Information session wage tax 2012 (apr 1)

1. KEY ELEMENTS
OF A GOOD
WAGE ADMINISTRATION
TAX DEPARTMENT ST. MAARTEN
F acilitator: M aria P . Bas s , LLM - Ins p e ctor of Taxe s

2. Program
s Welcome by Ms. Alicia Barry
s Introduction by Mr. Roland Richardson
Head of Inspectorate
s Presentation Wage Tax Administration
by Ms. Maria Bass - Inspector of Taxes
s Question and Answer session
Closing remarks

3. What is a wage administration?
s A wage administration is the process of compensating
an organization's employees in accordance with
accepted policy and procedures.

4. What are the key elements of a good wage administration?
s The periodic payroll, which is a critical component of any organization's
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.

5. 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

6. 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.

7. How can a poor administration turn into a good
administration?
s Knowledge
s Will.

8. Knowledge
 What is wage tax and your obligations.
 Procedures
 Wage tax
Key words – Employee
– Employment
– Withholding agent
– Salary (wage).

9. 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

10. 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.

11. 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

12. 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.

13. 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.

14. 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 (….);

15. 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;

16. 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.

17. 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.

18. 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.

19. Salary periods / full year’s salary
s 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

20. 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).

21. 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

22. 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).

23. 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.

24. Allowances St. Maarten 2012 continues
II - 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 education
III - 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)

25. Allowances St. Maarten 2012 continues
IV 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

26. 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.

27. Table exceptional remuneration
s 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 remuneration
s (art. 8, sec. 4).
Anonymous rate
s 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).

28. 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.

29. 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 2012
January Feb. 15, 2012 July Aug. 15, 2012
February Mar. 15, 2012 August Sep. 15, 2012
March Apr. 16, 2012 September Oct. 15, 2012
April May 15, 2012 October Nov. 15, 2012
May Jun. 15, 2012 November Dec. 17, 2012
June Jul. 16, 2012 December Jan. 15, 2013

30. s The withholding agent is required to:
s a. maintain records of his accounts for the wage tax from
s which it appears clearly on what basis and in what manner
s the tax was calculated and withheld;
s b. ask the employee to supply any information which may be
s 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 tax
s withheld and other information, which may be necessary
s for the assessment of the income tax.
s d. Provide the employee with a summary of the salary earned
s by the employee during a calendar year, of the tax withheld
s and other information, which may be necessary for the
s assessment of the income tax.
s Termination of employment – request – within 10 days.

31. The withholding agent provides a wage tax
declaration to the employee:
s
a. as soon as he becomes liable to withhold wage tax from the
s employee;
s b. at the request of the employee;
s c. as soon as he becomes aware that a change has occurred in
s the personal circumstances of the employee which will result
s in a higher amount of wage tax to be withheld;
Wage declaration and wage tax accounts
s
The withholding agent shall keep the wage declaration and
s wage tax accounts (loonstaat) for at least 10 years after the
s end of the calendar year in which the employment is
s terminated (..) (art 19 WTO).

32. 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 the
Inspector with a statement concerning third parties who in the past year
worked 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 from
the Inspector.
Those required to maintain an administration are obliged to provide the
Inspector 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 info
based on art 45 esc 2 and 3 is not provided, provided too late or is
incomplete (art 21A GOFT).

33. 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.

34. Procedures
System additional assessments
The system will generate an additional assessment and fine in
cases 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 contact
your advisor.

35. 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

36. s Q&A