Taxation compatibility condition
In detail
What is the taxation compatibility condition?
Most of your use of personal information related to taxation is likely to form part of your purposes for originally collecting and using it. For example, you may use it:
- in relation to employment;
- as part of a legal obligation; or
- if you’re a public authority with a function that involves the assessment and collection of tax or other duties.
However, sometimes you may later need to reuse personal information for taxation purposes that you didn’t expect when you originally collected the information. For example, you may need to further use personal information in connection with tax assessment or when tax needs to be collected.
Annex 2 says:
“Taxation
11. This condition is met where the processing is necessary for the purposes of the assessment or collection of a tax or duty or an imposition of a similar nature.”
We call this the ‘taxation compatibility condition’ (although this term is not used in the legislation itself). This compatibility condition is for when you need to reuse personal information for a taxation purpose different from your original purpose.
How do we apply this compatibility condition?
To apply the taxation condition, you must:
- intend to reuse the personal information in connection with taxation; and
- ensure that reusing the personal information is necessary for this purpose.
Remember, if you originally collected the personal information under the lawful basis of consent, you must consider whether it is reasonable to ask for consent for the new processing.
In any case, you must satisfy a lawful basis for reusing personal information in this way.
Example
A start-up company has provided some of its staff with non-monetary benefits as part of its pay and reward package. However, the company’s new HR director becomes aware that the way these benefits are provided may not comply with tax law. This means the company may be open to investigation by the tax authorities.
The company decides it’s necessary to review and analyse the pay and rewards it has provided to all affected staff. This is to ensure it has provided the pay and rewards appropriately and given correct information to the tax authorities. To do this, the company decides to share the pay and reward information of these staff members with a tax specialist it has hired to make this assessment. The company relies on the taxation compatibility condition. It also identifies a lawful basis, such as legitimate interests.