Holiday pay is tax liable income in the year in which it’s paid to you. Holiday pay is, under certain conditions, not subject to withholding tax (no tax deducted) if it’s paid the year after the accrual year.
Holiday pay and tax
Holiday pay is always tax liable and is included in the basis when calculating tax for the income year. Generally, the tax deduction card is adjusted so that some extra tax is deducted from your regular salary payments for the rest of the year, so that tax is not actually deducted from the holiday pay upon payment.
Holiday pay is accrued in the year before you take the actual holiday. The holiday pay must amount to at least 10.2 percent of your salary in the accrual year (12 percent if you have five weeks’ holiday). Employees over the age of 60 are entitled to a minimum of 12.5 percent (14.3 percent in the case of six weeks’ holiday).
The basis for holiday pay is stated on your payslip for the accrual year.
If holiday pay is paid to you in the accrual year, tax will be deducted upon payment. Read more about what your employer have to do, the calculation, and what is and what is not subject to withholding tax.
Remember to check your tax deduction card in order to avoid underpaid tax.
When you are a private employer
Holiday pay does not accrue on salaries for individual assignments. If the work was carried out under an employment relationship, the employee is entitled to holiday pay. All about calculating holiday pay, and what is and what is not subject to withholding tax