Dutch court ruling on tax withholding for back-payments of benefits, Digi Mart USA News (Northern Netherlands): The Netherlands’ Rechtbank Noord-Nederland has signaled a tax problem involving back-payments of benefits. The court found that a back-payment was correctly taxed in 2023, because it was paid out in that year and the law follows that timing.
However, the court said the UWV, the Dutch employee insurance agency, withheld too little wage tax on the back-payment. At the time, it was already foreseeable that the woman concerned would later have to pay additional tax.
The court noted that the UWV formally followed the rules. It said, however, that the agency could have chosen another approach that would have led to higher withholding and avoided the problem.
In the court’s view, the Tax Authorities’ inspector should have weighed who should bear the shortfall. Because the UWV had withheld too little, the court ruled that the inspector should have collected the unpaid wage tax from the UWV rather than from the woman.
The court said the issue is likely to recur with back-payments of benefits. Recipients first receive too much from one government body and may later have to return it to another, which the court considers undesirable.
It called on implementing agencies and lawmakers to resolve the problem.
