The werkkostenregeling sits at the heart of every Dutch payroll setup. However, foreign employers often underestimate it. As a result, they miss tax-free rooms or trigger an unwelcome 80% levy. This guide walks you through the werkkostenregeling 2026 rules. You will learn the free margin, the targeted exemptions and the smartest ways to reimburse staff without losing money to tax.
What is the werkkostenregeling?
The werkkostenregeling, or WKR, is the Dutch tax scheme that lets employers reimburse staff costs without payroll tax up to a fixed yearly budget. Therefore, every Dutch employer must apply it. The scheme covers gifts, allowances, equipment, training and other staff perks. Moreover, it bundles them into one “free margin” (vrije ruimte). Anything above that margin attracts an 80% final levy. The WKR applies to all employers with Dutch wage tax obligations, including foreign companies running a Dutch payroll.
How does the free margin work in 2026?
In 2026, the werkkostenregeling free margin stays the same as 2025. Employers may spend 2.00% of the first €400,000 of taxable wages tax-free. Above that, the rate drops to 1.18%. Consequently, a payroll of €600,000 produces €8,000 + €2,360 = €10,360 in tax-free room.
| Taxable wage bill | 2026 free margin |
| First €400,000 | 2.00% |
| Above €400,000 | 1.18% |
Note: from 2027 the first bracket rises to 2.16%, so planning ahead pays off.
Which reimbursements fall outside the werkkostenregeling?
Some reimbursements skip the free margin entirely. The Belastingdienst calls these “gerichte vrijstellingen” (targeted exemptions). Therefore, they do not eat into your WKR budget. Common 2026 examples include:
- Commuting and business travel at €0.23 per kilometre
- Working-from-home allowance of €2.45 per day
- Study costs and professional development
- Tools, equipment and ICT under the necessity criterion
- Certain meals, relocation costs and work clothing
Additionally, fixed items such as office coffee qualify as nil-valuations and also sit outside the free margin.
Common allowances inside the WKR free margin
Many popular perks do count against the vrije ruimte. For example, Christmas gifts, offsite staff parties, sports memberships and net bonuses all sit inside the werkkostenregeling. Moreover, you must designate them as “final levy wages” before paying them. Otherwise, the tax office treats them as regular salary. That raises wage tax and social security. As a rule, document every designation in your payroll administration before year-end.
What happens if you exceed the free margin?
If your spending exceeds the free margin, you pay 80% final levy on the excess. The employer pays this levy, not the employee. So the cost of overshooting adds up fast. Importantly, you only settle the WKR balance once per year, in the second payroll period of the following year. Therefore, mid-year tracking matters. Many Dutch payroll providers offer dashboards that show your remaining room.
WKR tips for foreign employers
Foreign employers often overlook the werkkostenregeling because no similar scheme exists in their home country. First, register the Dutch wage tax base correctly, since the free margin depends on it. Second, log every reimbursement against the right WKR category. Third, designate items as final levy wages on time. Finally, work with a Dutch payroll partner who tracks usage monthly. Otherwise, surprise levies appear at year-end and erode the value of your local hire.
Final words
The werkkostenregeling is a real lever, not just paperwork. Used well, it lowers your effective payroll cost while boosting employee perks. Used badly, it triggers an 80% levy that eats your hiring budget. Contact Octagon Professionals for tailored support on Dutch payroll, EOR and WKR planning.
Frequently asked questions
What is the werkkostenregeling in simple terms?
The werkkostenregeling is the Dutch rule that lets employers reimburse staff or give perks tax-free, up to a yearly budget. The budget depends on the company’s total wage bill. Above the budget, the employer pays an 80% levy on the excess amount.
How much is the WKR free margin in 2026?
In 2026 the WKR free margin equals 2.00% of the first €400,000 of taxable wages and 1.18% on the part above €400,000. These percentages match 2025. The first bracket then rises to 2.16% from 1 January 2027.
What is the 80% eindheffing in the werkkostenregeling?
The 80% eindheffing is the final levy that an employer pays when total designated reimbursements exceed the werkkostenregeling free margin. The employer settles it once per year in the next payroll cycle. Employees themselves never owe this tax.
Can a foreign employer use the werkkostenregeling?
Yes. Any employer with a Dutch wage tax registration must apply the werkkostenregeling, including foreign companies. Therefore, multinationals running a shadow payroll or using a Dutch employer of record benefit from the same free margin as local Dutch businesses.
Does the home-working allowance count toward the WKR margin?
No. The €2.45 daily home-working allowance is a targeted exemption in 2026. It sits outside the werkkostenregeling free margin. However, you may not combine it with the €0.23 commuting allowance on the same day, since both cover the same workday.
