The discretionary scope

Many employers find it difficult to determine which components are allowed to be allocated to the discretionary scope. It is important to make a correct assessment, as a wrong one may have unintended consequences. In this chapter we will focus on the discretionary scope and how you can put it to good use.

What is the discretionary scope?

The discretionary scope is comprised of a percentage of a company’s wage bill, which includes the total taxable income of all employees. For example, basic salaries and other components like the fiscal addition for a company car are included.

There are two rates that apply to the discretionary scope in 2026: 2 percent over the first 400.000 and 1.18 percent over the excess.

Which components can be allocated to the discretionary scope?

All reimbursements, allowances, or benefits in kind that are not ‘specifically exempt’, are not ‘intermediary costs’, or are valued as ‘zero’, may be allocated to the discretionary scope. However, one important condition applies: the component or amount must be customary. If this condition is met, the employer can designate the reimbursement as net salary.

Examples of specific exemptions include a travel allowance with a maximum of 23 cents per kilometer, public transport costs, costs for a certificate for conduct, a work from home allowance with a maximum of €2,45 per day, or meals during business trips.

Examples of intermediary costs include advance costs made by employees for which they can be reimbursed afterwards, such as costs made while on the road for business, or stationary. If the employee wants the costs made returned, a receipt is generally required.

Examples of zero valuations include work clothes, consumptions at the workspace during office hours – such as coffee, tea, and cookies. Note, consumptions can only be valued at zero as long as they do not constitute a meal. If a meal is provided, there is a fixed rate of €3,95 that can either be included as a fiscal addition in the employee’s salary, or the costs can be designated as a final levy component and included in the discretionary scope.

How freely can you assign components to the discretionary scope?

You can assign costs to the discretionary scope freely – to a certain extent. In general, the scope is meant for matters for which you don’t want to tax your employee. If you want to gift a bike, for example, you can use the discretionary scope to do so untaxed. Other examples include: a bonus, home office allowance, gym membership, et cetera.

The customary test

When assigning components to the discretionary scope, the components must meet the customary test. This test states that the allowances or benefits in kind provided are not allowed to deviate more than 30 percent from what is customary in similar circumstances. For example, when providing a bike tax-free to employees, a bike of 10.000 euros is not considered customary, as that is well over 30 percent more than what is considered to be a customary amount for a bike. What is considered customary can be different per company and per industry.

De deviation of 30 percent does not count for the aforementioned maximum amount of 2.400 euros. Reimbursements, allowances, benefits in kind, or provisions up to 2.400 euros is the maximum that is considered to be customary per person per year. The following criteria are considered in the customary test:

  • The nature of reimbursements and provisions, and their value;
  • The number of reimbursements and provisions;
  • Who are the recipients of the reimbursements and provisions;
  • Whether tariff advantages play a crucial role when designating the component as a final levy one.

What if the discretionary scope is exceeded?

If the costs allocated to the discretionary scope exceed the limit, the employer is responsible for paying final levy taxes; the employer must pay an 80 percent final levy over the surplus amount. This amount, when applicable, must be included when filing the payroll tax return over the second month of the year that follows. Keeping track of the limit of the scope is the employer’s responsibility, and you cannot retrieve these potential costs from employees.

The discretionary scope in action: a few notable points and tipsHere are some common mistakes and tips:

Here are some common mistakes and tips:

  • Within bigger companies, often different departments are involved in matters relating to the WKR, e.g., HR, finance, and payroll. Because of this, it is important to have good communication regarding WKR policy and expenses. It might be useful to appoint someone who is responsible for managing all things WKR related.
  • Processing incorrect entries in the financial administration might lead to insufficient insight in expenditure. This can result in exceeding the scope without realising it.
  • Mistakes can be also made in the calculations of the discretionary scope. Using the wrong payroll information will lead to an incorrect scope limit.
  • Tip: when providing employees with fixed costs reimbursements each month, it is important to be able to substantiate these costs. Recent details of the nature and the amounts covered are necessary to provide. If these details are not available, the costs cannot be reimbursed as a specific exemption or intermediary cost and must instead be allocated to the discretionary scope. This is why research into fixed costs reimbursements are often worth the investment.
  • In order to correctly value provisions and gifts and allocate the costs to the discretionary scope, you must register the costs including VAT. Keep in mind that the VAT is not always included in the entries in the general ledger.
  • Tip: it is possible to combine the discretionary scope from multiple subsidiaries into one. This way, the WKR is applied as a group scheme. If one limited liability company exceeds the scope and others do not, it is possible to combine these scopes.
  • Tip: when a company consists of multiple subsidiaries, it is possible to apply for a group scheme. When the group scheme is applied, the discretionary scopes of all subsidiaries are combined into one. Therefore, if the discretionary scope of one limited liability company is exceeded, it is possible to settle the excess amount with the scopes of the others. However, this does mean that the 2% over the first 400.000 euros can only be applied once. Whether or not to apply the group scheme can be made after the calendar year, specifically when filing the tax return for the second period of the next year.
  • A workplace is a place where work is usually carried out and a place for which the employer is responsible for the employees’ health and safety. A party, drinks, or other events that are hosted at the workplace are valued at zero. However, if a meal is involved, this meal’s fixed rate (3,95 euros per meal), must be included in the discretionary scope. If the event takes place outside of the workplace, the invoice costs must be allocated to the scope in its entirety.
  • Tip: please keep the customary test in mind when providing allowances and benefits in kind to employees who earn minimum wage or get an internship allowance. According to the Tax Administration, it is not allowed to allocate mandatory taxed wage components, such as salary, to the discretionary scope in order to provide these components untaxed. Even if this component meets the customary test, it is not allowed to designate a part of their salary or internship allowance as a final levy component.