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More guidance on taxation of cross border activities of employees


The Dutch State Secretary of Finance published a Decree on 12 January 2010 in which the Dutch interpretation of the concept of employership has been formalised in accordance with Supreme Court judgments rendered in 2006. Taxand Netherlands review the interpretation of economic employership and how this affects both employees and employers.

The concept of employership is an important qualification to determine whether non-resident employees temporarily carrying out activities in the Netherlands are taxed in the Netherlands, as well as the situation where Dutch resident employees temporarily carry out activities abroad. The concept of employership was interpreted in a legal way in the Netherlands up to 2004. The assumption was that legal employers could also be deemed as the economic employers. The economic interpretation was followed in abuse cases and the international hiring-out of labour (employment agencies).

In Supreme Court rulings rendered in 2006 on cross-border employment it was decided that in case of a temporary cross-border secondment of employees, the employer under the treaty article on dependent services is the person with whom the employee is in a subordinated relationship for the carrying out of the cross-border activities. Moreover, a pre-requisite was set stating that the employees' employment activities are for the account and risk of the foreign employer. This means that the foreign employer must bear the costs, e.g. salary and benefits, losses and risks resulting from the employees' employment activities.

The State Secretary has also introduced a rule for intra-group secondment. This rule states that if the employee does not work in the Netherlands for more than 60 days in a 12-month period, the Dutch employer is deemed not to have the authority over the employment of the employee. To apply this rule, the employees' workdays in the Netherlands must be monitored and registered.

Taxand's Take

There are, in principle, no taxation or withholding obligations for employees working in the Netherlands for less than 60 days. Please note, however, that the actual workdays must be registered as the Dutch Tax Authorities may request proof of the days actually worked. Moreover, as the cross-border activities of employees are ever-increasing, we advise that the cross-border activities of the employees be closely monitored to reduce any potential employer's and employees' liabilities.

Your Taxand contact for further queries is:
Chris van Wjingaarden
T. +31 20 757 09 40

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