By letter dated July 3, 2014 the Deputy Minister of Finance informed the Lower House about which elements of the work-related costs rules (werkkostenregeling; “WKR”) will be amended as of January 1, 2015. The changes are intended to make the rules easier to administer and will be included in the 2015 Tax Plan.
1. Fixed exemption rate will be reduced
To enable the changes listed below to be implemented on a budget-neutral basis, it has been proposed lowering the rate for the fixed exemption from 1.5% to 1.2%.
2. End of WKR option regime
The WKR has been law since January 1, 2011. As of that date, transitional rules also applied, under which employers could opt to apply either the old regime or the WKR. It has been proposed to end the transitional rules as of January 1, 2015. All employers must then apply the WKR.
3. Limitations to the introduction of the necessity criterion
The Deputy Minister intends to limit the introduction of a necessity criterion to tools, computers, and mobile communication and similar equipment. This means that laptops, tablets, smartphones and mobile telephones will no longer be treated differently for tax purposes. On the basis of the necessity criterion, the provisions that an employer considers essential in the context of business operations can be provided to employees without having to take account of a private use component for tax purposes.
4. Group rules
The introduction of group rules will enable the fixed exemptions, reimbursements and provisions of each group entity to be added together to form one total amount. Within the group, no split of employee benefits has to be made if employees of one group company receive the same kind of employee benefits compared to employees of another group company. A group is present if 95% or more of the shares in a subsidiary/sub-subsidiary are held by the parent company.
5. Exemption for business-specific products
Prior to the introduction of the WKR, the law contained a discount scheme for industry-specific products. The intention is to continue this scheme as a specific exemption as of January 1, 2015.
6. The distinction between reimbursements, provisions and items made available in respect of workplace-related provisions will no longer apply
The initial point of departure for the WKR was that all reimbursements and provisions to employees were to be deducted from the fixed exemption, as this would alleviate the need for separate entries in the accounts with regard to employees. From the perspective of ease of administration, in addition to the specific exemptions an exception was made for provisions that are partly used at work. In practice, it has proven difficult to value such provisions or determine how often they are used. For this reason a nil valuation was introduced. A distinction thereby arose between provisions that are made available at work and provisions that are supplied or reimbursed.
It has been proposed to introduce a specific exemption for a number of workplace-related provisions for which a nil valuation applies under the current WKR. This will increase the administrative burden in comparison to the existing WKR, because, for example, reimbursements will only be paid after the relevant invoice has been submitted.
7. Annual payment methodology
At present, there are three methods available under the WKR to establish whether the fixed exemption has been exceeded. It has been proposed to use only one method as of January 1, 2015. After the end of the year, the employer will have to make a one-off calculation to determine whether the fixed exemption has been exceeded. If this is the case, the final levy payable will have to be remitted at the end of the first tax return period for the following year.
Under the WKR, the expense amount entered into the accounts must be inclusive of VAT. This will increase the administrative burden for many businesses. To resolve this problem, it has been proposed that the employer, in consultation with the tax inspector, agree on an average VAT rate, which can be applied to all provisions charged against the fixed exemption.
KPMG Meijburg & Co recommends that businesses start preparing well in advance for the implementation of the WKR. This will allow you to gain insight into any additional costs that may accompany the implementation. Any changes to employment conditions and accounting records should also be undertaken well in advance.
If you would like to participate in one of our workshops (given in Dutch) on WKR, please click on the following link to register: http://www.meijburg.nl/seminars/training-werkkostenregeling.