A wage tax audit is like any audit never an appointment you are looking forward to. Even though the bookkeeping is up to date and you have complied with all the legislation, a missing document could imply a fine. Fines could become a higher income source for the Dutch Government than the actual tax, so it seems.
Wage tax audit
A wage tax audit implies you need to have signed wage tax statements, correct copies of the identification of the employees, original 30% ruling applications on file and if possible the contract details. In the Netherlands a verbal employment contract is as valid as a written employment contract, hence it is not required to have a copy of the employment agreement on file.
If the identification of the employee is not in the file, the Dutch tax office will assume this employee is unidentified, hence unknown, therefore the maximum tax rate should have been applied for. The strange thing is though, this employee could be sitting in the office during the audit with his or her ID in his or her hand, but if not in the file, this could be an issue. Fortunately most employees of the tax office executing the audit give you room to update the file, as it is not their intention to go home with the highest fine rate, but to have the employer understand that rules needs to be obeyed. That can also be achieved without fine.
Then again, not all tax office employees are alike.
Unfair wage tax audit
A foundation with the aim to educate painters who where employed by this foundation as well was audited for the years 2011 and 2012. In both years this foundation claimed a wage tax discount for education. The tax inspector executing the audit demanded to see the statements on bases of which this discount was claimed. This discount was claimed based on hiring painters that were unemployed, from the unemployment registrar. That yields a discount. Unfortunately, such statements were never applied for. A huge fine for theses years was issued and the wage tax discount was to be paid now afterall.
During the audit the tax inspector stated that if no statement were present, the foundation could apply for them now retro actively by the unemployment agency, the UWV, he would accept these statement. The UWV was willing to do that, so how is it then possible the audit resulted in a fine in this field?
The same tax inspector who made this suggestion went to the UWV without informing the foundation, and stated to the UWV that if they would issue these statements, all other employers in the same situation would do the same. Imagine that work load. As the UWV has already enough work load, the UWV decided not to grant the request of the foundation, hence no statements were issued.
In January 2016 the court decided that the tax inspector had harmed the fair play principle of the audit by going to the UWV which in fact prohibited the foundation to meet the audit requests. The fine was cancelled, the wage tax due was cancelled as well, as the court stated that the wage tax discounts were granted, hence the wage administration was correct.
Orange Tax Services
Processing a payroll administration has become more complex over time. No only you have the formalities as mentioned above, but you also need to keep an eye on the work cost principle. Moreover, we experience busloads of managing directors of a BV company, where they are the only employee, who came up with the bright idea to keep their salary at the minimum income of EUR 44.000 and pay the balance as a dividend. This practise yields, we think, the highest rates of fines by the Dutch tax office as it is very easy to determine via the online tax systems.
