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How is the order of tax liabilities determined during alimony payments?
How is the order of tax liabilities determined during alimony payments?
The State Tax Service receives inquiries regarding the order of calculation of taxes and insurance contributions when alimony is withheld from the employment income of individuals. In this regard, it has become necessary to provide a detailed explanation of Article 102.1.5 of the Tax Code and paragraph 7 of the Regulation approved by the Cabinet of Ministers entitled “Types of wages and/or other income of parents received in manats and foreign currency from which alimony for children is withheld.”
According to the Tax Code, alimony income of individuals is exempt from personal income tax. At the same time, Article 15 of the Law “On Social Insurance” classifies alimony payments as a type of income not subject to compulsory state social insurance contributions.
These exemptions apply to the person receiving the alimony. With respect to the person paying alimony (the employee receiving wages), such tax and insurance exemptions are not applied by the employer when calculating the salary.
From the total amount of employment income earned by individuals, personal income tax is calculated in accordance with the Tax Code, and insurance contributions are calculated in accordance with the Laws “On Social Insurance,” “On Unemployment Insurance,” and “On Medical Insurance.”
By decision of the Cabinet of Ministers, the “Types of wages and/or other income of parents from which alimony for children is withheld” have been approved. Pursuant to paragraph 7 of this Regulation, alimony is withheld from the income (earnings) payable to the alimony payer after taxes have been deducted. The Decision does not determine the amount to which tax and insurance rates apply; it regulates only the order of deductions. The term “taxes” refers to taxes withheld from income in accordance with the Tax Code and does not include other mandatory deductions.
Accordingly, deductions are made in the following order:
1. Personal income tax;
2. Alimony — from the amount remaining after personal income tax is withheld;
3. Insurance contributions — from the amount remaining after alimony is paid.
The State Tax Service receives inquiries regarding the order of calculation of taxes and insurance contributions when alimony is withheld from the employment income of individuals. In this regard, it has become necessary to provide a detailed explanation of Article 102.1.5 of the Tax Code and paragraph 7 of the Regulation approved by the Cabinet of Ministers entitled “Types of wages and/or other income of parents received in manats and foreign currency from which alimony for children is withheld.”
According to the Tax Code, alimony income of individuals is exempt from personal income tax. At the same time, Article 15 of the Law “On Social Insurance” classifies alimony payments as a type of income not subject to compulsory state social insurance contributions.
These exemptions apply to the person receiving the alimony. With respect to the person paying alimony (the employee receiving wages), such tax and insurance exemptions are not applied by the employer when calculating the salary.
From the total amount of employment income earned by individuals, personal income tax is calculated in accordance with the Tax Code, and insurance contributions are calculated in accordance with the Laws “On Social Insurance,” “On Unemployment Insurance,” and “On Medical Insurance.”
By decision of the Cabinet of Ministers, the “Types of wages and/or other income of parents from which alimony for children is withheld” have been approved. Pursuant to paragraph 7 of this Regulation, alimony is withheld from the income (earnings) payable to the alimony payer after taxes have been deducted. The Decision does not determine the amount to which tax and insurance rates apply; it regulates only the order of deductions. The term “taxes” refers to taxes withheld from income in accordance with the Tax Code and does not include other mandatory deductions.
Accordingly, deductions are made in the following order:
1. Personal income tax;
2. Alimony — from the amount remaining after personal income tax is withheld;
3. Insurance contributions — from the amount remaining after alimony is paid.