Payroll tax risk model - Supervision of foreign service providers for payroll taxes (TBD)

Dutch Tax and Customs Administration

The 'Supervision of Foreign Service Providers (TBD)' algorithm is part of the Payroll Tax Risk Model, which helps Tax Administration staff supervise the correct and complete withholding and remittance of payroll taxes.

Last change on 26th of November 2024, at 15:35 (CET) | Publication Standard 1.0

• Publication category: Impactful algorithms
• Impact assessment: Field not filled in.
• Status: In use

General information

Theme

Public finance

Begin date

Field not filled in.

Contact information

[e-mail]

Link to publication website

https://over-ons.belastingdienst.nl/onderwerpen/omgaan-met-gegevens/algoritmeregister/

Link to source registration

https://over-ons.belastingdienst.nl/onderwerpen/omgaan-met-gegevens/algoritmeregister/risicomodel-loonheffingen-toezicht-op-juiste-kwalificatie-arbeidsrelaties-tka/

Responsible use

Goal and impact

The Tax Authority supervises the correct and complete withholding and remittance of payroll taxes. Payroll taxes consist of wage tax, national insurance contributions, employee insurance contributions and income-related healthcare insurance contributions, and must be remitted by employers via the payroll tax return. The payroll tax risk model helps Tax and Customs Administration staff monitor proper compliance with legislation relevant to payroll taxes.

There are several laws and regulations that affect this supervision. One such law is the Law on Working Conditions for Posted Workers in the EU (WagwEU). This regulates the right to the main conditions of employment for workers who come to work temporarily in the Netherlands. There are a number of administrative obligations that are part of this law. One of these obligations concerns the reporting of workers posted in the Netherlands by the foreign service provider. This is done through a specific online reporting office. The Tax and Customs Administration receives these reports of employees posted in the Netherlands from the Social Insurance Bank to carry out supervision.

The algorithm TBD is designed to detect foreign service providers who may have wrongly failed to pay payroll taxes for employees posted in the Netherlands. It can then investigate whether wage taxes are indeed wrongly not remitted. This is done by calling, sending a letter or via an inspection visit, among other things.

Considerations

This algorithm allows the Tax and Customs Administration to use its limited supervisory capacity more efficiently. The use of the algorithm increases the chances of approaching the right foreign service provider for an interview or investigation.

The use of algorithms makes supervision more efficient and effective than if detection and selection were done manually. Using the results from the algorithm, the Tax Administration can also act proactively by, for example, providing additional information.

Human intervention

The algorithm TBD is designed to detect foreign service providers who may have wrongly failed to remit payroll taxes for employees posted in the Netherlands. It can then investigate whether indeed no payroll taxes have been wrongly withheld. This is done by calling, sending a letter or via an inspection visit, among other things.

Risk management

The use of the data is tested against the General Data Protection Regulation (GDPR). The Tax Administration avoids direct discrimination with the algorithms by using protected personal data, such as ethnic origin, as little as possible.

The algorithm TBD does process the nationality of posted employees. However, nationality is not a selection criterion, but is used so that Tax Administration staff can determine which legislation applies when dealing with a signal.

The decision rules are reviewed periodically and adjusted if necessary to, among other things, remain compliant with laws and regulations.

For the development of algorithms, the Tax and Customs Administration has drawn up conditions (a quality framework). This contains rules and agreements that are followed when developing the algorithm. The conditions of the Audit Department Rijk (ADR) are leading in this respect. When changes are made to one of the algorithms, the Tax and Customs Administration checks whether the algorithms still meet the quality requirements.

The use of the relevant data is tested against the relevant legislation. The AVG prescribes that we should not use more data than necessary. This is called data minimisation. The Tax Authority regularly examines whether the data used is still necessary and therefore may be used. If this is not the case, the algorithm is adjusted and this data is also no longer used.

Legal basis

• General State Tax Act
• General Administrative Law Act
• General Data Protection Regulation
• General Data Protection Regulation (Implementation) Act
• Payroll Tax Act 1964
• Social Insurance (Funding) Act
• Act on Working Conditions for Posted Workers in the European Union
• Income Tax Act 2001
• Corporation Tax Act 1969
• Turnover Tax Act 1968
• Citizen Service Number (General Provisions) Act
• Archives Act 1995

Links to legal bases

• Algemene wet inzake rijksbelastingen: https://wetten.overheid.nl/BWBR0002320/
• Algemene wet bestuursrecht: https://wetten.overheid.nl/BWBR0005537
• Algemene verordening gegevensbescherming: https://eur-lex.europa.eu/legal-content/NL/TXT/HTML/?uri=CELEX:32016R0679
• Uitvoeringswet algemene verordening gegevensbescherming: https://wetten.overheid.nl/BWBR0040940
• Wet op de loonbelasting 1964: https://wetten.overheid.nl/BWBR0002471
• Wet financiering sociale verzekeringen: https://wetten.overheid.nl/BWBR0017745
• Wet arbeidsvoorwaarden gedetacheerde werknemers in de Europese Unie : https://wetten.overheid.nl/BWBR0038054
• Wet inkomstenbelasting 2001: https://wetten.overheid.nl/BWBR0011353
• Wet op de vennootschapsbelasting 1969: https://wetten.overheid.nl/BWBR0002672
• Wet op de omzetbelasting 1968: https://wetten.overheid.nl/BWBR0002629/
• Wet algemene bepalingen burgerservicenummer: https://wetten.overheid.nl/BWBR0022428/
• Archiefwet 1995: https://wetten.overheid.nl/BWBR0007376/

Operations

Data

• Identifying personal data (including BSN)
• Identifying company data (including tax number)
• Payroll data (BSN employee)
• Wage tax return details
• Turnover tax return details (tax number)
• Corporate income tax return details (tax number)
• WagwEU notifications

Links to data sources

• Identificerende persoonsgegevens (o.a. BSN): Basisregistratie Personen (BRP)
• Identificerende bedrijfsgegevens (o.a. fiscaal nummer): Kamer van Koophandel (KvK)
• Loongegevens (BSN werknemer): Uitvoeringsinstituut Werknemersverzekeringen (UWV)
• Aangiftegegevens Loonheffingen: Belastingdienst
• Aangiftegegevens Omzetbelasting (fiscaal nummer): Belastingdienst
• Aangiftegegevens Vennootschapsbelasting (fiscaal nummer): Belastingdienst
• WagwEU meldingen: Sociale Verzekeringsbank (SVB)

Technical design

The algorithm consists of decision rules created in collaboration with content experts and lawyers.

The algorithm is not self-learning. This means that it does not evolve while being used.

External provider

The algorithm was developed by the Inland Revenue and is also maintained internally.