Entrepreneur or opportune facility user, that is the question. The circumstances you are in, determine what you are. The one does not imply you cannot become the other.
Entrepreneur or opportune facility user – the entrepreneur
The entrepreneur is the person that has an urge to start a company in which his or her business idea is being developed. Some have small ideas, some have big ideas. We like them all. The vision of an entrepreneur excites us to work for them. Not only because our invoice is better accepted.
Entrepreneur or opportune facility user – the facility user
The opportune facility user is a person that uses the situation and the facilities because it is for them the better solution. Example. A person moves to the Netherlands and keeps on working for a US company. The question is, how can this income become part of the Dutch tax system?
Two solutions we offer. The first and in our opinion best solution is when the US company would set up a payroll administration for this employee in the Netherlands. We can process this with little input of the US company and nearly no exposure of the US company in the Netherlands. Such a set up implies the person in the Netherlands becomes part of the Dutch employee social system. This implies the employee is insured for disability, unemployment, health care is taken care of, pension can be arranged.
The we are asked about the other solution. The other solution is sending an invoice to the US company. So what is the difference we are asked. Well, you pay much less tax over that income. Instantly that is the better choice and the only choice offered to the US company. Both Dutch resident and US company are happy.
How are you then a facility user?
The person choosing the invoice option is only driven by the fact less tax is to be paid. You would imagine us who actually think tax is exciting, are as much enthusiastic as the facility user. Unfortunately that is not the case.
The reason is that we experienced that life is more complex than only tax. The choice is only taken based on the tax rate. What happens if you become disabled due to whatever reason. Have you taken out the extremely expensive disability insurance? And if you did, was your disabled claim denied by the insurance company, because you missed something on the 40 page application form? Probably yes. If you are in the employee social system, you do not have this issue.
You cannot take out an unemployment insurance, or if you can, a bit silly. You do need to take out a health care insurance and pay health premium as facility user via the income tax return.
What happens when the one US client decides to terminate tomorrow? Was something negotiated in a contract? Oh, you had no contract. As employee, even if you work for a foreign company, Dutch labour law protects the employee from harm.
Is that a true difference between the entrepreneur and facility user?
Maybe not, as the entrepreneur has the same issues. The difference is that the entrepreneur has a vision. Is willing to make contracts with clients, takes out the disability insurance. Even better, hire employees to make the company stronger, advertise for more clients. This is the difference. The choice is not made based on the tax rate. It is based on an urge to start a company to run the vision.
There does not go a week by in our office when the question is not asked. Can I freelance/invoice my old foreign employer? Isn’t that tax wise better than being employed? It does not really matter what we reply, the moment a quick calculation of the taxation is made. The freelance/invoice choice has won.
The few times employment wins is when the so called 30% ruling can be continued for a while. And sometimes we have clients who already experienced the freelance set up and have a desire to stay away from that and have the employer take care of tax issues.