How will the wage tax reduction be processed in payroll?
The wage tax reduction will be activated by entering wage code 490 under ‘fixed wage codes & taxed fringe benefits’ for the employee concerned.
The amount to be entered concerns the amount of the wage tax deduction per selected payment period. If it concerns, for instance, a wage tax reduction of ANG 12,000 per year, then ANG 1,000 should be entered under wage code 490. This is applicable in Curacao, St. Maarten and BES payrolls in case Wage Tax is calculated based in the Wage Tax tables and Extra Income Tax tables. This is not applicable if the Wage Tax is calculated based on the annual income and the annual Income Tax table.
Aruba is different - in an Aruba payroll you must enter the result of the total annual amount of the Wage tax reduction (in Dutch: Beschikking vermindering loon) divided by the total number of wage periods per year. So, if you run a monthly payroll, you must divide the annual amount by 12 months. Example: the annual amount of the Wage tax reduction is AWG 18.000,00 and you process a monthly payroll, in that case you have to enter AWG 1.500,00 per month (18.000/12). You must always enter this amount, even if the Wage tax reduction is added later in the fiscal year. After processing a pay run you can consult report A23 and check whether the correct annual amount of the wage tax reduction is taken into account.
The wage tax reduction is not visible in the gross-net calculation part in the pay slip, but it will be visible at the bottom of the pay slip where also other tax items such as a the fiscal allowances are mentioned.
During a transition to a new fiscal year, wage code 490 will be set to zero, because the wage tax reduction has to be applied for every year again.