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Agreements Germany and Belgium home work days Covid-19

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Dutch tax agreements with Germany and Belgium for days working from home due to Covid-19

The main rule for salary taxation is that employees are taxed in the county were they work. Because of Covid-19 people are working way more from home and this can bring unwanted double taxation and a higher income tax burden. Think of situations were usually you traveled a lot and worked often in the country were you get your salary from, this income is taxed there.

But now due to Covid-19 you have not travelled that much and most of your income will be taxable in The Netherlands, while the other country may also want to have a claim on part of your income.

To cope with these problems, additional agreements have been made by The Netherlands with Germany (6th April 2020 – at least 31st of March 2021) and Belgium (30th of April 2020 – at least 31st of March 2021)  regarding working from home.

In both cases the countries have agreed that cross-border workers may treat days worked from home as days were they would have normally (pre Covid-19) worked across the border, these days may be taxed by the other country.

If you require assistance with preparing your personal income tax return, please feel free to contact us.

 

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.

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 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.

Deadline personal income tax return 2018 & be aware of interest

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Now that the year 2018 has ended, it’s time to prepare for the Dutch personal income tax return (“aangifte inkomstenbelasting”) 2018! The Dutch tax year is similar to the calender year.

The Dutch tax office (“Belastingdienst”) has set the filing deadline of the personal income tax return 2018 on May 1st 2019. To this purpose you may receive a so called aangiftebrief 2018 from the Dutch tax office. Our tax advisors can assist with the full process to file your personal income tax return 2018.

In case you have to pay additional personal income tax on your personal income tax return 2018 be aware of the accruing interest (“belastingrente”) on the amount on tax due following the 2018 personal income tax return. In case you file your personal income tax return 2018 after May 1st 2019, the tax office will start calculating interest.

The tax authorities have three months to impose a personal income tax assessment 2018 after having taken receipt of a personal income tax return 2018. During this 3 months period they retain the right, if filed after May 1st 2019, to charge interest on the tax amount due following the 2018 personal income tax return.

Since the interest rate is fixed at 4% on annual basis, this interest rate is well above any interest percentage you may expect to receive on a Dutch bank current account / savings account.

Personal income tax may be due e.g. in case of savings held above the applicable thresholds or other taxable income which was not yet taxed, e.g. by means of wage tax and/or a preliminary tax assessment.

Filing your personal income tax return 2018 can be especially interesting in case of an expected tax refund, e.g. in the year of migration (immigration or emigration).

The Dutch personal income tax rates for tax year 2018 (in Dutch) can be found here. The Dutch personal income tax rates for tax year 2019 (in English) can be found here

We can assist with the full process to file your personal income tax return. If needed we can arrange for a lengthy filing extension of your personal income tax return 2018, however be aware that the possible interest calculation will not be extended by the tax authorities.


Tax deduction of costs related to the purchase or sale of a participation

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The Supreme Court recently ruled that costs related to the purchase or sale of a participation are tax deductible in case the transaction is not finalised.

Purchase costs or selling expenses incurred to acquire or sell a participation are excluded from tax deduction by means of the participation exemption (applicable when holding 5% or more of the shares in a company). The Supreme Court has defined purchase costs or sales costs as costs that would not have been incurred without that acquisition or disposal.

With external selling or purchasing costs, a clearer distinction can usually be made in this context than in the case of internal costs, the question of internal costs (for example, salaries of employees assisting with the purchase or sale in question) is to what extent these costs have been incurred solely for the purchase or sale.

Purchase costs or selling expenses only fall under the participation exemption insofar as the relevant purchase or sale has actually taken place.

The Supreme Court ruled on a situation in which a purchase or sale initially fell through, but then succeeded in a subsequent phase with another party. In such a case, it must be assessed to what extent the sales costs incurred in that first phase would also have been incurred if that phase had not taken place. Only those costs are not deductible.

It is not always possible to estimate in advance whether a purchase or sale will take place, therefore (tax) accountancy rules imply that the costs related to the planned purchase or transfer of a participation will be activated on the company’s balance sheet until it is clear whether or not the purchase or disposal goes forward.

Subsequently, it is determined to what extent the activated amounts are subject to the participation exemption (to be activated upon purchase), the remaining initially activated amount is tax deductible.

Tax rules full electric cars will change as of the year 2019

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The tax rules for full electric cars will change as of the year 2019. It can still be very interesting to get a full electric company car before the end of 2018 in order to avoid the “Tesla tax”. In the below we give an overview of the current company car tax system as well as the changes for the coming years.

Bijtelling / adding benefit company car to salary
Having the benefit of a company car is seen as an income (“bijteling”), unless you drive it less than 500 kilometers per year for private use and you keep an administration of these kilometers.

When you buy a full electric car (only applicable when zero emission) car in 2018, you will fall under the 4% “bijtelling” (added taxable salary because of the benefit of driving a company car). This bijtelling is calculated over the gross catalogue value of the car, so when the catalogue value is EUR 40,000, the bijtelling is 4% x EUR 40,000 = EUR 1,600 which amount is added to your salary and taxed at the applicable progressive rate. So if the top of your salary falls in the 42% rate, the payable wage tax on the company car is EUR 1,600 x 42% = EUR 672.

This 4% bijtelling will remain applicable for 5 years as of the moment the car is first registered. Also when the car is sold so someone else this five year period (as started as of registration first owner) will remain. After those five years (so at the latest at the end of 2023) the bijtelling rate will go to 22%.

If you buy a full electric car in 2019 or 2020 the rules are different, still 4% bijtelling applies as long as the catalogue value of the car is below EUR 50,000. When the catalogue is higher than EUR 50,000, the excess will get a bijtelling of 22% (unless the fuel is water based). Also referred to as the Tesla-tax. So if the catalogue value is EUR 70,000, the first EUR 50,000 will have a bijtelling of 4% the remainder (EUR 20,000) will have a bijtelling of 22%. So it will be a mix of rates. As of 2021 the bijtelling rate will be 22% on all electric cars.

Corporate income tax
There is also a tax incentive for full electric cars for corporate income tax purposes. In 2018 there is an (environmental) deduction of 36% over the catalogue value till EUR 50,000 (only when the car is bought new), if the car is more expensive than on the excess the 36% deduction does not apply. It is obigatory to request this incentive by registering at the “RVO” agency within three months (after signing the purchase agreement with the car dealer) in order to obtain this incentive.

VAT
As far as the VAT refund, this is also applicable for non-electric cars, you can get a full refund of VAT when the car is bought (or financial lease) by the company. Also VAT on running costs can be deducted, however VAT has to be paid on private use, if no records of the private use is kept, you should pay a deemed VAT amount on annual basis, being 2,7% over the catalogue value.

Road tax
Till 2021 no road tax for full electric cars, as of 2021 the normal road tax applies also on full electric cars.

Company owner with company car
In general company cars will become less attractive for tax purposes after 5 years, because there will be no more depreciation and the bijtelling in this case will increase considerably. So best to take it out of your company after five years. If the car has been fully depreciated in those five years, the gain on the sale is profit for your company. But you can take the market value which after five years may be limited at that time especially given the uncertain market for electric cars.

Please note that this is the (suggested) legislation as per 2018, rules may well change the coming years since as it stands now in a few years time the electrical will have the same tax treatment as regular fuelled cars, which may lead to electrical cars becoming far less interesting whilst the environmental rules the Netherlands has to meet are strict and becoming stricter for the coming years. So there may well be further more interesting change of the above legislation the coming years.

If you have any questions, or a concrete vehicle you wish to purchase, please contact us and we can advise further on the above.