Check whether the free space was exceeded in 2023
Did the employer exceed the free space of the work-related costs scheme (WKR or WRCS in English) in 2023? Then you must declare the final levy due no later than in the wage tax return for the 2nd period of 2024.
You test no later than the end of the year whether the total of the allowances, benefits in kind and provisions exceed the free space. The free space in 2023 is a maximum of 3% of the fiscal wage up to € 400,000. Over the excess of the taxable wage, the free space is 1.18%. You must pay 80% final tax on the amount above the free space.
If it turns out that you have declared too much or too little final levy for 2023, you must set this off. The last possibility to do this is in the wage tax return for the 2nd period of 2024 (deadline for monthly return 29-02-2024, for four-weekly return 28-02-2024).
Note: you may also declare the final levy earlier, for example per return period.
End of the withholding obligation
Does the withholding obligation end during the calendar year? Then you must report the final levy at the latest in the return for the period in which the withholding obligation ends.
Work-related costs scheme in brief
What steps should you take if you want to place allowances, benefits in kind and provisions in the free space:
Step 1: Determine whether the allowance, benefit in kind or provision is wages. The work-related costs scheme only applies to wages.
Step 2: If the allowance, benefit or provision is wages, check whether it falls under the targeted exemptions or nil valuations.
Step 3: If the allowance, benefit or provision is not covered by the targeted exemptions or nil valuations, choose whether to designate it as final levy wage or to treat it as the employee’s wages.
Step 4: Calculate the amount of the free space.
Step 5: Determine whether the amount of final levy wage exceeds the free space.
Step 6: Pay the final levy work-related costs scheme.
You must declare and pay the final levy calculated in step 5 with the wage tax return. You do this no later than with the return for the 2nd period of the following calendar year. An employer with a wage tax return period of (for example) one month must therefore declare and pay the final levy WKR for the calendar year 2023 at the latest with the wage tax return of February 2024.
You may also declare and pay the final levy earlier, for example in the last wage tax return of the year. You may also declare the final levy during the year. If it appears at the end of the year that you have paid too much or too little final, you must offset this no later than in the wage tax return for the 2nd tax period of the following year. Does the withholding obligation end during the calendar year? Then you must report the final levy no later than in the return for the period in which the withholding obligation ends.
Note: if the final levy payments do not exceed the free space, you do not have to report and pay the final levy WKR.
Choosing between final levy wage and employee wage
An employer makes the choice between final levy pay and employee wage no later than the moment of reimbursement or provision. Therefore, he does not have to choose in advance – for example, at the beginning of the year.
The choice is apparent from the administration, for example, in which the employer records the reimbursement or provision as final levy wage or as employee’s wage. He does not have to report this choice to the tax authorities.
The employer cannot retroactively designate wages as final levy wages. Once the employer has made a choice, that choice is final.
Adjustment in case of wrong choice
If the employer has accidentally made a wrong choice, he may adjust it. For example, if he treated a compensation as final levy wage while he had agreed with the employee that this would be employee wage. He fixes the mistake by correcting the return and adjusting the administration.
If the employer did not designate the wages as employee wages or final levy wages, the tax authorities will assume that the wages are:
- employee wage if it was enjoyed in a previous calendar year;
- final levy wage if the salary was earned in the current calendar year and the usability test is met.
If an employer meets the conditions and limits of the targeted exemptions, the tax authorities will assume that he has designated these reimbursements, benefits in kind and provisions as final taxable wages.
Always employee wage or final levy wage
Some wage components are mandatory employee wage or final levy wage.