COMPLIANCE
to more manageable levels. Employees are placed into one of three ‘baremes’, based on residency and marital status, and in which a basic personal tax allowance has been included in the relevant tax table published for the bareme. The tables increase in monthly income increments of €15 – the employer compares the income assessable with the income column on the tax table and goes down to the next entry. Example l Jean-Paul has taxable income of €3,010 per month l the bareme entry shows deductions for taxable income of €3,000 and €3,015 l tax will be calculated using the entry for €3,000 (which has been calculated on the midpoint between €3,000 and €3,015) Jean-Paul will rectify this position through the submission of an annual tax return, which is mandatory in Belgium. However, if he has only one job and his affairs are straightforward, he can benefit from a simplified declaration – there are a potential 885 boxes to complete but by adopting the simplified declaration, up to 320 boxes are auto-filled based on his employer’s payroll submissions. On average, the simplified return should take around five minutes to complete online. Similar systems operate in the Nordic countries where pre-completed tax returns, based on regular electronic submissions of income data provided by employers, banks and company share registers ease the pain of completing an annual tax return. France l Jean-Paul is therefore likely to have a small underpayment on tax by the end of the year as €30 will have been ‘missed’ from the PWT calculation.
opted for a more straightforward approach. If you were to look at your P60 and work out the percentage that tax makes up of your gross pay, it’s unlikely to exactly match one of the UK’s rates of tax – for example, an individual with taxable income of £30,000 entitled to the standard personal allowance would see £3,484.20 (or 11.61%) deducted. It’s this percentage that France notifies employers to deduct, with the calculation based on the previous year’s income to tax ratio. The employer applies the notified percentage, which is advised to employers electronically by the tax authorities as part of the onboarding process, to total monthly taxable income. There’s no reference to taxable income for the year to date, and no requirement for the employer to pay tax refunds or collect arrears. Should an employee not have a PAS rate notified, then payroll software includes a default rate table that matches the monthly income to a default rate. This is likely to be more than the average taxpayer’s liability – 90% of employed taxpayers in France hold a PAS rate of under 10%, whereas the default rate for someone earning the average salary of €3,275 per month would see a withholding of 11.9%. France came to the concept of a pay as you earn style scheme late, with prelevement a la source only being introduced as a general employer obligation in 2019
an upward variation in their tax deduction by submitting a written request to the employer. This must be actioned on the next available payroll, and the additional tax is usually a dollar-specified amount to be taken each pay period. It must be added to the standard deduction calculated from the relevant tax tables and reported as one sum to the Australian Taxation Office (ATO) on payroll reports. Similar requests might also be received from employees in Sweden, Belgium and the Netherlands. Employees also might ask to pay less tax – again this is a feature of Australian PAYG, but this time, the employee must make the request direct to the ATO who will send an appropriate authorisation to the employer to action. A similar arrangement applies in India, and it’s imperative that the employer verifies the authorisation to reduce or suspend all together withholding. Canada That self-correction under UK PAYE won’t Examples include the Australian pay as you go system, where an employee can apply for an upward variation in their tax deduction by submitting a written request to the employer
occur in countries that use a per pay period system, which
Australia The beauty of the UK system is that it self-corrects for
France came to the concept of a PAYE style scheme late, with prelevement a la source (PAS) only
simply checks monthly income against a monthly tax table. To accommodate one-off peaks in income, the PAYE system will often therefore operate a special calculation against one-off elements of pay. Consider the position in Canada, where the standard calculation refers to per pay period tax tables. There are three possible alternative calculations performed on one- off elements of pay. Clearly, this will need a detailed report produced from the gross-to net-run, to
peaks and troughs in income, but it doesn’t
being introduced as a general employer obligation in 2019. The introduction of PAS brought about a relatively simple obligation for employers to perform. France has multiple rates of income tax on bands of income covering an 11%, 30%, 41% and 45% liability. But instead of attempting to mirror this within the PAS system, France
allow for an individual to volunteer to pay more. Indeed in my 34 years as a payroll professional, I can count the occasions that someone did ask to do so on the fingers of one hand! In other countries, this is a given part of the system. Examples include the Australian pay as you go (PAYG) system, where an employee can apply for
| Professional in Payroll, Pensions and Reward | November 2022 | Issue 85 24
Made with FlippingBook - Online magazine maker