Important points of attention for Dutch employers and their employees when working from home outside the Netherlands
The year 2020 was and is still a turbulent year, certainly now that many companies have been hit hard by the corona crisis. With the corona measures still in effect, many employees are continuously encouraged (or sometimes forced) to work from home. Especially in cross border situations this may lead to unforeseen tax, social security and even labor law consequences for employers and their employees. We are happy to provide a short overview of the important points of attention Dutch employers and their employees have to consider when working from home outside the Netherlands.
Cross border workers who (temporarily) work from home outside the Netherlands may end up with a lower Dutch and a higher home country income tax liability. Dutch non-resident taxpayers with the 30%-ruling who have to work from home in their home country might also lose a part of the 30%-ruling benefit, as this ruling is only applicable on employment income that is taxable in the Netherlands.
The so-called ‘183-days rule’ plays a role for Dutch resident taxpayers who (temporarily) work in their original home country. Meeting or not meeting the 183-days rule – in contrary to what is anticipated - will affect the overall tax liability. We advise Dutch employers to instruct employees, who are considered Dutch resident taxpayers and who (temporarily) work in their original home country, to keep track of their whereabouts and to inform them when it is likely that they exceed 183 days of stay in the home country.
As a Dutch employer you may be confronted with a foreign registration and wage tax withholding requirement if your employee works from home outside the Netherlands. In some situations, a home office could even constitute a permanent establishment. This is in general only the case if the home office is used on a regular and continuous base for carrying on business activities and in where it is clear that the company has required the employee to work from home.
Bilateral agreements with Belgium and Germany
The Netherlands has concluded bilateral agreements with Belgium and Germany, holding that there will be no tax consequences for employees who have to work from home in their home country as a result of the corona measures taken. Notwithstanding what is stated in the tax treaty, the workdays from home will be treated as workdays in the country ‘where the workdays would normally be performed’ (hereafter referred to as ‘the country of employment’). This is only applicable under the condition that the income relating to these (additional) workdays from home will be taxed in the country of employment. The employee has the right to invoke the conditions set out in the tax treaty as a result of which the right to tax the workdays from home will shift to home country (country of residency).
The bilateral agreements between the Netherlands and Germany and the Netherlands and Belgium have recently been extended through December 31, 2020.
As a result of the corona measures taken, a situation can arise whereby you, as a Dutch employer, hire an employee from outside the Netherlands who is not allowed to travel to the Netherlands and has to work from home during the first period of the Dutch employment. This employee will, in principle, not be taxable nor socially insured in the Netherlands when he or she works from home outside the Netherlands during this period. This means that it is not required to pay and withhold wage tax and social security contributions for this employee until he or she (physically) starts to work in the Netherlands.
We can imagine that Dutch employers do not want to take any risk and would like to have this employee enrolled in Dutch payroll as from the start of the employment. In order to setup a Dutch payroll administration, the employee needs a Dutch social security number (in Dutch: ‘Burgerservicenummer’) which can normally only be applied for when registering with the municipality in the Netherlands. In this specific situation it is temporarily possible to apply for a Dutch social security number by using the following form.
The employee has to send the form together with a valid copy of the passport and a residence certificate granted by the foreign municipality (no older than six months) to the Dutch tax authorities.
Social security consequences
Working from home may also have consequences for the social security position of employees that are working from home outside the Netherlands. Based on EU social security legislation, an employee is in principle socially insured in the country where he or she works. However, if the employee pursues a substantial part of the activities (i.e. at least 25%) in the home country, he or she might become socially insured in home country. This means that the social security position of cross border workers who are socially insured in the host country may change when they work at least 25% of their time in the home country, depending on the expectations for the coming 12 months. This change may then lead to social security implications and obligations for both you (as an employer) and your employees.
The Dutch social security authorities (SVB) confirmed that cross border workers will not be impacted on their social security position when working in the home country if the home country is inside the EU/EER/Switzerland. There are several other European countries that have announced similar rules (e.g. Belgium, France, and Germany). We advise you to also get informed about the rules that are applicable in the home country in order not to end up with unforeseen social security obligations for both you and your employees in the home country.
Labor law consequences
Based on the international labor law an employee is in principle subject to the laws and rules in the country of work. However, when an employee will be working from home outside the Netherlands for a longer period, the laws and rules of the home country may apply. We strongly recommend employers to reconsider the contractual agreements when an employee will be working from home outside the Netherlands.
Our partner HBK expat consultants is offering a free of charge first consultation to further inform you about the tax, social security and labor law consequences of cross border employees within your organization that are working from home outside the Netherlands. The free consultation is a first step towards a tailor-made plan of approach to minimize the tax, social security and labor law consequences. It is now time to take action!
This article is brought to you by HBK Expats.