Permanent establishment in the Netherlands; rules tightened

Broadstreet - News - - Permanent establishment in the Netherlands; rules tightened

October 2nd, 2019

As a result of the discussion on implementing BEPS internationally;  the Dutch government will implement new regulations regarding the conditions that create a permanent establishment. The implementation is aimed at tackling common tax avoidance strategies worldwide.

It is important to realize that the existence of a permanent establishment (PE) may lead to a material increase of your tax exposure in the Netherlands. The new regulations expand the possibilities for the Netherlands to tax foreign enterprises, especially when they have employees assigned to the Netherlands.

The key changes to a permanent establishment with regards to employees working in the Netherlands can be summarised as follows:

Dependent agent PE

At this moment a PE arises when an agent is acting on behalf of the company and habitually conclude contracts in the name of the company. This definition will expand to situations in which an agent habitually plays the principal role leading to the conclusion of contracts that are then routinely concluded without material modification by the company. In other words, when the employee plays part in the conclusion of a contract, you should be aware of your tax exposure in the Netherlands.

Impact of the changes

In most cases a PE does not automatically mean paying more tax in the Netherlands. In most cases, remuneration based on costs incurred by the PE plus a small “cost plus” cross charge should be appropriate, though there may be situations in which remuneration based on commission would be more suitable.

The new rules could trigger higher compliance costs and administrative burden for the businesses.

Review the activities

There is an increased risk of a dispute with the Dutch tax office with regard to the presence of a creates a permanent establishment or the selection of the appropriate method of profit attribution to the PE. In order to avoid this uncertainty and increased compliance costs we would recommend to prepare for the new regulations and review the existing structures. In particular you should analyse the activities performed by the employees in the Netherlands.

More information

If you require further information, please contact thierry@broadstreet.nl or any of our other tax advisors by calling + 31 (0)20 262 4300

 

Daniel Sokolov
Daniel Sokolov
14:41 06 Dec 18
Thank you Broadstreet!!!first I have to say that my knowledge in taxes is 0%.I'm checked a lot before I find a Broadstreet team and I'm really glad.they are professional helpful and helped me step by step with everything what I ask for.Thanks again to everyone
Dehlia Kruger
Dehlia Kruger
14:08 01 Sep 18
We are extremely happy and satisfied with the service we received from Broadstreet, Elisabeth Bouwer in particular. Financial information was accurate to the cent, and every promise given was kept. Highly recommended!
Susie Breuer
Susie Breuer
15:33 30 Aug 18
I have used Broadstreet for around 10 years for tax purposes within Holland. I found them knowledgable, responsive and very professional. I would highly recommend them as an expat tax service.
Benedict Carey
Benedict Carey
13:43 06 Nov 17
Having been bounced around a few tax advisors and almost got my self in hot water by being told the wrong thing, I got a recommendation from another person who had a similar business structure to me. The Broadstreet advisor was efficient and thorough and provided a comprehensive and understandable summary of how to deal with my situation. Relocating between regimes with complex tax laws is never going to be straightforward, at least these guys do put the effort in ... beware of others who will make a suggestion and then disappear when it goes haywire!
marco lirio diaz
marco lirio diaz
09:41 24 Jun 17
Great services,thorough and real professionals. As an expat I highly recommend Broadstreet. I had some issues with my tax and they manage to solved the problem avoiding a penalty fee. If you don't want to worry about the complex Dutch Tax, I recommend to leave it on their hands to be sort it for you.
See All Reviews