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Difference non-resident employer and resident employer

Sometimes an employer is regarded a non resident employer, most of the time the employer is a resident employer. What makes the difference and is there a difference tax wise?

A non-resident employer is an employer that employs employees in for instance the Netherlands, without having a presence in the Netherlands. Based on the tax treaties and Dutch legislation, an employee working in the Netherlands is subject to Dutch legislation, including wage tax and social premiums. Not having a presence in the Netherlands therefore does not imply you can pay the Dutch employee a for instance British salary with UK tax or a German salary with German tax.

The moment the employer has a presence in the Netherlands, the employer is regarded a resident tax payer. A presence is a fixed place from where business is conducted, such as an office. But a presence is also assumed when a person is regarded to be the known representative in the country. That implies that if your employees are the contact point in the Netherlands, with Dutch contact details, for instance using their home address, that makes the employer becoming a resident employer.

For the wage tax and social premiums there will not be a change, other than the tax inspection address that changes from foreign to domestic. But more important the employer has now also become subject to value added tax and corporate income tax. Both could result in allocation issues when also your client are situated in the Netherlands. Where is the turnover created, which country levies VAT and how is transfer pricing wise the corporate result determined.

A company operating with employees in the Netherlands should be keen to understand what is their fiscal standpoint if the employees get into direct contact with the clients.

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