The place where a company is taxed depends on where the owner or managing director of this company is a tax resident. Or is it, thought this handyman taxed in Poland.
Handy man taxed in Poland?
A person is a tax resident in the country where he or she has its central point of life. That is how article 4 of every tax treaty states it, more or less. What is your central point of life? Your central point of life is where you work, sleep, buy your groceries.
However there are some exceptions. One of them is when you own your home in the Netherlands. Your tax partner does stay there but you are working and sleeping in another country. In that case you remained a Dutch tax resident as well.
The Polish handy man taxed in Poland? – court case
A Polish handy man owns a Dutch company registered with the Dutch Chamber of Commerce. The Dutch tax office does an audit with the company. The result of this audit is for the years 2013 and 2014: additional income tax, additional value added tax, penalties and interest is to be paid.
The Polish handy man argued that he is not at all a Dutch tax resident. He lives with his wife and children in Poland. Actually his coworker, not employed by him, not partner in the company, in this case called Mr Y, is the owner of the company. The Polish handy man is only on paper the owner, but Mr Y is the true owner as he can speak Dutch.
Mr Y has done all the administrative transactions, opened a bank account for the company, obtained the Value Added Tax number, signed the contracts. All things the Polish handy man states he cannot do as he cannot speak, read or write Dutch.
The court ruled that the Polish handy man was owner of and running the Dutch company. Mr Y was indeed on contracts, but Mr Y should be seen as intermediary, contact person. Not the actual entrepreneur. The court did not believe Mr Y opened a bank account in name of the company of the Polish handy man as the checks and balances in this procedure does not permit that. The same with the application of the VAT number.
The Polish handy man was therefore liable for the results of the audit.
Tax is Exciting
We think tax is exciting. With respect to the court case: you cannot run a company in the Netherlands if you are not a Dutch tax resident.
This question is asked to us so many times per week. I think that is caused by the fact that the Netherlands is labelled as a tax heaven in the world. But everybody that lives, works and pays tax in the Netherlands knows it is not heaven at all.