefore advised to regularly verify whether their fixed allowances still reflect the actual costs of employees.

2. Intermediary Costs under the WKR

Intermediary costs are expenses that an employee incurs on behalf of the employer. The employee pays these costs in advance and later claims reimbursement.
For example, if an employee pays for a business gift or covers parking costs for a company car, these are considered intermediary costs. The employee then submits an expense claim to the employer for reimbursement. These reimbursements are not considered income for the employee and therefore do not count towards the free space.

However, note that if the employee pays in advance for something that is subsequently made available for their own use, this is regarded as income, and this rule no longer applies. In such cases, the advance payment must be offset against the free space, unless a specific exemption or zero valuation applies.

3. Specific Exemptions under the WKR

The Dutch Tax Administration has defined several specific exemptions within the WKR. These are specific categories of reimbursements and provisions that can be granted to employees tax-free and do not count towards the free space. Examples of specific exemptions include:

• Commuting costs (maximum €0.23 per kilometre);
• Public transport travel expenses;
• Business overnight stays;
• Meals with a primarily business purpose, such as overtime meals or late-evening shifts;
• Training and education: courses, seminars, professional literature, and development programmes;
• Necessary equipment, such as laptops, made available to employees;
• Statutory occupational health and safety (Arbo) provisions
• Relocation expenses related to employment (at least 25 kilometres from the workplace);
• Tools that the employee also uses outside the workplace but for at least 90% business purposes;
• Additional costs related to home working (up to €2.40 per day);
• Reimbursement for obtaining a Certificate of Good Conduct (VOG).

3.1. Actual car travel costs

For travel using an employee’s own car, there is a specific exemption of €0.23 per kilometre.
This rate applies as a total reimbursement; it does not cover additional expenses such as parking or fuel costs, as these are already included in the kilometre rate.

If an employee claims actual car travel expenses, these are treated as taxable income. However, they can alternatively be deducted from the free space. It is therefore advisable to use the kilometre allowance when reimbursing private car use for business travel.
The distinction between an employee’s own car and a company car is significant under the WKR.

3.2. Meals

A specific exemption applies to meals with a more than incidental business character.
The following situations qualify as having a clear business purpose:

• The meal is taken with a business relation. It is recommended to record the name of the relation in your administration.
• If a meal has no business character, it is considered taxable income for the employee. Alternatively, it can be assigned to the free space, where the employer may choose between the actual cost or a fixed amount of €3.95 per meal.
  It is also possible to add a fixed addition of €3.95 per meal to the employee’s gross salary instead. This way, the employer does not use up the free space for these meals.
  • An employee is considered ambulant if they travel to different workplaces on a regular basis.
  • An employee is also considered ambulant if they usually travel to and from the same workplace at least one day per week, and do so on no more than 20 days in total (the 20-day rule).
• The employee starts work before 17:00 and finishes after 20:00; meals consumed between 17:00–20:00 are regarded as business meals.
• Meals after 20:00 linked to (unexpected) overtime.
• Meals during late-night shopping shifts (koopavonden).
• Therapeutic group meals (for rehabilitation or social purposes).
• Meals during work on non-permanent locations (e.g. construction, roadworks, film crews).
• Meals during work on non-permanent locations (e.g. construction, roadworks, film crews).
• Meals taken with colleagues during a work meeting. In this case, it’s advisable to retain the agenda or minutes as supporting documentation for any future audit by the Tax Administration.

If the meal does not have a business purpose, it is considered taxable income for the employee. Alternatively, the meal can be allocated to the free space. In this case, the employer may choose between the actual cost or a fixed amount of €3.95 per meal.

It is also possible to add a fixed amount of €3.95 per meal to the employee’s gross salary. This way, the employer does not need to use the free space for these meals.

3.3. Knowledge and skills

There are specific exemptions for reimbursing/providing:

• Courses, conferences, training programmes, coaching trajectories, professional literature and similar activities aimed at maintaining and improving the knowledge and skills required for the job, as well as registration in a professional register and outplacement.
• Study and education aimed at acquiring (additional) income, and procedures for the recognition of prior learning (EVC procedures). Three conditions apply:
  • The study costs are not already reimbursed by another party.
  • The study or training is aimed at qualifying for a future profession.
  • The employer has provided or committed to the reimbursement before the end of the calendar year in which the costs are incurred.

If a study day includes various activities, the costs can be divided into:

• The costs of activities with a primarily business-related nature. In that case, the specific exemption for the above, business-related meals, and temporary accommodation in the context of employment may apply
• The costs of activities with a primarily recreational nature. The rules for staff parties apply in this case (see below).

It is advisable to document this allocation clearly.

3.4. Staff parties

How refreshments and meals for a staff party should be treated under the WKR depends on the location of the event:

• Party at the workplace:
  For refreshments provided, a zero valuation applies. For meals, the standard amount of €3.90 per meal must be included as taxable wages. However, this amount may also be allocated to the free space. All other costs, such as decorations or entertainment, are part of the event and fall under a zero valuation.
• Party at an external location hosted by a third party:
  These events are considered taxable wages for the employee but may also be allocated to the free space. This concerns the total costs including VAT. No specific exemption or zero valuation applies, and no standard amount is set for these meals.

If an external activity is primarily of a business nature and its festive aspect is only incidental, the total costs of the activity do not need to be divided into business and consumptive expenses. In that case, the refreshments are specifically exempt.

3.5. Travel

In the case of a trip with staff that does not have a business purpose, the costs for the employees are regarded as taxable wages. Alternatively, the costs may be allocated to the free space.

Als een reis met personeel van een zakelijke aard is, moet er m.b.t. de kosten voor personeel rekening worden gehouden met normbedragen. De Belastingdienst stelt dat uitgaven voor personeel boven die normbedragen belastbaar loon zijn of aan de vrije ruimte moeten worden toegewezen. Ter hoogte van de normbedragen zijn de kosten gericht vrijgesteld. Een werkgever dient dit te volgen indien de uitgaven van de werknemer vergelijkbaar zijn met ambtenaren op dienstreis. Het is bovendien belangrijk dat je een eventueel zakelijke aard van de reis duidelijk vastlegt.

The standard amounts differ for domestic and international business trips:

• Domestic business trips: The standard amounts are as follows:
  • Small daytime expenses: €6.27
  • Small evening expenses: €12.54
  • een ontbijt: € 14,87
  • Lunch: € 12,51
  • Meal € 31,40
  • Hotel: € 150,55

• International business trips: The standard amounts are listed in the “Tariff list for accommodation costs of international business trips as of 1 January 2025” as included in the CAO Rijk and available online. This list specifies, per location, the maximum amounts for accommodation and other daily expenses per employee. Within these maximum limits, a specific exemption applies. Any excess reimbursement above these limits is considered taxable wages (or may be allocated to the free space). It is also important to be able to substantiate the accommodation costs.

3.6. Necessary provisions

Reimbursements, provisions, and supplies of tools, laptops, telephones, and similar equipment are specifically exempt if they meet the following conditions:

• The provision is, in the reasonable opinion of the employer, necessary for the proper performance of the employee’s duties (necessity criterion). For directors and supervisory board members, the provision must be customary for the proper fulfilment of their position.
• The employee must return the provision, or pay the employer the residual value of the provision, once it is no longer needed for the performance of their duties.
• The provision is not part of a cafeteria scheme.

Any potential private benefit from these provisions does not need to be included as taxable wages.

SIM cards, dongles, subscriptions for internet and telephone services, and software can also be exempt. If the employee has a 3-in-1 package, the portion of the invoice related to the internet connection must be determined. If necessary, the provider’s rate for an internet-only subscription should be used as a reference.

Another specific exemption applies to tools or equipment that the employee can also use outside the workplace, provided they are used at least 90% for business purposes.

3.7. Occupational health and safety (Arbo) provisions

Mandatory occupational health and safety provisions are specifically exempt. It does not matter whether the employee uses the provision at the workplace or elsewhere. Examples include an ergonomically suitable office chair or a computer screen glasses.

The occupational health and safety provisions must meet the following conditions:

• These are mandatory occupational health and safety provisions that directly arise from the Working Conditions Act. In short, they concern measures that ensure the safety and health of the employee.
• The employee uses or consumes the provisions at the (home) workplace (wholly or partly) or at a location where the employer implements the Working Conditions Act.
• The employer does not charge any costs to the employee.

Since 2022, the rule applies that the occupational health and safety provision must be mandatory. A non-mandatory provision may be allocated to the discretionary budget.

4. Zero valuation

Certain provisions that an employee uses in the workplace may be designated as having a zero valuation. Costs that fall under a zero valuation also do not count towards the discretionary budget. Important examples of zero valuations include:

• Refreshments at the workplace that are not part of a full meal. For example, coffee, fruit, a cookie, or cup-a-soup. Once it can be considered as
  a meal, it must be determined whether the specific exemption for meals with more than an incidental business purpose applies;
• Workwear;
• Workplace amenities, such as a desk, fixed computer,
  copier or gym. This nil valuation can also apply under
  certain conditions to home workplace facilities.

4.1. Work clothing

If you reimburse or provide work clothing to the employee, there is no zero valuation, and it is considered taxable wages. However, it is possible to allocate this reimbursement or provision to the discretionary budget

A zero valuation may apply when work clothing is provided to an employee. In that case, one of the following conditions must be met:

• The clothing is (almost) exclusively suitable to be worn during work, such as a lab coat or an overall.
• The clothing bears one or more clearly visible visual elements associated with the employer (for example, a company logo). Together, these elements must cover a surface area of at least 70 cm² per garment. The surface area is calculated using an imaginary rectangle around the outermost points of the logo.
  
• The clothing demonstrably remains at the workplace.
• The clothing is a uniform or an overall. If a group of employees wears the same clothing that is also recognized outside the workplace as representing a company or profession, that clothing qualifies as a uniform.
• You reimburse, provide, or make the clothing available because it is required under the Working Conditions Act, such as a pair of safety shoes. The employee is not required to make any personal contribution.

If the clothing does not meet one of the conditions, its value is considered taxable wages for the employee. However, it may be allocated to the discretionary budget. If a zero valuation applies to the clothing, cleaning costs may be reimbursed tax-free. Such reimbursement qualifies as compensation for intermediary expenses.

4.2. Home workplace provisions

The zero valuation for workplace provisions may also apply to provisions at the home workplace if all of the following conditions are met:

• The space is an independent part of the home; for example, it has its own entrance and its own sanitary facilities.
• The employer has a (genuine) business lease agreement with the employee, granting the employer exclusive use of the space.
• The employee performs work in that space.

If these conditions are not met, the zero valuation does not apply. However, a specific exemption for the provision at the home workplace may still be applicable:

• See the two specific exemptions under Necessary provisions.
• Occupational health and safety provisions in the home workspace are specifically exempt if:
  • those occupational health and safety provisions directly arise from the Working Conditions Act;
  • the employee (partly) uses or consumes those provisions in the workspace;
  • the employee does not pay any personal contribution for those provisions.

5. Discretionary budget

All reimbursements or benefits that do not fall under one of the above categories must be allocated to the discretionary budget. If they are not allocated to the discretionary budget, they are considered taxable income for the employee. Common examples of such expenses include meals without a business purpose, staff outings, untaxed bonuses, and Christmas gifts. The discretionary budget is determined based on:

• 2% of the taxable wage bill up to €400,000; plus
• 1.18% of the remaining portion of the taxable wage bill.

The reimbursements or benefits remain tax-free as long as the limit of the discretionary budget is not exceeded. Therefore, the discretionary budget can represent a valuable fiscal advantage for a business.

A maximum of €2,400 per employee per year may be allocated to the discretionary budget. This applies only to benefits that may not be considered customary. If the employer exceeds this threshold, the Dutch Tax Administration will require the employer to justify the customary nature of the allocations. An amount of up to €2,400 is, in any case, considered customary by the Tax Administration.

If the limit of the discretionary budget is exceeded, an 80% final levy is due on the excess amount. Any such final levy is entirely borne by the employer and must be included in the payroll tax return no later than February of the following year.

6. The Work-Related Costs Scheme (WKR) and your administration within Practical

How can Practical provide value to its clients regarding the WKR? For each client, we use a dedicated WKR tool. In this tool, we calculate the discretionary budget and display a specific set of general ledger accounts. We can then review these accounts and assign a WKR label to each transaction:

• Intermediary expenses;
• Zero valuation;
• Specific exemption;
• Discretionary budget;
• Not WKR-related.

By carefully reviewing the transactions and addressing any questions with the client, we can ensure that each entry is correctly handled within the WKR. The more relevant information the client provides concerning the WKR, the faster and more accurately we can perform this service on their behalf.

6.1. WKR reporting

And what is the end product? A clear and comprehensive report generated based on our work in the WKR tool. In this report, the client first sees a clear overview of the total discretionary budget, the extent to which it has been utilized, and the amount of expenses allocated to each WKR category.

The client then sees a detailed breakdown of the transactions assigned to each WKR category. This allows them to easily verify whether the expenses have been correctly classified and to inform us if they disagree with how certain costs have been allocated. Expenses categorized as “Not WKR-related” do not appear in the report.

The client can also include relevant notes in advance when submitting invoices, such as specifying the business contact with whom a meal was held or indicating that a dinner had a non-business purpose.

Practical kan periodiek voor de klant de WKR checken en een rapportage aanleveren. Dit levert op meerdere manieren waarde voor de klant:

• If, through the report, the employer sees that the company is well below the limit of the free space, they know that a certain amount remains available to spend on untaxed allowances or benefits for employees. This allows the employer to make use of the fiscal advantage.
• If, through the report, the employer sees that they are close to the limit of the free space, they know they must handle untaxed allowances and benefits to staff carefully for the remainder of the year. If the year ends with an excess over the free space, the company is liable to pay an 80% final levy on the excess amount.

At the end of the year, Practical provides a final WKR report at the beginning of the following year. This report shows whether an 80% final levy is due or not. If applicable, the final levy must be included in the February payroll tax return at the latest.