The regulations regarding exemption to pay tax on holiday pay do not apply to PAYE

Section 5-7 of the Tax Payment Act lists the benefits for which you should not deduct withholding tax, but in accordance with section 5-4 of the Tax Payment Act, these provisions do not apply to tax deductions under the PAYE scheme. Employers must use the tax deduction card applicable at the time when the holiday pay is paid, even if the holiday pay was earned earlier.

 

Example

If you're paying out holiday pay in 2019 for pay earned in 2018 and the employee falls under the PAYE scheme, you must deduct taxes according to the rate stated on the tax deduction card for 2019.
The same applies even if the person does not work for you anymore.

 

How do you know if the employee falls under the PAYE scheme?

The employee’s tax deduction card is marked “KildeskattPaaLoenn” (Pay As You Earn). When you retrieve a tax deduction card for a person in the PAYE scheme, you’ll also receive information in Altinn stating that the employee falls under the PAYE scheme and that you should deduct taxes for 12 months.

 

What happens if you do not comply with the obligation to withhold tax?

If taxes are not deducted in accordance with the regulations in the Tax Payment Act, the employer is responsible for the amount, see section 16-20 of the Tax Payment Act.