To derive the percentage rate used in special tax calculation, you need to determine the employee's taxable income from the previous year. The income value appears in the Last Year Salary field, incorporating the employee's entire taxable income for the year, and not just the income for their individual assignments. Oracle Payroll derives the total, but you can manually enter a value in the Override field, if required. If you enter a value into this field, it automatically overrides any value returned in the Last Year Salary field.
If your employee has multiple assignments, then the system derives the taxable income for each assignment and adds them together to provide the total previous year's taxable income for the employee. You use the total income in the special tax calculation for each assignment.
See: Entering Income Details for Taxation Information
See: Running the Dutch Reset Last Year Salary Override Process
The method for deriving the taxable income in the previous year for an employee depends on which of the following apply for each assignment:
The employee (assignment) worked the whole of the previous year, or the assignment ended part way through the year.
The system derives the total taxable income for the assignment in the previous year, for both standard and special rate, including any retrospective changes, by adding together the values of the appropriate balances: Standard Taxable Income, Special Taxable Income, Retro Standard Taxable Income, Retro Standard Taxable Income Current Quarter and Retro Special Taxable Income.
The employee (assignment) was a new hire at the beginning of a payroll period, in the previous year.
The system derives the previous year's taxable income for an assignment starting part way through the previous year, but at the beginning of a payroll period, for example, the 1st June on a monthly payroll. When calculating the previous year's taxable income for a new hire in the previous year, you must remove any holiday allowance included in the taxable income for the part year, before any calculation is performed by the system.
Attention: When setting up an earnings element for a holiday allowance payment for the Netherlands, you must specify the appropriate secondary element classification for the tax category, for example, Subject to Standard Tax or Subject to Special Tax. Most holiday allowance payments are Subject to Special Tax. The mechanism for calculating the previous year's taxable income always assumes any holiday allowance payment is taxable, and that you specify one of the aforementioned secondary element classifications for the holiday allowance payment element. Therefore, the system assumes the holiday allowance payment will never be non taxable. You must also add the secondary classification Holiday Allowance Payment, to indicate that it is a holiday allowance payment.
The employee (assignment) was a new hire during a payroll period, in the previous year.
The system derives the previous year's taxable income for an assignment starting part way through the previous year, and part way through a payroll period, for example, the 15th June on a monthly payroll. When calculating the previous year's taxable income for a new hire in the previous year, you must remove any holiday allowance included in the taxable income for the part year, before any calculation is performed by the system.
The employee is a new hire in the current year, or was employed in the previous year but did not receive pay.
The system derives the previous years' taxable income for special tax calculation for a new starter in the current year, or an employee who was employed in the previous year but didn't receive any pay- returning a value of zero for annual income. The balance Special Rate Income is referenced for the current period to date, with the value multiplied by the number of periods in the year, providing an estimated annual income.
If the employee started part way through the current period, the period to date value for the income must be pro-rated to a value for the whole period according to the number of week days worked, before being multiplied by the number of periods in the year to provide the estimated annual income.
Note: You must set up the feeds for the balance Special Rate Income. Use this balance to derive the annual income for use in special rate taxation when the employee is a new starter in the current year, or was employed in the previous year but received no pay.