If an employee wishes to work remotely from abroad, it will be necessary to check, from a tax point of view, whether the Netherlands has concluded a treaty with the relevant country. Such a treaty contains rules to avoid double taxation. An overview of all treaties can be consulted via the government treaty database. Most treaties follow the principle that wages are taxed in the country of residence, unless the employee works in another country. However, the country of residence may still levy tax if the so-called 183-day rule applies. The conditions for application of this scheme are treaty-dependent, but generally it is met if:
If a tax liability arises abroad, the employer may have to keep payroll records in the relevant country and register with the foreign tax authority. Sometimes, the employee may pay the tax with the income tax return.
When moving structurally abroad, the salary is no longer taxed in the Netherlands. Moreover, the employee - if applicable - can no longer claim the so-called 30% rule, where 30% of the salary remains untaxed as reimbursement of extraterritorial costs.
Finally, a significant employer risk exists when working abroad, namely the risk that the employee is considered a "permanent representative" of the employer abroad. In that case, the employer is deemed to have a "permanent establishment" abroad, creating a substantial burden. Think of having to pay income tax and VAT and compliance obligations.
In conclusion, we would like to point out some other points that deserve the attention of employers in case an employee works remotely from abroad.
All in all, the ability to work remotely from abroad seems to be becoming an increasingly important employment condition. We do stress the importance for employers to be well informed about possible risks involved. We also advise employers dealing with employees working (temporarily) abroad to, where possible, make agreements on the topics discussed in the employment contract. Which agreements these are will always depend on the circumstances of the case.
Would you like to know more about working from abroad or have questions in response to the above? Then please feel free to contact Caroline Mehlem, lawyer Employment Law, Employee Participation and Pension.