When a worker submits a lawsuit to the competent court for unpaid salaries, the salary must be sued in the gross value, i.e. it must include the contributions from salaries, income tax and surtax. Since, according to the Labour Act, salaries are considered to be gross salaries, which is also stated in the provisions of the Income Tax Act regulating taxation of salaries by a court decision, this means that the court should not even accept a lawsuit if the salary does not include all the salary elements. However, if this occurs, or if the salaries are paid according to the out-of-court settlement, then the tax is paid according to the regulations in force on the day of payment. In this case, tax progression and net salary reductions will occur, unless the salary refers to the period from December 2016 and on.
Besides, it should be pointed out that the salaries paid according to court decisions are always regarded as income from independent work and subject to taxation regardless of the fact that they have been stated as damages in the lawsuit. The article explains the procedure of calculating contributions and taxes if the salaries are paid according to the court decisions and in the case when they are paid according to the out –of--court settlement.
1. Introduction
2. Issues to be considered upon payment of salaries according to the court decision
3. Use of personal exemption from the previous taxation periods
4. Tax rates and tax brackets to be applied upon calculation of income tax for the previous taxation periods
5. How to treat default interests
6. Tax position of default interests calculated on contributions, income tax and surtax according to court decisions
7. How to calculate default interests
8. How to act in the case when the salary is paid according to the off-court settlement
9. How to treat the sued non-taxable receipts
10. Payment of salaries in distraint procedure