Employee tax declaration

What it means

The declaration is the form by which an employee asks the employer to apply, already in the monthly payroll, the tax-free allowance for the taxpayer and the child tax bonus for dependent children.

It is not a tax return, nor a request for the annual reconciliation, only an instruction to payroll. For the same period an employee may have it signed with one employer only, even when working for several at once.

The declaration covers only the personal tax-free allowance and the child tax bonus. The allowance for a spouse or the tax bonus on mortgage interest paid cannot be claimed monthly through it; they are claimed only after the year ends, in the annual tax settlement or in a tax return.

How it works in practice

It is signed on joining, by the end of the month of entry, and stays valid without being renewed each year. Changes such as a child born, an old-age pension granted or a second employer are reported by the end of the month in which they happen.

Payroll files the signed declaration in the personal file: it is the document that justifies a lower payroll tax advance when the tax office asks. Without it full tax is withheld and the employee recovers it only in the annual reconciliation or in a return.

A student on a work agreement with a small monthly income often does not sign the declaration. The employer then withholds withholding tax on income up to the statutory threshold, which is final and can only be recovered through a tax return. With a signed declaration an advance is withheld instead, and on a low income it comes out at zero.

What to watch out for

An employee signs the declaration with two employers at once and the allowance is applied twice. The annual reconciliation then recalculates the tax correctly and the employer withholds the underpayment from pay, as a rule in one go from the next month’s wages.

The employee does not report that the child has finished school, and the employer keeps paying the tax bonus. A bonus claimed without entitlement is reversed in the annual settlement and deducted from pay, and if the employer has nothing on the personnel file to support its decision, it has to explain at an inspection why it granted the bonus.