Expense Allowance Scheme
In 2020, the government expanded the capacity for tax benefits in the Expense Allowance Scheme (WKR) in connection with the pandemic. Where the increase of tax benefits was initially planned to be reversed at the end of 2020, it has now also been extended for the whole of 2021.
The tax benefits under the Expense Allowance Scheme for the first 400,000 euros in wages was temporarily increased in 2020 from 1,7% to 3%. In 2020 a tax free budget of 1,2% applied to the excess. The temporary increase to 3% in the first bracket will also continue to apply throughout 2021. The tax benefits in the second bracket, the wage bill above 400,000 has been changed to 1,18% for 2021.
Basic rules of the Expence Allowance Scheme 2021
- the tax benefits for work expenses, which are not specifically exempt or may be valued at nil, amount to 3% from 1 January 2021 and 1.18% on the taxable wage bill from 400,000 euros;
- allowances that exceed the work expenses are taxed at a final levy of 80% by the employer; and
- in principle, the employer does not have to deal with free allowances and benefits in kind per individual employee. Therefore, it does not have to be tested per employee, but the expenses must be accounted for at the collective employer level.
The Expense Allowance Scheme also includes specific exemptions. These are not taxed for payroll taxes and have no influence on the tax benefits (if designated as a final tax component). A exhaustive list can be found on XpertHR. A recently added exemption is, for example, reimbursement of the costs for the Certificate of Good Conduct (VOG). The costs of following a training course or studies with a view to generating income for former employees will be specifically exempted from 2021. The provision of facemasks is also a specific exemption until 31 March 2021.
Indicate in advance
The Tax and Customs Administration wants employers to explicitly indicate in advance how they wish to designate certain wage benefits. Within certain limits, you are able to designate wage components as work costs. Specific exemptions or the zero valuations and standard amounts that apply to some costs may be applied here. Please note that it is the policy of the Tax Authorities that designation of work expenses must take place during the calendar year.
If no work expenses have been designated and no payroll taxes have been withheld and paid on a wage component, then you must bear the payable wage tax. The wages are then charged to the tax benefit allowance. You will only bear the 80% levy if this allowance is exceeded.
If you want to know whether a allowance can be paid tax-free or whether this allowance should be placed under tax benefit allowance, please contact our payroll department. Please don't hesitate to contact us to find out more about your tax benefit allowance. We can inform you of your tax benefit allowance and if you have entrusted us with your accounting, we can also inform you on how much free margin you have left.