Working remotely for an employer who is based in another country is a common situation. But how does working from another country work tax-wise? Arnold Waal from Tax is Exciting tells you what you need to know.
Imagine that your partner was offered an awesome opportunity in the Netherlands, hence you have made the decision to move with your partner to this new country. Your employer has agreed to you working remotely for them, but how does this work in terms of how you will be taxed?
Working remotely for an employer abroad
You moved to the Netherlands and continue to work for the employer from abroad. The employer continues to pay you a local salary with local tax and social premiums from the country that you just left.
Everything looks fine and you decide with your partner to purchase a home in the Netherlands. Your combined salaries should be sufficient for a modest family house. But then you learn at the mortgage advisor desk, that you have no income that is usable for a Dutch mortgage. Thus, you cannot buy the house and you are confused.
Another situation that might occur is that you have children, which you bring to a daycare centre, and you would like to receive tax credit. However, a tax credit is only granted if both parents work. And while you do work, you actually have no work income because it has not been reported in the Netherlands - hence you receive no tax credit.
How to adapt your remote work to the Dutch system
There are two possibilities to adapt your remote work to the Dutch system. One is setting up a remote Dutch payroll for the remote employer. That is the best solution because you will be taxed as if you are a Dutch employee. Dutch social premiums apply, hence Dutch unemployment and disability benefits are available to you as an employee. Dutch labour law is also in place, despite a foreign employment contract being signed. However, that contract may need updating.
But what if the foreign employer is reluctant to set up a Dutch payroll due to Dutch rules and regulations? The second best option is to become a contractor for the formerly known employer. Then a “one-man” Dutch company is set up and invoices are sent to the client. In international situations, the “One client is no client” rule is not applicable.
Self-employment
The self-employed situation is the second best solution as you are not protected by Dutch labour law and you are not insured for unemployment and disability. Plus, you need to act as an entrepreneur by doing bookkeeping, filing tax returns and being personally liable for what you do. And the former employer can easily terminate the relationship.
Solutions
Both the non-resident employer payroll and the self-employed situation can be set up easily. For the first situation, the costs are paid by the employer, while the latter accounting costs are paid by the entrepreneur.
The result is that you do have income reported in the Netherlands, so you can obtain a mortgage on both income sources and you can use facilities such as daycare credit.
Do you need help figuring out your tax situation as an employee working abroad? The team from Tax is Exciting supports internationals in the Netherlands with tax and financial matters. Connect with them via [email protected] or +31 (0) 205 207 991.