Employer Payroll Reporting Requirements in The Netherlands

Does an employer relocating employees or sending employees on secondment to The Netherlands have an obligation to register as an employer and pay payroll taxes in The Netherlands?  If so, what are the filing requirements?

Registration at the Chamber of Commerce

As a result of the European Posted Workers Directive Irish employers which second employees to the Netherlands, receiving a reimbursement for this secondment and where the employee works under the supervision of a Dutch employer, are obliged to register with the Dutch Chamber of Commerce and to make a so-called WAADI-registration.

Should the above not be applicable the Irish company is only obliged to register with the Dutch Chamber of Commerce in case they have a permanent establishment in the Netherlands.

Registration Wage taxes

An Irish company is obliged to register and withhold Dutch wage taxes in case it has a permanent establishment in the Netherlands. Whether or not an Irish company has a permanent establishment depends on double tax treaty between the Netherlands and Ireland. In short the Irish company should either have a fixed place of business in the Netherlands through which their business is wholly or partly carried on, a building/installation site in the Netherlands for more than 12 month or a dependent agent active in the Netherlands. Whether this is the case strongly depends on the facts and circumstances on how the Irish company operates in the Netherlands. A non-resident company would have a fictional permanent establishment for the Dutch wage taxes in case the company seconds employees to the Netherlands and their employees will work under the supervision of a Dutch employer (WAADI-situations, see above).   

An Irish company can also make voluntarily registration with the Dutch tax authorities in case they have employees subject to Dutch personal income tax. A voluntary registration could be beneficiary in case one of the employees is eligible for the 30% wage tax facility (see under 30%-ruling).

Under the double tax treaty between Ireland and the Netherlands (seconded) employees are subject to Dutch income tax in case the employees perform work on Dutch territory and either;

1. Are present in the Netherlands for more than 183 days in one tax year;
2. The remuneration for the employee is paid by a material of formal employer in the Netherlands; or
3. The Irish employer has a permanent establishment in the Netherlands which economically bears the remuneration for the employee. 

What are the income tax rates in The Netherlands?

The rates of the income tax and social security tax in 2016 are:   

How would travel and subsistence expenses from home country be treated if employee is required to be in The Netherlands?

In case these costs qualify as extraterritorial costs, the actual costs of these expenses can be reimbursed tax free by the employer. In case the employee is eligible for a so-called 30%-ruling (see next question) the employee may reimburse these costs via a lump-sum amount of 30% of the taxable wage in the Netherlands.

Definition of extraterritorial costs

In general, extraterritorial costs are the costs incurred by an employee because he is residing temporarily outside of his country of origin, such as:

• The extra costs due to the fact in general the prices are higher than the prices in the state of origin, like costs for meals, gas, water and light;
• The costs for a familiarization trip to the country of employment, possibly with family, for example in order to search for a house or a school;
• The costs for the application or conversion of official documents; like residence permits, visa and driving licenses;
• The costs for medical examinations or vaccinations in order to reside in the country of employment;
• The costs that an employee makes because he continues to live in his country of origin, like hotel expenses;
• The costs for temporary storage of furniture and inventory that is not moved to the country of employment;
• The costs for traveling to the country of origin, for example in order to visit family or for family reunification;
• The extra costs for filing of income taxes, if this is more expensive than the filing by a tax consultant in the country of origin. For this purpose a maximum of € 1000,- applies;
• Tuition fees in order to learn the language of the country of employment for the employee and his family members residing with him;
• The extra phone costs in order to telephone with the country of origin;
• The costs in order to apply for an exemption of social security (E101/ A1);

The following costs are explicitly not considered to be extraterritorial costs:

• Secondment fees, bonuses and similar fees;
• The purchase and selling costs regarding the first residence;
• The compensation for higher tax rates in the country of employment.

Are there any exemptions for workers coming from abroad?

In the Netherlands we do not have a specific engineering or IT consultancy wage tax exemption. Expatriates may however in the Netherlands be eligible for a so-called 30%-ruling. Under this ruling employees are allowed to receive a tax free reimbursement from their employer to a maximum of 30% of their wage. This reimbursement is meant as a compensation for the extra expenses made for working abroad (“extra-territorial costs”, see above). Without having to substantiate the actual height of these costs with invoices/receipts.

In order to obtain an 30%-ruling, the employee and the employer must file a formal request within 4 months after the arrival of the employee in the Netherlands and meet the following requirements:

• The employee may not be self-employed:
• The employee must be fully or partly subject to Dutch wage tax withholding:
• The employee must have a salary of at least € 36.889 (for 2016) which is taxable in the Netherlands (i.e. without the tax reimbursement): and
  • For expatriates younger than 30 years with a master degree this threshold is lowered to € 28.041.
• The employee may not have lived within a 150km radius from the nearest Dutch border for more than 8 months in the 2 years before moving over to the Netherlands.

In case a request is filed later than 4 months after the arrival, the ruling cannot be applied retroactive to the moment of immigration. A 30%-ruling will normally be provided for the term of 8 years. This term may be shortened with prior stays in the Netherlands over the past 25 years. The ruling is withdrawn in case the secondment has ended, and upon request the ruling can be continued in case the employee switches to another employer.  

In addition employees with an 30%-ruling who become Dutch resident tax payers, might opt for the treatment as a partial resident tax payer for the Dutch personal income tax purposes. Partial resident tax payers are not taxed in the Netherlands for their worldwide income but only for their Dutch sourced income.     

For further information, please contact Ruud van Poppel Wesselman Accountants

E: Ruud.vanPoppel@wesselman-info.nl

W: www.wesselman-info.nl