Employing people in the Netherlands can lead to advantages but also challenges. It is important to maximize these advantages and minimize possible issues. Discussions with the Dutch tax authorities must be prevented. Make sure that all tax and legal obligations are met. Expatax assists employers, ranging from small to large multinationals.
An employer can be established in the Netherlands through a permanent establishment. When you have a business in the Netherlands which is a permanent establishment then you are under the obligation to act as the withholding agent for the employees who work at that establishment.
A permanent establishment is a business premises in the Netherlands that is equipped with sufficient facilities to operate as an independent business. The business premises are used to supply goods or services to third parties. Examples of a permanent establishment include:
The following business premises are not a permanent establishment:
The permanent establishment can also be linked to a company which is incorporated in the Netherlands. By incorporating a limited company it is possible to limit the risks of acting as an employer in the Netherlands to this Dutch company. This company will be registered with the tax authorities and will get it's own tax numbers. The employer can decide whether the contract with the employee will be signed with this Dutch entity or with the foreign entity.
The employer is however not required to have a permanent establishment in the Netherlands. All business can be done from outside the Netherlands. Employees can be employed directly by the foreign entity. This way the presence in the Netherlands can be minimized. The foreign entity will then be registered as foreign employer with the Dutch tax authorities. A payroll administration will have to be set up so that the employees who are working in the Netherlands can be administered properly. This is necessary if the employee falls under Dutch taxation or social security.
In principle income from employment is taxed in the country where the actual work is done. So if an employee is working in the Netherlands in principle tax has to be withheld at source in the Netherlands. This is different if the so called 183 days ruling is applicable. In that case tax can remain to be paid in the country of origin. To determine which country can tax the income the applicable tax treaty will have to be checked. The 183 days ruling is applicable if:
Besides the 183 days ruling the Netherlands does not require withholding tax for ‘short business visits’ of up to 60 days when certain conditions are satisfied.
The employee is taxed on his world wide income in his country of residence. If country or work and residence are two different countries double taxation can occur. To prevent this the tax status must be checked closely. Expatax can arrange this and also take care of the payroll administration.
In principle the employee falls under the social security system of the country in which the actual work is done. There may also be social security deduction and remittance requirements imposed on the employer by the country of residence. Important in this situation are the EU regulations about social security and working in another country or two countries at the same time. Besides that the Netherlands has also signed several social security agreements with other countries like the USA, Turkey and Japan. These social security agreements may provide relief from the Dutch social security remittance obligations during a short-term assignment of an employee to the Netherlands.
Expatax can for example assist you with:
Payroll administration in English
Application of the 30% ruling
Completing the individual tax returns from your employees at a very reasonable rate (at your business address)
Setting up a corporate pension scheme
Do not hesitate to contact us with your questions/requirements. There is no obligation from your side at all. Don't be afraid we keep calling you for work. You are in charge, but please know that we are there if you need our assistance.