Income tax, social security and wage tax compliance requirements are becoming increasingly complex and are constantly changing. Companies need to ensure that their global remuneration policy is compliant with legal and regulatory requirements wherever their employees are working. Global tax compliance and tax efficient incentive plans are vital if the maximum value is to be achieved for both employers and employees. Our Compensation Tax team provides proactive advice on compensation and employee retention plans, wage and income tax compliance services, cross border tax and social security advice.
Practical advice that works
The nature of employee compensation means that operational accuracy and compliance is essential. Errors can be costly as they result in reputational damage as well as financial loss. As tax authorities across the globe increasingly co-operate with each other, disclosure demands are increasing, and tax and social security rates rise worldwide, companies need to take even greater care to achieve cross border compliance. Our Compensation team provides a hands-on service to ensure your compliance works in practice not just in theory, wherever you deploy your people.
The 30% ruling is a tax benefit available to a specific group of foreign employees temporarily working in the Netherlands. Effectively it represents a tax-free allowance of 30% of the taxable salary. The purpose of the allowance is to cover extra-territorial expenses incurred by an expatriate employee as a result of a temporary work assignment to the Netherlands.
Download our 30%-memo here
We can assist with the following services in this respect:
– determining eligibility for the Ruling;
– provide you with employer- cost and gross to net calculations;
– application of the 30%-Ruling.
As of 1 January 2019, the duration of the 30% ruling has been shortened from eight to five years. Transitional law applies to employees who already have obtained a 30% ruling before 1 January 2019. For this group of employees, we recommend to check whether the 30% ruling is still applicable to them. The following overview can be used to determine whether the 30% ruling can still be applied and what the new end date will be under the transitional law. We recommend you to set this new end date of the 30% ruling in the payroll administration, as the Dutch tax office will not adjust the 30% ruling decision and employers should review this themselves. In case the 30% ruling of one of your employees has ended per 31 December 2020, then you can still adjust this is in the current payroll administration.
|End date of the 30% ruling issued
before 1 January 2019:
|New end date based on the transitional law:|
|2019 or 2020||End date equal to end date of the original 30% ruling decision|
|2021, 2022 or 2023||End date 31 December 2020|
|2024 or later||End date of the original 30% ruling decision minus 3 years|
Tax & social security advisory
Employers are obliged to withhold wage tax and social security contributions in the Netherlands in a number of situations. Taxand knows which questions to ask so that you can be confident your organisation is complying with the right regulations. A different set of rules apply for an employee working for a non-Dutch employer. Overseas employees may be subject to social security such as national insurance and employee insurance in their home country, their work country or their employer’s country of residence. Cross border employee activities may lead tax withholding obligations in several countries (salary split). Taxand experts help you understand your situation and the local law and EU regulations that may apply so as to determine where obligations lie for both the employee and the employer. For example:
– Wage tax & social security advisory services
– Assist in tax audits
– Obtain NEN-4400-01/02 certifications
– Waadi registration
Payroll and individual income tax compliance
In order to safeguard compliance with respect to your international working employees, Taxand can assist you on payroll implementation, payroll advisory services and operating your payroll. For example:
– Set up a Dutch wage tax administration
– Maintain a monthly payroll for your employees
– Employer costs calculations
– Hypotax and tax equalization advice and calculations
– Confidential executive payroll advice and implementation
2. Individual income tax returns
Cross border operating employees may face complex compliance obligations. Depending their status they may be obliged to file an immigration tax form, resident tax form or non-resident tax form. Taxand can help you or your employees with determining the tax status and assist with the preparation and filing of the individual income tax returns. For example:
– Preparation and filing income tax returns
– Review, object and appeal against incorrect assessments
– Assist with question letters from the tax authorities
Management structures and employee participation
The management structure you have affects the wage tax issues you may face. We can advise you on the steps you need to take in terms of tax, labour law and corporate law when undertaking an acquisition, sale of a participation, management agreement or shareholder agreement, and in the case of issues with deemed wages, deemed employment relationships, employee share plans, social security consequences, or carried interest anti-abuse legislation. We offer thorough and independent advice in rulings with the tax administration and regarding employee insurances.
Supply of labour / WAADI-registration
Our findings and experience
The Obligation to Register Intermediaries Act (‘Wet registratieplicht intermediairs’) in the Netherlands came into effect on 1 July 2012. This new law affects non-resident temporary employment and secondment agencies and foreign companies supplying one or more specialized workers on an ad hoc basis to clients in the Netherlands. These non-resident companies are obliged to register with the Dutch Chamber of Commerce. Failure to register will result in high fines. Both the company supplying workers and the Dutch hirers risk fines. Accordingly, Dutch clients hiring personnel from foreign companies should check whether or not the foreign company is registered. If not, our experience is that Dutch companies request the foreign company to register before doing business. From their perspective this eliminates their risk. The Dutch Tax Authorities have adopted a proactive approach; they send wage tax registration forms to foreign employment and secondment companies that have registered with the Chamber of Commerce.
Foreign companies supplying independent contractors should also know that the Dutch Tax Authorities may re-qualify such contracts to an employment relationship. When a foreign company supply an independent contractor there are a few criteria based on which the contract could be re-qualified, remuneration, labour, power of authority, number of clients, etc. Once the relationship is re-qualified to employment relationship the independent contractors can be subject to Dutch wage tax/social security etc.
The employer, the foreign (intermediate) company will be obliged to withhold and remit wage tax and social security in the Netherlands. Using group companies or umbrella companies for the payment of the independent contractors does not mitigate the abovementioned risks.
Tax treaty application
The Dutch Tax Authorities hold the view that when personnel is provided to Dutch clients, a Dutch wage tax/social security withholding obligation exists for the foreign company with effect from the first day the employees are present in the Netherlands.
Based on case law, for treaty purposes, the Dutch client will be deemed to be the economic employer, as a result an income tax and wage tax obligation arises. In addition, pension funds, collective labour parties, the Labour Inspectorate and immigration authorities have announced they intend investigating whether these foreign companies comply with Dutch mandatory employment laws and agreements.
Non Dutch employment agencies, secondment companies and companies supplying specialized personnel to Dutch clients should;
- Check their registration obligation with the Chamber of Commerce, ascertain whether the contracts concluded with their Dutch clients contain providing services or labour.
- Check the wage/income tax and social security obligation of the employees and employer.
- Check whether the employment benefits and labour conditions are in line with Dutch law.
- If the contractual (employment) relation is uncertain (i.e. provision of services, supply of labour or independent contractor), review any potential risks and liabilities.
Every foreign company that supplies personnel must register with the Dutch Chamber of Commerce. It is forbidden to supply personnel without registration with the Chamber of Commerce. It is also forbidden to hire personnel from a company which is not registered with the Chamber of Commerce. Both the company supplying workers and the hirers risk a fine of up to €76,000 for the first violation, €152,000 for the second and €228,000 for the third violation of the obligation to register per worker. In practice, the fines are not expected to amount to more than €12,000 for the first violation, €24,000 for the second and €36,000 for the third violation. You can speak of providing personnel or services to Dutch clients when there is a company that supplies labour force to another company, in exchange for a remuneration from the company who hires personnel and the personnel is under surveillance and management of the hiring company. There are different kinds of supply of labour, such as providing personnel, services or an acting as intermediate for an independent contractor.
Examples of companies who are obliged to register:
- Employment agency established in for example the UK supplying workers to clients in the Netherlands.
- Companies providing specialized personnel to clients in the Netherlands, for example, offshore projects, seasonal work, construction projects.
- An (IT) consultancy firm that temporarily places one or more of its employees with a client to assist on a client’s project.
- Wage tax and social security obligations:
If the services provided fall under the definition of supply of labour, the following tax and social security consequences need to be considered:
- Wage tax and social security obligation of the employer as of the first Dutch work day.
- Social security in home country possible under EU-regulation.
- Set up a shadow payroll in the Netherlands for payment of wage tax and or social security.
- Arrange exemption of tax withholding in home country payroll for Dutch workdays.
- File individual income tax returns to reclaim any excess taxes withheld or conclude ruling with the Dutch tax authorities.
- Every foreign company which supplies employees to a company in the Netherlands must check whether the employment benefits are in line with the minimum requirements as set by Dutch law and or applicable Collective Labour Agreements:
Primarily, the employment benefits and labour conditions consist amongst others of:
- Limitation on the working hours
- Minimum wages
- Minimum leave
- Immigration requirements (non-EU)
When a foreign company isn’t sure whether they provide personnel, services or act as intermediate for independent contractors it is advisable to review the current structure.
- Review and/moderate contracts with Dutch client to providing services or labour.
- Arrange declaration of independency statements for independent contractors.
- Determine whether employees presence may lead to a permanent establishment for corporate tax purposes.
- Risk reducing measurements
Dutch clients hiring in foreign personnel can be held liable for the social security and wage taxes due by the foreign supplier of labour. In order to reduce the risks for the Dutch clients they can take the following actions:
When a foreign company provides personnel, service or a contractor, the hiring company can ask the first company to open a G-account. A G-account is a blocked bank account for remittance of wage tax and social security. The hiring company deposits part of the fee on this bank account by which it is protected against any tax and social security claims on the level of the supplier up to the amount deposit. The supplier can only use this money for the payment of wage taxes and social security for its employees.
The supplier of labour can apply for a NEN-certification. Under this certification, the hirer of labour may deposit 25% of the fee on the G-account and cannot be held liable for any excess of tax and social security above the 25% due by the supplier.
Please contact us for any questions and or assistance with the WAADI registration or NEN-certification.