Companies hiring personnel run the risk of being held liable for the wage tax and VAT due by the supplier should the supplier fail to pay these taxes. The rules governing indemnification against recipient's liability have been amended with effect from 1 July 2012. To qualify for recipient's liability with effect from 1 July 2012, the following conditions must be met:
- the organization supplying workers must satisfy the NEN 4400-1 or the NEN 4400-2 standard and must be recorded in the register of the Stichting Normering Arbeid (SNA) [Labor Standards Association]; and
- the hirer must deposit 25% of the invoice amount including VAT (20% if the VAT reverse charge mechanism applies) on the G account [blocked account] of the organization.
The conditions governing indemnification prior to 1 July 2012 remain also applicable after 1 July 2012.
- the supplier’s invoice must satisfy the requirements laid down in the Dutch Turnover Tax Act, namely;
o it must include the reference of the agreement to which the invoice relates;
o it must state the period/periods for which the sum is being invoiced; and
o it must state the name or reference of the work performed;
- the hirer must state the invoice number and all other possible other identification data of the invoice;
- the accounting records of the hirer must be structured in such a way that all data relating to the hiring of personnel are directly accessible; and
- a copy of the worker’s passport must be kept in the hirer’s records;
- the hirer must be able to prove, insofar as possible, that the worker hired possesses a valid work permit or work permit for EU nationals.
If the above conditions are met, going forward the hirer is fully indemnified against recipient’s liability; thus not only for the actual sum deposited by it (as was the case prior to 1 July 2012). This means that even if the supplier owes more wage tax and/or VAT than the amount deposited on the G account (25%/20% of the invoice amount excluding VAT) the Tax Authorities cannot hold the hirer liable for these monies.
A even more simplified rule applies to companies hiring personnel (established in OECD countries) from listed temporary employment agencies. If the temporary employment agency is able to provide a statement issued by the Dutch Tax Authorities in which it guarantees the payment of wage tax and VAT, the hirer will not need to transfer the deposit to a G account. The Dutch Tax Authorities issue these statements annually to listed companies if they have been furnished with the required security.
For more information, please contact Paul Bakker, Chris van Wijngaarden, or Maarten Krikke