KEY ELEMENTS OF A GOODWAGE ADMINISTRATION TAX DEPARTMENT ST. MAARTEN F acilitator: M aria P . Bas s , LLM - Ins p e ctor of Taxe s
Programs Welcome by Ms. Alicia Barrys Introduction by Mr. Roland Richardson Head of Inspectorates Presentation Wage Tax Administration by Ms. Maria Bass - Inspector of Taxess Question and Answer session Closing remarks
What is a wage administration?s A wage administration is the process of compensating an organizations employees in accordance with accepted policy and procedures.
What are the key elements of a good wage administration?s The periodic payroll, which is a critical component of any organizations functioning.s Monitoring and evaluating employees compensation. This is an ongoing function.s Obliged to conduct an administration of the assets and liabilities and of everything concerning the company in accordance with the requirements of that company and keep the corresponding data carriers in such a manner that at all times the rights and obligations and also the data that are of importance for levying tax clearly appear from this (art 43 GOFT).s Records and accounts are kept for a period of at least 10 years.
Common and reoccuring errors in a wage administration / payroll:s Casual labourers are not listed as employees.s Not all benefits that an employee receives is accounted for as wage.s The employer does not have the correct / complete information of the employees.s The monthly declarations are not filed / not paid.s The monthly declarations are not filed / not paid on time.s The monthly amounts declared are not equal to the monhtly amounts paid.s The wage tax is not correctly calculated.s Boarding / free housing provided to employee not declared as salary
What are the consequences of a poor administration:s Additional assessments / fines,s More advisor’s fees - > less profit. What are the results of a good administration:s Less or no additional assessments / fines,s Less advisor’s fees - > more profit.
How can a poor administration turn into a good administration?s Knowledges Will.
Knowledge What is wage tax and your obligations. Procedures Wage tax Key words – Employee – Employment – Withholding agent – Salary (wage).
s Wage tax: a tax that is levied from employees on the net yearly salary (art 1 junto art. 5. WTO).s An employee: is a natural person in employment by a withholding agent or who receives from a withholding agent a salary (..). (art 2, section 1 WTO).s Employment: any labour relationship in which the person assigning the work has a position of authority over the person carrying out the work
Withholding agent:s any person who employs one or more persons.s any person who pays to one or more persons a salary owed (…) (art 3, section 1 WTO). Salary: everything earned from current or past employment under whatsoever name and in whatsoever form (art 6, section 1 WTO).s The definition is very broad: - Remuneration in cash - Remuneration in kind (fringe benefits) : * Market value: max. the amount of the resulting savings (Art 6c, sec. 1 WTO). - Tips - Causal relation: relation between cause and result.
s Remuneration in kind (fringe benefits) : - Passenger car provided to employee: Remuneration = at least equal to 15% of the new value of the car minus the amount owed by the employee for the private use of the car. Private use if the car is also the trips from home to work and vice versa. - Products from the company given to the employee or sold to the employee for a lower price. - Meals: Breakfast Naf 2,50 Bread meal “ 2,50 Warm meal “ 5,00
s Remuneration in kind (fringe benefits) continues: - Boarding provided to employee: Remuneration: at least Naf. 300. - Free housing: A house is provided to the employee without costs. Remuneration: the rental value of the house. If the savings of the employee is less than the amount of the rental value and this can be proving by the employee, the employee can request a ruling from the Inspector to tax the lower amount. If the money is given to the employee to pay the rent, the full amount will be considered as remuneration and taxed.
s Remuneration in kind (fringe benefits) continues: - Costs of domestic worker, utilities If the employee receives an allowance for these expenses, the allowance is taxed as salary in cash, if the expenses are paid by the company, they are taxed as salary in kind. - Telephone: if a telephone connection at home is provided to the employee and the bills are paid by the company: at least Naf. 480,00 is taxed as salary in kind.
Not part of the salary are (art 6 sec 3): a. The premium paid by the employer based on the National Ordinance accident Insurance and the National Ordinance Health Insurance; b. The one-time benefits and disbursements in connection with the death of the employee – not more than 3x the monthly salary; c. Employer’s contribution based on the National Ordinance General Old Age Insurance and the National Ordinance Widow and Orphan Insurance; d. Employer’s mandatory contributions for pension and to pension funds; e. Expenses paid by the employer on behalf of the employee for medical treatment and care (….);
Not part of the salary are (art 6 sec 3) continues:f. Reimbursements for job related expenses, except in the case of: 1. items as meant in art 9C, par. 1, ITO ’43, with the exception of the letter h; 2. Transportation expenses as meant in art 9C sec. 3 ITO ’43 if more is reimbursed than Naf. 0.35 per kilometer; 3. Fixed allowances not in accordance with the rules to be defined by the Minister of Finance;
Not part of the salary are (art 6 sec 3) continues:g. Disbursements and benefits to compensate for the damage to or loss of personal belongings;h. Disbursements to defray the expenses borne by an employee in connection with his schooling or his following a course of study and the expenses thereof.
Ministerial degree fixed allowances) :Fixed allowances as meant in art 6, sec. 3, letter f,under 3 WTO shall not be a part of salary if:A. the withholding agent can show that said allowances can be considered to serve to defray the necessary expense incurred by the employee to acquire the salary;B. These allowances are specified according to the nature and estimated value of said expense.
s Condition will in any case be fulfilled if a random sample of the actual expenses incurred to acquire the salary is taken every three years, in which the employee maintains a record of the expenses borne by him duiring a period of at least three consecutive months, including relevant invoices and proof of payment thereof.
Salary periods / full year’s salarys A salary earned in a period other than a calendar year will be converted into a full year’s salary (art 7 WTO)s A salary period is the period in which a salary is earned: a. half-day labourers = 520 half days A salary period less 4 hours = half day b. day “ = 260 days c. week “ = 52 weeks d. bi-weekly (quincena) “ = 26 quincenas e. month “ = 12 months f. quarterly “ = 4 quarters
Calculation of salary to be paid out per period based on the “loonstaat” (resident employee) Col 1. Salary in cash+ Col 2. Salary in kind Col 3. Total Salary- Col 4. Fixed job related expenses (Naf 500. pj)-- Col 5. Pension (Employee’s mandatory contributions)- Col 6. *Pr. Health-care expenses for pensioned civil servants pension, *savings and privisional funds: 5% - max Naf. 840 Employee’s mandatory contributions),- Col 7. Decision wage reduction Col 8. Basis for pr. General Old Age Ins (GOAI) / General Widow and Orphan Ins. GWOI) and General AVBZ (3-4-5-6-7).
Calculation of salary to be paid out per period based on the “loonstaat” (resident employee) continues:- Col 9. Pr. GOAI / GWOI (Employee’s mandatory contributions) Col 10. Pr. AVBZ (Employee’s manadatory contributions) Col 11. Total pr. GOAI / GWOI to be paid to the receiver/ SZV. Col 12. Total pr. AVBZ to be paid to the receiver. Col 13. Basis for the wage tax table (8 - 9). Col 14. Wage tax based on wage tax table.- Col 15. Allowance for children, sole earner allowance and senior allowance
Calculation of salary to be paid out per period based on the “loonstaat” (resident employee) continues: Col 16. Wage tax to be withheld (14 – 15); Col 17. Non deductible part of the savings and provisional funds; Col 18. Various non taxable (fixed) allowances; Col 19. Wage to be paid out (1-5-6-9-10-16-17+18).
Allowances St. Maarten 2012 Naf. Basic reduction. 1,833 Child allowance:Ia. - child aged 16 up to and including 26, 652 - living abroad, - for the purpose of following an intermediate - level or higher level vocational, or academic - education or a comparable education;Ib - child aged 16 up to and including 26, 652 - living abroad, - for the purpose of following an educational - Institute that is not available on the island of - the Taxpayer.
Allowances St. Maarten 2012 continuesII - child aged 16 up to and including 26, 325 - living on the island of the taxpayer -- for the purpose of following an intermediate - level or higher level vocational, or academic - education or a comparable educationIII - child aged 16 up to and including 26, 83 - living in the household of the taxpayer, - of whom the time available for employment is - occupied for the greater part by, or in - connection with, the pursuit of an education or vocational training (other than as referred to under categories Ia, Ib or II)
Allowances St. Maarten 2012 continuesIV a child younger than 16 years, Naf. who is a member of the household of the 66 taxpayer. Sole earner allowance 1,224 Senior allowance 924
Rights to child allowance: - the child (own, foster, child of spouse) must fall under one of the four categories. - the situation at the beginning of the year is decisive. The amount can be doubled if the spouse of the married tax payer does not earn any personal income in the sense of art 20 par. 2 ITO. Requirement for sole earner allowance: • Were married the entire year in question, • Live in St. Maarten and • The taxable income of your spouse amounts nil or is (a) negative (amount). Requirement for senior allowance:- Age 60 at the beginning of the calendar year.
Table exceptional remunerations Bonuses, gifts, overtime pay and other remuneration which is normally received once or once per year shall be taxed in accordance with the table for exceptional remunerations (art. 8, sec. 4). Anonymous rates In cases where the employee has not provided the withholding agent with his name, address or place of residence as also in the case that the employee provided incorrect information in this regard and the withholding agent knew this fact or reasonably should have known this fact.s The rate which will be applied is 43% (art 9, sec. 1 WTO).
Obligation of the employee (art. 19A WTO)1. The employee is required to provide the withholding agent with information which may be necessary for the assessment of the tax.2. The employee shall request a wage tax declaration from the withholding agent if a change has occurred in his personal circumstances which bear relevance to the assessment of the tax.3. The employee is required to provide the requested information by returning the signed declaration to the withholding agent, filled out clearly, affirmatively and without reservation, before the first payment of salary for which the information is necessary to withhold the tax.
Obligation of the employer / withholding agent.- The tax will be levied by withholding it from the salary.- The withholding agent is obligated to withhold the tax at the moment that the salary: a. is paid or compensated, is made available to the employee (….) (art. 10 WTO)- The tax return will be filed simultaneously with the payment of the tax withheld (art. 11 WTO).Filing / payments date 2012January Feb. 15, 2012 July Aug. 15, 2012February Mar. 15, 2012 August Sep. 15, 2012March Apr. 16, 2012 September Oct. 15, 2012April May 15, 2012 October Nov. 15, 2012May Jun. 15, 2012 November Dec. 17, 2012June Jul. 16, 2012 December Jan. 15, 2013
s The withholding agent is required to:s a. maintain records of his accounts for the wage tax froms which it appears clearly on what basis and in what manners the tax was calculated and withheld;s b. ask the employee to supply any information which may bes important for the assessment of the tax; c. Provide the Inspector with a summary of the salary earned by the employee during a calendar year, of the taxs withheld and other information, which may be necessarys for the assessment of the income tax.s d. Provide the employee with a summary of the salary earneds by the employee during a calendar year, of the tax withhelds and other information, which may be necessary for thes assessment of the income tax.s Termination of employment – request – within 10 days.
The withholding agent provides a wage tax declaration to the employee:s a. as soon as he becomes liable to withhold wage tax from thes employee;s b. at the request of the employee;s c. as soon as he becomes aware that a change has occurred ins the personal circumstances of the employee which will results in a higher amount of wage tax to be withheld; Wage declaration and wage tax accountss The withholding agent shall keep the wage declaration ands wage tax accounts (loonstaat) for at least 10 years after thes end of the calendar year in which the employment iss terminated (..) (art 19 WTO).
Obligation of the employer / withholding agent continues.The summary wage statement has to be submitted before April 1.Those required to maintain an administration are obliged to provide theInspector with a statement concerning third parties who in the past yearworked or rendered services for them, other than as their employee(art 45 GOFT).The statement must be made on a form which can be obtained fromthe Inspector.Those required to maintain an administration are obliged to provide theInspector with a statement of the employees in employment in the past year,including directors (..). (art 45 GOFT).The Inspector can imposed a fine of Max. Naf 5,000 if the requested infobased on art 45 esc 2 and 3 is not provided, provided too late or isincomplete (art 21A GOFT).
Jointly and severally liable for the tax and administrative fines:s Every one of the directors of a legal entity established on St. Maarten;s Every one of the directors of an entity not qualifying as a legal person or an association.
ProceduresSystem additional assessmentsThe system will generate an additional assessment and fine incases of late filing / late payments.Problem for both parties: - assessments for you and more advisor’s fees - plenty protest letters for us.In these cases you can write a protest letter with proof of filing /payment and come to the Tax department or you can contactyour advisor.
System auditing (jaarwerk)s Compare the amounts filed for wage tax with the amounts paid.s Check if the amounts paid were correctly calculated. “Stoel” auditing and field auditing