Your Dutch sales representative and Dutch tax
Thursday, December 29th, 2016 by Arnold Waal
The situation we often encounter is that of the Dutch sales representative and the foreign company are looking for the correct method to run his or her payroll. We experience creative solutions of which the impact is not fully acknowledged by either party.
Dutch sales representative sets up BV company
The most common mistake we learn about is the Dutch sales representative being asked to incorporate a legal entity in order to be able to process his salary.
A legal entity in this case is a so called BV company. When the sales representative incorporates a BV company, he is the shareholder and managing director. Being a shareholder and managing director implies that certain formal requirements are to be met, with which comes rules and regulations. These rules and regulations are enforced with penalties. Moreover, as the BV is set up by the sales representative, there is no connection to the foreign company.
This road to taxation is often thought of by either party, but a bad road to take.
But it can be worse:
Dutch sales representative is put on the foreign payroll
This often happens with companies from the UK and USA. The companies feel that this employee is part of their company, hence their local tax should be applied to this Dutch employee as well.
The Dutch employee initially does not care, is not aware, or does not see the problem. However, the moment he would like to take out a loan to purchase a home or anything else, the wake up call is announced by the bank: no loan as there is no known income.
If this employee would like to benefit from the Dutch system, the answer will be also no, as he has nothing to show for. Plus in case of disability or unemployment he is not insured.
How to process the payroll of a Dutch sales representative?
The Dutch sales representative lives in the Netherlands, hence he is a Dutch resident tax payer. Which implies his world wide income is taxed in the Netherlands. Moreover, we can safely assume he leaves his house in the morning to start his job. Maybe not every morning from his home, but the base of his work is at his home address. That makes that his salary is subject to Dutch tax and Dutch social premiums.
The foreign employer needs to register themselves in the Netherlands with the Dutch tax office as employer of this sales representative. No legal entity is required. The employer will not be exposed to any other tax, then the tax and social premiums due for this employee. So no corporate tax, no sales tax. That is under the condition that the company does not open an office in the Netherlands, nor make the sales representative a fixed person of contact in the Netherlands for clients and relations. The latter is possible by organizing the contacts always via company home office contact points.
We offer the services of setting up, running and fully organizing the payroll of your Dutch employee. Whether it is a sales representative or another type of employee. As long as the employee is actually working for your company, hence not subcontracted to another Dutch company.
The setup can be done for one employee or more. The costs are fixed, but in a gliding scale the moment the number of employees increase.
In the event you have more sales representatives spread around the world working for your company, or any other type of employee, then we offer also global payroll solutions. Again under the condition it is not subcontracting. For that umbrella payroll is required, which we do not provide.
Feel free to inquire about our services.