Starting foreign companies for payroll taxes

Dutch Tax and Customs Administration

The algorithm 'Starting Foreign Companies for Payroll Taxes' helps Tax Administration staff to monitor correct and complete deduction and remittance of payroll taxes for foreign companies. The algorithm helps Tax Administration employees respond to potentially incorrect returns.

Last change on 29th of January 2025, at 9:31 (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/algoritme-startende-buitenlandse-ondernemingen-voor-loonheffingen/

Responsible use

Goal and impact

The Tax Authority checks withholding agents for correct and complete declaration and payment of payroll taxes. Payroll taxes consist of wage tax, national insurance contributions, employee insurance and the income-related Healthcare Insurance Act contribution. Withholding agents (such as an employer, pension fund or benefits agency) deduct the wage tax and national insurance contributions from their employee's wages and pay them to the Tax Administration. The employee insurance contributions and income-dependent Healthcare Insurance Act contribution are not deducted from the employee's wage, but are paid by the employer to the Tax Administration.

The 'Starting foreign companies for Payroll Taxes' algorithm (hereafter: the Starters algorithm) looks at companies that are established abroad and carry out activities in the Netherlands, as a result of which they are obliged to file payroll tax returns in the Netherlands.

The Algorithm Starters helps Tax Authorities staff monitor compliance with filing a correct payroll tax return. It is designed to target foreign companies starting up and employing employees living and/or working in the Netherlands. The algorithm looks for foreign companies where there may be a higher risk of filing an incorrect wage tax return. The algorithm leads to supervision of foreign companies starting work in the Netherlands.

The adverse consequences of an incorrect return include the following:

• The company pays too little payroll taxes.
• Errors made in the returns are not corrected and keep coming back.
• Unnecessary additional tax assessments and fines may be imposed.
• Incorrect employee details are declared, with possible consequences for benefits.

The Starters algorithm combines different types of data to detect indications of situations where there may be a potentially incorrect declaration.

Based on the indications from the algorithm, the processor will assess the first wage declarations on certain points. This assessment will take place in different ways, depending on what is found in these wage returns. It is the Tax Administration's handler who ultimately determines whether the wage declarations contain inaccuracies.

Considerations

The Starters algorithm is important in supporting Tax Administration staff in supervising foreign start-ups that have to file payroll tax returns in the Netherlands for the first time. As a result, the assessment is more careful, efficient and unambiguous.

The algorithm contributes to the systematic and accurate checking of returns.

With this algorithm, the Tax and Customs Administration can deploy supervisory capacity more efficiently. The use of the algorithm increases the chances of approaching the right business for an interview or investigation. Through the results from the algorithm, the Tax and Customs Administration can also act proactively through, for example, additional information.

Human intervention

Human intervention in the Tax Administration context implies that a competent and knowledgeable employee plays a substantial role in decision-making.

The operation of the algorithm always involves human intervention. The algorithm detects and selects. It is the Tax Administration employee who makes the decision whether to contact the withholding agent.

Risk management

Selection rules in the algorithm are tested against non-discrimination laws. Processing as little personal data as possible reduces the risk of direct discrimination. Employees involved in developing and managing the algorithms receive training on data protection and bias.

There are no rules in the algorithm that use the personal data present, it only tests for the objective tax data present. By doing so, the Inland Revenue prevents any possible discrimination from using the algorithm.

The General Administrative Law Act (Awb) requires the government's actions to be transparent and lawful. The Tax and Customs Administration observes the general principles of proper administration when applying and developing algorithms.

The algorithm uses data collected under various tax laws. As required by the AVG, no more data is used than necessary.

The use of the data is tested against the General Data Protection Regulation (AVG). The testing of personal data highlights any privacy risks and appropriate measures can be taken.

The AVG prescribes that no more data should be used than necessary. This is called data minimisation. The Tax Administration regularly examines whether the data used are still necessary and can therefore be used. The algorithm Starters does not use any special personal data.

The selection rules are reviewed periodically and adjusted if necessary to remain in compliance with laws and regulations.

Legal basis

1. General State Tax Act
2. General Administrative Law Act
3. General Data Protection Regulation
4. General Data Protection Regulation (Implementation) Act
5. Payroll Tax Act 1964
6. Social Insurance (Funding) Act
7. Basic Social Security Regulation 883/2004
8. Social Security Implementing Regulation 987/2009
9. General provisions Citizen Service Number Act
10. 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/
• Basisverordening Sociale zekerheid 883/2004: https://eur-lex.europa.eu/legal-content/NL/TXT/PDF/?uri=CELEX:02004R0883-20190731
• Toepassingsverordening sociale zekerheid 987/2009: https://eur-lex.europa.eu/legal-content/NL/TXT/PDF/?uri=CELEX:32009R0987&from=NL
• Wet algemene bepalingen Burgerservicenummer: https://wetten.overheid.nl/BWBR0022428/
• Archiefwet 1995: https://wetten.overheid.nl/BWBR0007376/

Operations

Data

1. Identifying data (including BSN)
2. Identifying company data (including tax number)
3. Payroll tax return data

Links to data sources

• Identificerende gegevens : Basisregistratie Personen (BRP)
• Identificerende bedrijfsgegevens : Kamer van Koophandel
• Aangiftegegevens Loonheffingen: Belastingdienst

Technical design

The algorithm consists of selection rules created by content experts based on laws, regulations and expertise.

The algorithm is not self-learning. That means it does not evolve as it is used.

External provider

The algorithm was developed by Tax Administration staff and is also maintained internally.