New guidelines for temporary workers in the Netherlands 

In December 2023, the State Secretary of Finance issued a new decree regarding temporary employments in the Netherlands. This decree introduces a more extensive assessment to determine whether employment income is taxable in the Netherlands. Crucial to this is the distinction between tax treaties that the Netherlands entered into before or after July 22, 2010. This development sheds new light on the fiscal treatment of temporary workers and brings various implications for both companies and individual taxpayers. 

Determining the employer under the tax treaty 

The Netherlands has an extensive network of tax treaties based on OECD (Organization for Economic Cooperation and Development) guidelines. For employees temporarily employed here by their foreign employer, this means that employees are taxable here if they stay in the Netherlands for more than 183 days (per calendar year or 12-month period) or if their income is borne by a so-called permanent establishment. Another reason for tax liability in the Netherlands arises when the hiring company is considered a so-called ‘economic employer.‘ Therefore, the formal employer with whom the employment contract is concluded may exist abroad while simultaneously, the economic employer is in the Netherlands. Recognizing such an economic employer can be complex, and the OECD has provided guidelines for this. Until recently, it was unclear for which cases the Netherlands had to apply these guidelines. The new Decree now stipulates that the OECD guidelines must be followed for all tax treaties concluded by the Netherlands after July 22, 2010, the date on which these guidelines were published. For older tax treaties, a ruling from the Supreme Court of 2006 remains applicable. Based on this ruling, to determine an economic employer, only the presence of an authority relationship between the employee and the hiring party and the existence or non-existence of (itemized) recharged salary costs to the Netherlands need to be considered. 

Extensive assessment based on OECD guidelines 

For tax treaties concluded after July 22, 2010, therefore, a more extensive assessment is required to determine whether there is an employer (and hence tax liability) for temporary projects in the Netherlands. This includes examining whether the hiring party has control over the type of work provided and how it is done. It is also important to determine whether the work forms an integral part of the regular business operations of the Dutch company. For example, when foreign workers are hired to provide training on new IT software, this latter condition is not met. In such a case, no Dutch employer is recognized, and therefore, there is no Dutch tax liability based solely on that. Not only the concluded contracts are decisive in this assessment, but especially the implementation in practice. 

The more extensive assessment based on the OECD commentary, for example, applies to employees temporarily employed in the Netherlands from Germany (treaty from 2012) or Belgium (2023). For employees from, for instance, the United Kingdom (2008) or France (1973), older tax treaties apply, and the existence of an economic employer in the Netherlands is only based on the presence of an authority relationship and cost recharging. 

Impact of determining the employer in the Netherlands 

If there is an economic employer in the Netherlands, then the foreign formal employer must register here for the payment of payroll taxes (shadow payroll). This obligation can, however, be transferred to the Dutch group company upon request. In this regard, it may be advantageous to apply for the 30% ruling. 

60-Day Rule 

The Netherlands also applies, under certain conditions, an exemption for employments of less than 60 Dutch working days measured over a period of 12 consecutive months. This concerns employments within the framework of an exchange program or career development, or in the case of employees with specific expertise. For the assessment of specific expertise, the minimum wage requirement applicable to the 30% ruling is used. However, the aforementioned decree states that the 60-day rule is only applicable for incoming employees and not vice versa for employees seconded abroad. 

Expectations from Dutch companies and foreign employers  

To prevent tax claims from the Dutch Tax Authorities, companies will need to better map out the temporary hiring of workers from abroad. This may require new or adjusted internal processes detailing the residence of the foreign worker, the duration, and the nature of the activities. 

Professional advice 

For organizations in need of expert advice on temporary employments in the Netherlands, Crowe Peak offers tailor-made solutions. Our specialized team is ready to guide you through the complex regulations. We are happy to schedule an appointment to discuss your specific situation and see how we can best assist you. Fill out the contact form and we will get in touch with you within one business day.