Netherlands - Multiple company setup / Tax

**Brussels Slumdog** · 30 June 2010, 08:27

Does Agency or Direct Client agree to your NL MANCO

Originally posted by lecyclist View Post

Questions..
2) Can this work, or will the NL MANCO be obliged by the Netherlands tax authorities to tax all my contract income at source (PAYE)?
3) I will incur 2000euros in living and travel expenses per month. Amsterdam apartment = 1200euros. 2 redeye flights to visit EU MANCO each month =800euros. I know normally I could not invoice the NL MANCO for expenses to be deducted from my gross contract salary, using my UK LTD (under NL tax). UK LTD will pay my expenses, and invoice EU MANCO for the amount. Can this work, or again would this be classed as some kind of disguised salary on which I would be liable for tax on my worldwide income?

Kind regards,
Lecyclist

2 If you can find an agency or a direct client who will agree to sign a contract with a NL MANCO who does not declare all your income to the Netherlands tax authorities please let us know. If the Netherlands tax authorities discover any short fall in declared income they will recover the tax from the Client and not you.
The onus is on the client to ensure that all employees/contractors are compliant. The client will then sue your agency which means that 99% of agencies are very strict on who you can use as a MANCO
3 If you are a skilled IT worker then you can claim the 30% allowance which means that if you earn €333 a day you will receive €2000 a month to cover your expenses without having to keep receipts. If you earn more than €333 a day then you can pocket the diffrence. Your taxable income will be the gross less the 30% and this is the amount
you need to declare where you are tax resident as well as your world wide income

**normalbloke** · 30 June 2010, 10:09

Be careful....

I've just finished a 9 month contract in the Netherlands. In recent years the Belastingdienst (Dutch Tax authority) have turned the heat up on foreign contractors, by making it almost impossible to work through any other structure but a Payroll/Management Company. With the 30% ruling you end up taking home about 70-73% of gross. You can increase this figure slightly by signing up with a ManCo that has an office in the UK and is prepared to employ you there for, say, a day a month as a 'researcher' - assuming you travel back at least once a month. This means you can mitigate Dutch Social Security payments, which are high, and pay UK NI. You can also claim a commuting allowance in the Netherlands of a low amount per mile from home to office tax free.

If you are there for less than a Dutch Tax year (Jan-Dec), you end up with a rebate the following June, as they tax you on the assumption you will be working the whole year. If you are there more than a year, then there are opportunities to claim Mortgage Interest relief on your 'main' residence, even though this is in the UK. Your Manco will advise you on this, as its convoluted and complex.

I used 2 ManCos. ITECS and DutchPal.

I found both to be good. ITECS operated the UK researcher scheme, but didn't pay you until funds had been received from the particular agency..this could be up to 30 days after your time sheet went in. DutchPal on the other hand paid you with 2 days of your timesheet going in... I had cash flow issues so used DutchPal after a while. Both had very good customer services. I know ITECS in other countries have copped a lot of flak, but I found them very good in the Netherlands.

PM me if you need more details.

**lecyclist** · 1 July 2010, 06:59

Thanks for replies. The answer to my first question is E101 and E128. Since I'm paying myself the minimum through my UK LTD, this route is attractive.

With regards my expenses, I had a brief chat with TCP, and they indicated there was some monthly allowance of 1500euros for expenses which I could use to offset my accommodation and travel costs.

All my discussion about using multiple companies seems to be irrelevant based on my investigations so far, unless the company is registered in the Netherlands (or the client / agency / NL ManCo is happy paying an entity outside the Netherlands.. which they will not accept due to the potential for penalties). This agrees with Brussels Slumdog.

I'm now trying to understand the 183 days rule for residency. Here is some blurb from an article in 2003, so the advice may need to be updated:

If you are in The Netherlands for less than a relevant 183 day (approximately six months) period and are tax resident (and paying taxes on your salary/benefits) elsewhere then it may be possible and desirable for you to claim tax relief under a particular Double Tax Treaty. The relevant 183 day period is either 183 days in a calendar year or in any period of 12 months, depending upon the particular treaty involved. The Double Tax Treaty with the UK, for example, looks at a period of 183 days in the Dutch tax (which is a calendar) year.

So, for example, you could work in the Netherlands from 1 August through to the following 31 May and, whilst being ordinarily taxable on your salary and benefits in the Netherlands for this period by performing your duties there, could claim to be exempt from Dutch tax under a Double Tax Treaty for the entire period. This is on the understanding that, during the period, you were tax resident in another country and paying taxes on your salary and benefits there.

In some cases, it would be beneficial, from a tax standpoint, to claim exemption under a Double Tax Treaty, i.e., if your other country of tax residence levies much lower taxes. In other cases, whilst the tax liability may be broadly similar (e.g., as with the UK and Germany assuming the 30% ruling is applicable – see below), claiming exemption under a Double Tax Treaty offers administrative convenience and savings in professional fees (payroll bureau, tax return filing etc). In the Netherlands, if the criteria of a relevant Double Tax Treaty are satisfied then there is no requirement to submit a formal claim for relief; rather, exemption may simply be assumed. The other criteria are that you are paid by a non-Dutch company and that the costs of your employment are borne by a non-Dutch company. You should not, generally, have a problem satisfying these criteria.

The same approach will not work with regard to any dividends you receive from your limited company where you become a Dutch tax resident under either of the provisions outlined above. However, this dividend income is taxable at a flat rate of 25% which is, in itself, far more beneficial than in many countries. Furthermore, dividends received from any company in which you do not hold a ‘substantial interest’ (as defined in Dutch tax law) is exempt from Dutch tax.

In my case I'll be working for 5 months initially (following under 183 days). So I imagine this means that the NL Manco (say TCP or another like ITECS) will retain my income as if I was an employee (until the Dutch financial year is over) and then perhaps I can apply for exemption under the double-taxation agreement on the basis I've worked in NL for less than 183 days, and I will be declaring the income in the UK. However, since my contract has already been classed as income in the NL, I will need to declare all of this in the UK as PAYE earnings (so I won't have the opportunity to put it through my UK LTD which would be the ideal approach). So the only advantage to apply for double-taxation exemption would be if the tax rate on PAYE in the UK would be less than in the NL. This is not clear to me as I will be entitled to the exemption on the first 30% of my income in the NL.

Also of interest to me is the suggestion that "dividends received from any company in which you do not hold a ‘substantial interest’ (as defined in Dutch tax law) is exempt from Dutch tax" which leaves a door open for using a ManCo somewhere in the chain, where I have a limited or zero shareholding, to make dividend payments. This perhaps is where another EU Manco could come in, but this does not help me in this situation. A contractor's ManCo could perhaps be a solution here. Although I imagine this would only work for contractors who work for multiple customers (to avoid any IR35 style judgements, and the NL equivalent).

My investigations continue and I will report back.

Lecyclist

**normalbloke** · 1 July 2010, 13:39

You have to pay Dutch tax on Dutch emplyee earnings...

Originally posted by lecyclist View Post

.

..... So I imagine this means that the NL Manco (say TCP or another like ITECS) will retain my income as if I was an employee (until the Dutch financial year is over) and then perhaps I can apply for exemption under the double-taxation agreement on the basis I've worked in NL for less than 183 days, and I will be declaring the income in the UK.

Lecyclist

I don't think thats an option.

Its my understanding that regardless of your residency status, you are liable for Dutch tax if you are employed by a Dutch BV and receive a salary from them. Unless you are a genuine LtdCo with multiple clients/income streams I'm not sure you have any other options for a 5 month contract, other than to work via a ManCo BV.

Be aware also that Dutch contracts will have an end date of at least 2 years into the future, despite it only being a 3, 5, 6, 9, 12 month contract. This is to circumvent the Dutch employment laws which states that 3 renewals makes you a permie. Permies are heavily protected under Dutch law and you have all sorts of cast iron rights. Understandably clients use notice periods in the contract to terminate. Check on these before signing.

**lecyclist** · 1 July 2010, 21:36

To exercise the 183 day rule, this is the procedure one of the main ManCos follow. From reading this, I can understand why most people choose to stay within the Dutch payroll.

This option is called VAR in Holland and we will have to apply for a VAR certificate at the Tax Office.
This can take up to 8 weeks and as a precaution (incase it will not be issued) we will have to withhold 50% of the total amount of your invoices before paying you.
The remaining 50% will be paid to you as soon as we receive the outcome of the tax office. Please note that we will pay you as soon as we receive the funds from the agency.
In case the outcome is negative, then we will have to place you on our payroll. Please see below the procedure:

1) In the first stage, until we receive the VAR confirmation (outcome) from the Foreign Tax Office, we will withhold 50% of the total amount of each invoice before paying you.
The reason for this is simply as a precaution, because there might be a chance that the application will be unsuccessful.
2) We charge the following fees: €2 per hour with a min. €250 per month + one-off €250 setup fee.
3) If you work less than 183 days, we require proof ‘accountant statement’ every 3 months that proves that you have been paying tax in your homecountry on a monthly basis.
4) In the case you work more than 183 days, you will have to pay tax in the Netherlands retroactively from day 1, this means that we have to apply for a wage tax number.
We will charge a one-off charge of €100 to fill in a wage tax form.
5) It is important that you have an E101, this is required to prove to us that you are paying social security in your home country.

I'm looking at maximising retention. From the quotes I've been given, fully in the NL system (PAYE + social), including 30% allowance gives me 65% retention.

Using E101 retaining my UK payroll, increases my retention from to about 69%. The only way I can see to increase this retention figure is to claim expenses. Is this correct? How have other people increased their retention to 72,73% or above?

Regards,
Lecyclist

**lecyclist** · 1 July 2010, 21:39

Also, for everyone's interest, Here are TCP's standard terms:

The following is a list of the type of expenses that are allowable against your tax liability:
• Travel Expenses
Expenses for travel to and from work by car can be claimed at 0.19 Eurocents per kilometre, in order for TCP to pay this against your tax liability we need to receive a claim form showing the number of
kilometers travelled during the period. You should also maintain a Car logbook to keep track of the kilometers travelled fro work purposes. (TCP can provide a template for this if required).
Expenses for travel to and from work by public transport can also be claimed, please submit the original travel cards/receipts in order for us to process this as a tax allowable expense.
Taxi fares can only be claimed when there is no public transport available and the original taxi receipts are presented with the claim.
• Miscellaneous Expenses
Bicycle
The cost of a bicycle (up to € 749 incl. VAT) can be claimed over each period of three years. Please note that this rule does not include motorised vehicles, such as mopeds, scooters etc.
Books
Professional literature (computer books) is considered tax allowable. Other books, like language books, can be claimed through your income tax return.
• Relocation Costs
International
When relocating for business purposes to the
Netherlands, 12% of your annual gross pay (up to a maximum of € 7750) may be allowed to cover the costs of the international move of your household and is considered tax allowable. Relocating to the Netherlands implies having your place of residence exclusively in the Netherlands and we would require a copy of your registration with the local authorities (Gemeente) before this allowance can be applied. Please note that this has a direct impact on your tax situation as you will be considered a resident taxpayer.

National
If you are already a resident in Netherlands but have to relocate for business purposes, the relocation allowance can also be claimed. However, the following conditions need to be met:
® The relocation must take place within two years of your transfer
® The new residence must be within a radius of 10 klms from your new place of work
® The distance from your old home to your new home must be more than 25 klms closer to your work.
® The travelling distance to your new work must be reduced by at least 50%.
• International school fees
Only with an approved 30% ruling, can school fees paid to an international school be claimed (provided that the school is registered as an “international” school). School fees refer to educational, not boarding costs.
This facility only applies to education at primary and secondary level, not at nursery school level. Travel provided by the school may also be claimed.
• Education
Education for business purposes can be claimed. Expenses for education for professional reasons are considered to be business expenses. We would require either a) a statement from the Client detailing the
necessity of the education/training or b) other evidence that the education was directly linked to your current employment.

Regards,
Lecyclist

**Fred Bloggs** · 2 July 2010, 06:21

This thread amply illustrates what I consider to be a major let down of being in the EU. This really does restrict the free movement of workers and trade across EU states. For cripes sake, why can't you be rsident for tax in your home state and work for (say) upto two years in another member state whilst paying tax solely in your home state? This kind of thing has stopped me taking a european gig on more than one occaision.

**Brussels Slumdog** · 2 July 2010, 10:15

Harmonization of redidency

Originally posted by Fred Bloggs View Post

This thread amply illustrates what I consider to be a major let down of being in the EU. This really does restrict the free movement of workers and trade across EU states. For cripes sake, why can't you be rsident for tax in your home state and work for (say) upto two years in another member state whilst paying tax solely in your home state? This kind of thing has stopped me taking a european gig on more than one occaision.

Residency Not redidency (Can't Edit Title)

1 There is already a harmonization of Social Security across the EU states and there is a now a new form A.2which you can obtain to complete in order to exempt you from paying Social Security charges in another state.
If you are a UK National this can be to your advantage as social security payments are higher in most Western EU countries.

HM Revenue & Customs: National Insurance Contributions, Retirement Pension Forecasts and advice for those abroad

2 The EU is about freedom of movement, which you have. You are welcome to come to Belgium and look for work and when you find work you quite rightly should pay the local tax for the duration of your stay. Under your 2 year tax rule 2 Million Eastern Europeans workers will have the right to pay tax and social security in their home country. I think that Britain would use an opt out clause if Europe tried to introduce your residency rules. The amount of tax that you pay in Britain at the end of the year on foreign income is determined on UK double taxation agreements and the UK uses the Crediting method to calculate the amount. This means that
if you work in a Eastern European country with a flat rate of 10%,your UK tax bill will be the remaining 30%.
If you work in a country with a tax rate of 55% you end up paying 15% more tax
Some countries like Belgium uses the Progressive Exemption Method which uses only the foreign earned amount to calculate the final applied tax rate to be used to calculate the amount payable on the local earned Salary
3 Taxation between countries is based on international tax treaties and not on EU treaties.The problem in
trying to harmonize residency rules is that it is some people like you wish to remain a tax resident in their home country while others are trying to avoid being a resident

**Fred Bloggs** · 2 July 2010, 16:37

Thanks, well made points. My main beef is the seeming complication involved, (for example, some countries have a 183 day rule but some don't, Holland has a 30% rule for some expat circumstances but other states do not, in the UK it is easy to run a small Ltd Co as a one man band, in other states it is not so easy) your post goes some way to illustrating that. I would like consistent rules right across the EU, simple and easy to understand for Monday to Friday pan European workers. As an aside, I would like the burden of tax moved greatly away from income and towards consumption, hence the eastern Europeans over here and us Westerners over there would contribute to that country's economy by spending money there, but income would be taxed in our home states. But that isn't going to happen any time soon.

Netherlands - Multiple company setup / Tax