The 183-day rule: it’s not just about counting the days

The 183-day rule: it’s not just about counting the days

You’ll find lots of references to the 183-day rule on numerous websites and guides to living and working abroad. And, if you hang around enough expat bars or golf clubs, you’ll almost certainly hear it talked about. It’s worth bearing in mind that some of the opinions you hear are not universally applicable to all countries and circumstances.

Many international consultants and contractors come to work in the Netherlands using their own Limited Company. That’s not normally a problem, but it could be if you don’t understand the 138-day rule. Too many international workers still assume that if you’re not working in a country for more than about six months, you don’t become resident for tax purposes. That’s not the case with the Netherlands.

The 183-day rule does not always apply

The 183-day rule only applies when the material employer is a non-Dutch company. In November 2017, the Dutch Court of Appeal made a very clear distinction between what is considered a material employer as opposed to a payroll company or an Employer of Record (EOR).

The Court ruled that the 183-day rule was not applicable for a Belgium payroll company who seconded Belgium residents to a Dutch client. The material employer was deemed to be the Dutch end client, not the Belgium payroll company. In this situation, Dutch payroll taxes are due from day one.

Working via your own Ltd Company

For many contractors the best solution will be to register your own limited company as a non-resident employer with the Dutch Tax Authorities. This is a relatively small modification and we can help you with the registration procedure. If your limited company has a valid EU VAT number, that should also be able to continue as normal.

You will also need to ensure that your working relationship is classified as self-employment rather than employment. Being seen as an employee for tax purposes is a very real risk if you work under the management and supervision of the end client in much the same way as other team members who are employees. In this situation, under Dutch Chain Law, everyone in the employment relationship (including the end client and the recruitment agency) can be liable for any payroll taxes and VAT left unpaid by your limited company.

You can avoid the risk of your working relationship being qualified as an employee with a model agreement that clarifies your income tax status and payroll obligations. This involves registering your limited company with the Dutch Chamber of Commerce as a non-resident entity (so using your company address in your home country). You’ll also need a non-resident Citizen Service Number (BSN) and to have professional indemnity insurance in place.

Our previous blog gives more details about model agreements and we can help make these arrangements. We’re also happy to advise limited company directors on Dutch minimum annual salary rules and the 30% ruling (a highly beneficial tax-free allowance for high-skilled international consultants and contractors who meet certain eligibility criteria).

If you have any questions, please get in touch.