Imposition Of 10% Additional Tax For Employees/Pensioners With Other Income Apart From Employment Income/Pension

In brief

On 19 October 2021 the Tax Department issued Interpretative Circular No.54 ('IC 54') 'Imposition of 10% additional tax for employees with other income apart from employment income'.

The IC 54 relates to Articles 24 and 26 of the Assessment and Collection of Taxes Law.

In detail

The Tax Department issued on 19 October 2021 IC 54 that relates to the imposition of 10% additional tax for employees/pensioners with other income apart from employment income/pension.

IC 54 clarifies that it only applies to:

• employees/pensioners who derive employment income/pension that is higher than any other income they derive (e.g. rental income);
• employees who declare the other income to their employer, who then takes into consideration this other income when withholding income tax.

Where the income tax withheld by the employer corresponds to an income which constitutes at least ¾ (75%) of the chargeable income, then no 10% additional tax should be imposed. However, up to now, given that the taxpayer in the above cases had not submitted a provisional tax calculation, the 10% additional tax was being imposed.

Thus, IC 54 clarifies that:

1. when the amount of income tax withheld by the employer corresponds to at least 75% of the total chargeable income, then the said additional 10% tax will not be imposed, even without submission of a provisional tax calculation;
2. going forward, TAXISnet will not allow a taxpayer to submit an 'employee's income tax return', forcing him/her to instead submit a 'self-employed tax return', where, in the 'employee's income tax return', withholding tax would exceed 35% of the total of salary plus social insurance pension.

The takeaway

IC 54 is expected to clarify the application of Articles 24 and 26 of the Assessment and Collection of Taxes Law and in particular the application of the 10% additional tax for employees that derive income other than employment income.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.