A director and major shareholder declares a salary of €29,880 for 2023, with €7,442 in payroll tax withheld. However, his private limited company never pays this payroll tax, and the tax inspector therefore does not adjust the figures. The director and major shareholder cannot prove that the payroll tax was in fact withheld. Nevertheless, he is partially vindicated, as the tax inspector cannot demonstrate that the director and major shareholder received the amount in any other way. The court therefore reduces the taxable income by €7,442 to €22,438.
Payroll tax on paper
The director and sole shareholder is the director and sole shareholder of a private limited company. Following a reminder, his income tax return is not submitted until 7 October 2024. The tax assessment dated 11 January 2025 follows the return, but the tax inspector sets the withholding tax to zero. The tax inspector seeks to reverse the burden of proof. The court refuses this. Whilst the return was indeed late, it was submitted well before the tax assessment was issued. The tax inspector can and must therefore take this into account. Consequently, the normal rules of evidence apply.
Contents
Deduction means setting aside part of the gross salary for administrative purposes in order to pay it into the tax authorities. Payment to the tax authorities is not a prerequisite. The director and major shareholder has only his own statement to support this deduction. The private limited company’s accounts have been seized. According to the court, he could still have provided some initial evidence in the form of bank statements, payslips or backups from the external payroll administrator. An argument based on the ‘appearance of deduction’ also fails. According to the court, this principle applies primarily to employers and employees who are independent of one another, which is not the case here.
Didn’t enjoy it
The question then remains as to whether the director and major shareholder did in fact receive the amount. Normally, this is determined by the deduction itself. According to a 2016 Supreme Court ruling, the tax inspector must prove that the amount benefited the employee in some other way. The tax inspector makes no mention of this. The amount of the payroll tax therefore does not form part of taxable income. The director and major shareholder is not entitled to a set-off, but nor does he pay tax on wages that he has not received.
Too late
In a subsequent document, the inspector states that the amount of payroll tax represents missing customary remuneration. For that reason, it must still be taxed. The court considers the reliance on internal set-off to be contrary to the proper conduct of proceedings. The inspector’s position only became clear at the hearing.