A person is entitled to the employment tax credit if they receive income from employment. Since 1 January 2020, a benefit under the Sickness Benefits Act (ZW benefit) is only counted as income from employment if the employment relationship has not yet been terminated. The law now therefore distinguishes between sick employees with an ongoing employment contract and sick people without an employment contract. For the latter group, including people whose employment contract was terminated whilst they were ill, the ZW benefit no longer counts towards the employment tax credit.
Repaying the employment tax credit
A man joined his now former employer in 1992. In April 2021, they entered into a settlement agreement, in which they agreed that the employment contract would end by mutual consent with effect from 1 September 2021. In May 2021, the man reported sick. From that point onwards, he received sickness benefit (ZW) until May 2023. In his 2022 tax return, the man declared this income as income from current employment. However, the tax inspector assessed his tax liability on the basis of income from previous employment, meaning that the man was not entitled to the employed person’s tax credit.
Own-risk carrier
The man objects. In his view, the employment relationship is still in force. He argues that a statutory dismissal cannot take effect whilst he is on sick leave. He also refers to the payslip for December 2022 and the annual statements (2021–2023), in which he is referred to as an 'employee' and which state 'date of commencement of employment: 1 September 2021'. The inspector states that the employment relationship was terminated by mutual consent on 31 August 2021. The sickness benefit is paid by the former employer as a self-insured party and not in the context of an ongoing employment relationship.
Not entitled to the working tax credit
The court rules that there is no employment relationship. The employment relationship was terminated with effect from 1 September 2021 by virtue of the settlement agreement. The man has not provided any evidence that this agreement is invalid or has been revoked. The entries on the payslips and annual statements, such as 'date of commencement of employment: 1 September 2021' or 'employee', are not decisive. This is because the payslip also states the status 'recipient of ZW benefit'. The former employer assumed that the employment relationship continued until 1 September 2021, but not beyond that date. The court notes that, upon recovery after 1 September 2021, the man would no longer receive any wages from his former employer, as the employment contract no longer exists. As this does not concern a sickness benefit (ZW) received whilst in ongoing employment, the benefit does not count as earned income. Consequently, there is no entitlement to the employed person’s tax credit.