If you made payments to third parties in 2016, the Tax and Customs Administration asks you to before 1 February 2017 declaration to be made. You make this declaration using the form known as IB47. This can be done either on paper or digitally.
Is that necessary?
The obligation to report amounts paid to third parties is set out in the Payroll tax handbook. The Tax and Customs Administration publishes this handbook four times a year. The first edition for 2017 was not yet available at the time of writing.
Naturally, the Tax and Customs Administration cannot impose any obligations on you that are based solely on this Handbook. The reporting of amounts paid to third parties is therefore based on the information obligations set out in the General Tax Act (AWR). The relevant statutory provision stipulates that the Tax and Customs Administration when asked you must be informed.
Persons required to provide information under the AWR:
- legal entities (public limited company, private limited company, foundation, association, co-operative);
- natural persons who run a business or practise a self-employed profession;
- natural persons who are required to deduct tax at source (for payroll taxes);
- of course, individuals who carry out a function.
You do not need to submit the declaration if the person to whom you made the payment:
- was employed by you;
- carried out the work as a self-employed person.
Is the general question, as set out by the Tax and Customs Administration in the Handbook, a sufficient basis for imposing the obligation to declare amounts paid to third parties using form IB47? The tax court has never ruled on this matter.
Why?
The Tax and Customs Administration uses the statement of amounts paid to third parties to check whether the recipients have declared this income in their income tax returns.
For allowances paid tax-free to volunteers under the volunteer scheme, there is no need to submit a statement of amounts paid to third parties. The application of the volunteer scheme is subject to strict conditions, which we have explained in our article The volunteer scheme remains (rightly so) a hot topic.
What is your interest?
As we have indicated above, the question is whether a party required to provide information is obliged to disclose, of their own accord, amounts paid to third parties. However, it generally does not seem very wise to leave it to chance.
Failure to comply with the information obligations set out in the AWR is subject to substantial penalties. In this context, the Tax and Customs Administration may impose an administrative fine, a default penalty or criminal sanctions. Furthermore, by reporting amounts paid to third parties, you are emphasising that you have paid these amounts to individuals who, in your opinion, were not employed by you.