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Entities required to have eHerkenning to file their tax returns in 2020

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All legal entities are required to have eHerkenning to file their tax returns in 2020. For all legal entities, such as the ‘B.V.’, it is required to have a digital log in account called ‘e-herkenning’ (security level eH3 and up) in case they prepare their own tax return filings. The current portal for entrepreneurs will no longer be active for legal entities. Sole proprietors, such as the ‘eenmanszaak’, will remain to able to file through this portal.

Wage tax returns
From 1 February 2020, employers who submit their own wage tax return for 2020 via the website of the tax office can only do so via the new My Tax Office (MBD-Z) portal. Sole proprietors can log in there with DigiD, the other employers must use eHerkenning for this. The employers to whom this applies are already informed through a letter from the tax office.

The tax office advises employers who prepare their own wage tax returns and do not yet have access to MDB-Z to purchase e-Recognition as soon as possible from one of the suppliers recognized by the government. Alternatively a tax intermediate can take care of your tax filings. This allows employers to submit their wage tax returns in a timely manner. The monthly declaration for January 2020 must be submitted and paid for no later than 29 February.

VAT and corporate income tax returns
It is expected that – during the course of the year 2020 – also tax returns for VAT (legal entities) and corporate income tax can only be submitted through e-herkenning.

Be aware of timely filing annual accounts at Chamber of Commerce

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Be aware of timely filing of the annual accounts at Chamber of Commerce. 
Dutch legal entities such as BVs, NVs and cooperatives are required to file their annual accounts with the Dutch Chamber of Commerce (‘KVK‘) each year. These are the best known legal forms. But there are more legal forms with a requirement to file. Financial details of companies can be viewed by third parties and stakeholders by depositing. Depositing does not apply to sole traders.

We assist companies to deposit their annual accounts, we can assist with all company sizes.

A financial statement is a financial report of your company for the past year. Not or non timely depositing has consequences. Since September 2018, the law also imposes additional requirements on the information in the financial statements.

The basic principle is that you deposit the annual statement with KVK within 12 months after the end of a financial year. So the annual accounts for the year 2018 have to be filed before December 31st 2019. The management of the legal person is responsible for this. Has the financial statement been adopted? Then it must be at KVK within 8 days.

Adopting the annual financial statements is often quite a job. After drawing up by the management, the shareholders and possibly a supervisory board must also approve the annual accounts.

What is the timeline? The terms differ per legal person. If the financial year is the same as the calendar year, the following terms apply:

Within 5 months after the end of the financial year (no later than 31 May), the board prepares the annual financial statements and submits them to the shareholders. The shareholders grant the board a maximum of 5 months’ deferment for the preparation (31 October at the latest) in the event of special circumstances. The shareholders then have 2 months to adopt the financial statements. The final deposit date is therefore July 31 (5 + 2 months). With a maximum delay this is December 31 (5 + 5 + 2 months).

Exception to the rule
Are all shareholders also a director or supervisory director? Then the signing of the annual financial statement will immediately provide for this. Separate determination by the shareholders is not necessary. The extra 2 months expire. In this case, a BV will deposit on 8 June (5 months + 8 days) and no later than 8 November (5 months + 5 months + 8 days).

No timely determination
It is possible that the shareholders do not adopt the annual accounts in time. Not depositing is not an option. As the board of directors, you have a duty to file a provisional annual statement in such a case. This must be done within 7 months (31 July at the latest). With a maximum delay this is within 12 months (31 December at the latest).

No or late filing
Not depositing or not depositing on time has consequences. Within the bankruptcy of a legal person, this can be regarded as improper management. Directors can be held jointly and severally liable for any debts. In addition, it is an economic offense whereby the Public Prosecution Service can impose a substantial fine via the Tax Authorities (a maximum of 20,500 euros). Reason enough to adopt and file the annual accounts on time! We assist companies to deposit their annual accounts, we can assist with all company sizes. Please find more information this through clicking this link.

We can assist with all your legal, tax and accountancy needs.

Social security international employees; where are you insured?

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Social security international employees; where are you insured?

When you work as an employee or self-employed person in several countries at the same time, it is sometimes difficult to determine in which country you are socially insured and therefore which country is entitled to levy when it comes to social security contributions. The Dutch social premiums are the AOW, Anw and Wlz (national insurance schemes) and the WW, WAO, WIA and ZW (employee insurance schemes).

In order to ensure that several countries do not claim to be entitled to levy premiums, European Union Regulation 883/2004 on the coordination of social security systems has been created. The Regulation contains designation rules that assign the levy rights to only one country in cross-border situations. Please note: the Regulation only applies to EU member states.

Article 11 of the Regulation provides that the country of employment (ie the country in which the work takes place) may in principle levy social contributions. So if you live in the Netherlands but you work in Germany, then according to the Regulation you are obliged to hand over social contributions to Germany (you can never be obliged to do so to in two countries).

Do you perform work in 2 or more Member States for 1 employer? Then Article 13 of the Regulation applies. The rules are as follows:
If you perform 25% or more of the activities in the Member State in which you live, this Member State is entitled to tax.
If you perform less than 25% of the work in the Member State in which you live, then the Member State is entitled to tax where your employer is based, or where your employer is established.

Do you perform work in 2 or more Member States for 2 or more different employers? In this case the following rules apply:
If the 2 employers are located in the same Member State, this Member State is entitled to tax;
If employers are located in 2 different Member States, 1 of which is the Member State where you live, the other Member State is taxable;
If the employers are located in at least 2 different Member States, not being the Member State where you live, the Member State where you live is taxable.

Interesting is the concept of employer that has always been formally explained for the application of the Regulation. From the above rules it emerges, as soon as one does not perform at least 25% of the work in the country of residence and there is 1 employer (this is often the case) that the country where the employer is established is entitled to tax. Consider, for example, professions within professional goods transport, where many borders are crossed and along which they are en route.

A formal explanation of the term employer is about the location on paper. The registered office is usually looked at (in which country is the employer registered). It does not seem incomprehensible that such a formal approach encourages fraudulent arrangements whereby a paper employer is established in a certain country, but actually operates from another country.

On 26 November 2019 the Court of Justice of the European Union decided in a judgment to drastically change this interpretation. In the judgment, the Court answers questions referred for a preliminary ruling by the CRvB (Centrale Raad van Beroep).
There has long been a tendency within jurisprudence towards a more material interpretation of the concept of employer within social security, but this has never been pronounced by the Court.

The present case concerned an Cypriot employer. This Cypriot employer employs many truck drivers who thus have a paper based employer in Cyprus. Social security contributions in Cyprus are considerably lower than in the Netherlands. This goes hand in hand with a poorly functioning social safety net. If you suddenly become incapacitated for work, you can to a lesser extent count on a decent benefit.

The actual situation between the truck drivers and the Cypriot employer was that the truck drivers were fully available to companies established in the Netherlands for an indefinite period of time and that they also exercised actual authority over them. The Court has therefore ruled that the employer is “who has recruited the persons concerned, who in fact has them fully available for an indefinite period of time, who exercises the actual authority over them and who de facto bears their wage costs”.

This way, structures that have nothing to do with reality are avoided and you as an employee or self-employed person are also protected against a weak social safety net.

Study expenses remain deductible in 2020 and 2021, change as of 2022

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Study expenses remain deductible in 2020 and 2021, change now planned as of 2022 – For a number of years the government is aiming to convert the system of deducting study expenses to an allowance system.

This – apparently – is a complex transition, hence the last tax year study expenses can be deducted in the personal income tax return is being moved one year further. Meaning qualifying study expenses made in the year 2020 and 2021 can still be deducted.

The plans were that 2019 was the last year, now 2021 is the last year tax deduction of study expenses will be possible. Here we have published on study expenses before as well as on the related conditions.

New VAT number in 2020 for sole proprietors / ZZP

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Approximately 1.3 million sole proprietors / ZZP in the Netherlands will receive a new VAT identification number from the Tax Authorities as of January 1st 2020. This new VAT number no longer has a link with the BSN (Dutch personal social security number). The VAT number used to consist out of the BSN and the VAT code: B.01.

In recent years, resistance to the use of the BSN in the VAT number of
sole proprietors / ZZP has arisen. This is mainly due to reasons of privacy protection and identity fraud.

The new VAT number of the sole proprietor / ZZP is intended to be mentioned on, for example, invoices and website. It is also used for intra-community transactions (trade within the EU) and other transactions based on EU regulations.

The old VAT number, based on the BSN, will for now remain in use for communication with the tax authorities. In the longer term, the Tax and Customs Authorities strive for a single VAT number to be used for all purposes.

Sole proprietors / ZZP can already seize mentioning the VAT number on their website or webshop.

Check out our one stop shop services for businesses.

Insight determining tax residency by the Dutch tax office

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Recently the Dutch tax authorities have shared documents which give some detailed information on how they determine whether a person qualifies as a Dutch tax resident. The first important insight is that the tax office only focusses on the facts within the Netherlands.

The importance of the determination whether a person can be seen as a Dutch tax resident is that such Dutch tax resident is taxable for his/her worldwide earned income and held equity. Furthermore Dutch tax residency is crucial for gift and inheritance tax.

In some cases there is no doubt about the tax residency of a taxpayer. But there are also situations where more than one State claims to be the country of residence.

If two States say that a private individual is their tax resident, usually the tax treaty between these States determines of which state that person is a resident. A tax treaty goes beyond any (Dutch) tax residency fiction. For the treaty, the factual circumstances are decisive for determining the tax residency.

Because factual circumstances determine where a natural person is located, a tax residency survey of the Tax authorities must be of a very factual nature. It is also important to note that the inspector has the burden of proof that a person is a tax resident of the Netherlands.

The extend of such tax residency survey can be far reaching. Recently the Museum Card foundation, after a long process, was ordered in a Court case to share information on a Card holder with the tax office to this effect.

Only in case of a change in the living situation, the taxpayer is the person who bears the burden of proof of this change.

The Tax office will first check whether a private individual lives in the Netherlands on the basis of provisions in National laws and regulations. If a person is not a Dutch tax resident based upon Dutch laws, there is no need to rely on a tax treaty or other double taxation scheme.

The documents made public show that the Tax Authorities,
during a tax residency survey, check whether a person has a durable personal relationship with the Netherlands. According to the documents, it is not necessary that the center of social life of the person is in the Netherlands.

Facts that indicate a durable relationship with a state include:
• the person actually has a permanent home;
• the whereabouts of the family;
• the residence of the person himself;
• the presence of social ties;
• the presence of professional or business connections;
• the presence of financial interests;
• spending pattern;
• intention in so far as this is apparent from the facts;
• registration in the basic personal data registration (BRP);
• nationality.
The tax authorities do not apply a fixed ranking for these circumstances, but attach great importance to the sustainable housing and the residence of the partner and / or children. But no fact is in itself decisive.

The inspector must also distinguish between formal and material circumstances. The whereabouts of the family and the actual residence of the taxpayer are material circumstances. Examples of formal circumstances are nationality and registration in the municipality register. The inspector must attribute higher value to material circumstances than to formal circumstances.

Certain published documents state that the Tax office do not have to weigh domestic and foreign facts. Foreign facts and circumstances do not play a role. Only what binds the person as investigated within the Netherlands is important for the inspector.

A private individual is obliged to provide the Tax office with information that may be important for determining this individual’s tax liability. This means that the inspector can also ask to provide information that gives insight into the place of residence. Incidentally, the obligation to provide information also applies to foreign taxpayers. However, this obligation to provide information does not go so far that the Tax office may start a fishing expedition for information.

We often advise on tax residency issues. Please be aware that even if you are not a tax resident of the Netherlands, you may still have a Dutch tax liability as a foreign tax payer. For example when you as a foreigner own real estate located in the Netherlands. In that case an annual personal income tax return for foreign tax payers is to be filed.