Previous period payroll corrections in the Netherlands

The periodical wage tax return is accompanied by and based on a range of employee and income data. This data is processed by the Dutch tax authorities not only for determining the proper withholding obligation but also for providing other government bodies (like the Dutch Social Security Office ('SVB') and the Employee Insurance Agency ('UWV') with relevant information about the employee, the employer and the (type of) income of the employee.

The UWV stores this information in the policy administration, which can ultimately be used to determine the correct number of benefits and allowances to which employees are legally entitled. That is why the employee data must be complete.

If, after the filing and payment of wage tax, it appears that an incorrect or incomplete wage tax return has been filed, the law provides a sophisticated system for making so-called corrections. It depends on the nature of the omission and how corrections must be made. There are four ways allowed to make corrections:   

1. Resend the complete payroll return (including attachments);
2. File a supplementary return;
3. File a correction with a return;
4. File a single correction.

Which correction is required depends on:

• The year for which you want to correct;
• The tax return period;
• How the withholding agent files its returns: with a third-party filing software, such as the one we are using for our clients, or with the software of the Dutch tax authorities.

The withholding agent (the employer) must make the corrections as soon as they are discovered. Furthermore, it is common practice that the Dutch tax authorities report back if they find omissions that require correction. The Dutch tax authorities can force these corrections through an additional assessment that includes penalties and interest if the withholding company does not make the corrections voluntarily, which usually is the starting point for further investigation and possibly a full tax audit.