Court in The Hague has ruled that the Tax and Customs Administration is correct to tax a ZEZ payment as wages rather than as business profits.
ZEZ
ZEZ stands for Maternity and Childbirth Benefit for the Self-Employed. Under this scheme, a woman who ran a sole trader business received a benefit from the UWV. The UWV deducts payroll taxes and health insurance contributions from this benefit. However, the business owner argues that the ZEZ benefit should be included as profit from her sole trader business in her income tax assessment.
The significance of this is that the SME profit allowance (14%) is applied to the profit, meaning that less income tax is payable on profit than on wages. This has no bearing on the self-employed person’s allowance, as pregnant businesswomen are permitted, for a period of 16 weeks, to count their working hours as if they had continued to work full-time throughout that period.
Absorption
Nor can the ZEZ benefit be attributed to the company (absorption). This is only possible if there is a sufficient link to the company’s activities. This is not the case, as the benefit was introduced as a general income support measure, intended to protect the health of mother and child.
Nor is it contrary to the purpose of the scheme for the benefit to be taxed in full. According to the Court, the businesswoman does not need to be in exactly the same (tax) circumstances as she would have been had she not been pregnant.