Working as a self-employed for a company abroad

[cheese_fanatic]

Hi all,

 

I have been given an offer by a company that is based in the USA. Since the company does not have a legal representation in the Netherlands, they want me to provide my services as an independent consultant (i.e. contractor).

 

To my understanding, in order to act as an independent consultant, I would need to register myself as a self-employed in the Netherlands (or open a B.V.) and treat that company as one of my customers. I have been in contact with many tax advisors regarding this situation and I keep getting conflicting advice in regards to the false self-employment.

 

The contract provided by the company clearly states the following points:

• Consultant’s relationship with the Company will be that of an independent contractor and not that of an employee.
• Consultant shall be solely responsible for determining the method, details and means of performing the Services.

 

In general, the contract makes it clear that there is no treatment in regards to things that are common in a traditional employment, such as business expenses, benefits, etc.  I am in control of my work and the ways that I decide to conduct it. Despite that, I do plan to work full-time for that company, although that is not a requirement set by them. They clearly give me the option to work for other companies if I will to do so.

 

Has any of you been in a similar situation and could you share your experiences and steps you decided to follow? I want to make sure that I don't face any surprising tax-related issues in the future.

 

Much appreciated.

18 november 2021 aangepast door cheese_fanatic

[Joost Rietveld]

Hi there

 

Can you elaborate on your services and what services the US company provides?

 

Main issue to avoid here is a relationship of authority. This needs to be clear from the way you perform your work, not just because it's written on a contract.

 

So explaining how you work in relationship to the US company would help here.

 

Best

Joost

[cheese_fanatic]

Hi Joost,

 

I will be providing IT-related services for that company. So, I will helping them implement new software related capabilities. The company provides finance related services.

 

I will be working at a location of my liking, so for example at the address that I would register my self employment. The specific nature of the services will be requested on a continuous basis from the company, to which I will also need to report the work that I have done.

 

Does that information help? I'm not completely sure what the definition for 'relationship of authority' means.

 

Many thanks!

18 november 2021 aangepast door cheese_fanatic

[Joost Rietveld]

Op 18-11-2021 om 17:49, cheese_fanatic zei:

relationship of authority' means.

Amongst others: receiving instructions on what and how to do your job, reporting results to the company management, using their hardware, being available for them at set times, etc

[cheese_fanatic]

On 18/11/2021 at 19:04, Joost Rietveld said:

Amongst others: receiving instructions on what and how to do your job, reporting results to the company management, using their hardware, being available for them at set times, etc

I am free to decide how I do my job, but is expected of me that when necessary to handle any company-related information, that I do that using their hardware. There are no standard times of availability set or required for my work, I am free to decide on that.

[TwaBla]

Op 18-11-2021 om 17:49, cheese_fanatic zei:

So, I will helping them implement new software related capabilities. The company provides finance related services.

 

Implementing software related capabilities? That could be anything liking 'market research' or 'adjusting translation software' or 'making interior designs' or 'setting up job interviews' as many office jobs can now be done remote and computer-aided.

 

Op 18-11-2021 om 19:10, cheese_fanatic zei:

I am free to decide how I do my job, but is expected of me <> that I do that using their hardware. 

 

Their hardware?

[cheese_fanatic]

On 18/11/2021 at 20:41, TwaBla said:

 

Implementing software related capabilities? That could be anything liking 'market research' or 'adjusting translation software' or 'making interior designs' or 'setting up job interviews' as many office jobs can now be done remote and computer-aided.

 

 

Their hardware?

I will be implementing software that automates processes of the company or provides useful insights to their business. I will be able to access certain information only through the hardware (laptop) they provide me with. The hardware will be provided because thats the only possible way for anyone to get access to their information.

18 november 2021 aangepast door cheese_fanatic

[Joost Rietveld]

Your worst case scenario is that the Dutch tax offices mark your relationship with the US company as one of foreign employment. This will mean that you are not entitled to certain tax benefits that Dutch entrepreneurs can claim, nor can you deduct expenses.

 

In dutch tax law this is a grey area, mostly build up in court room rulings. You can either:

- file your Dutch taxes as income from other foreign sources (not from employment, but not from entrepreneurship either) in which case you are not claiming the entrepreneur tax benefits.

- or ask the tax offices for a ruling.

 

Based on your input thus far, I'd be surprised if the Dutch tax offices would consider this income from entrepreneurship. Your activities seen to miss most of the hallmarks of what would be considered a company. But income as a freelancer (in your Dutch tax return, income from other sources in box 1) should pose no problem, since there seems to be enough there* to warrent the absence of a relationship of authority.

 

* Based on your info above. Never forget that this is forum Q&A, so don't base your decisions solely on what I've written here

[prinsrachid]

I think it might be good to explain that two types of taxes might apply, and that both are assessed independently and handled separately.

 

First, there is the payroll withholding tax (loonbeleasting). Second, there is the income tax (inkomstenbelasting).

 

For the payroll tax it is important to determine if you are in fact an employee. If not, then the company doesn't have to withhold any payroll tax and social premiums. If you are, then the company will have to treat you like a Dutch employee. To determine this, you must follow Joost's rules: does the company have authority over you, can you do the work the way you like, do you get instructions, etc.

 

For the income tax it is important to determine if you are in fact an entrepreneur. If not, then you can not claim certain tax deductions and other fiscal entrepreneurial perks. If you are, then you can. Being considered an entrepreneur for income tax purposes does not mean that you are automatically also not considered an employee for payroll tax purposes. Because these two tax laws run parallel, both could be true (i.e. being seen as an entrepreneur for income tax purposes, but not for payroll tax purposes).

[TwaBla]

Op 18-11-2021 om 20:54, cheese_fanatic zei:

I will be implementing software that automates processes of the company or provides useful insights to their business. I will be able to access certain information only through the hardware (laptop) they provide me with. The hardware will be provided because thats the only possible way for anyone to get access to their information.

 

Sounds like some sort of 'meter reading job'.

 

Op 18-11-2021 om 17:21, cheese_fanatic zei:

....they want me to provide my services as an independent consultant (i.e. contractor).

 

There is not a lot of consulting happening and certainly nothing independents. Are you allowed to suggest anything else than 'implementing software' that is supplied by your contractor?

 

Who is selling these solutions and how?

[MGC1969]

Op 19-11-2021 om 01:41, TwaBla zei:

 

Sounds like some sort of 'meter reading job'.

 

 

Not sure if I understand this comment. Some companies have strict security protocols. Accessing clients environments requires additional assurances. I had software and hardware tokens for multi factor access, I had signed NDA in relation to sensitive data, but also signed IT security protocols. I had interviews with internal audit but also background checks. Some require me to follow their internal courses. And there are also companies that simply don't allow remote access from external computers. In those cases they provided me with a laptop I should use while working on their project.  Needless to say that these machines are completely locked down and secured. No way that I can use an USB stick, access my NAS or connect to any remote storage like Dropbox or Google drive. Nor can I access the internet to post on social media or open my private email.

 

This had nothing to do reading meters, this is taking security serious. 

[cheese_fanatic]

On 19/11/2021 at 08:02, MGC1969 said:

Not sure if I understand this comment. Some companies have strict security protocols. Accessing clients environments requires additional assurances. I had software and hardware tokens for multi factor access, I had signed NDA in relation to sensitive data, but also signed IT security protocols. I had interviews with internal audit but also background checks. Some require me to follow their internal courses. And there are also companies that simply don't allow remote access from external computers. In those cases they provided me with a laptop I should use while working on their project.  Needless to say that these machines are completely locked down and secured. No way that I can use an USB stick, access my NAS or connect to any remote storage like Dropbox or Google drive. Nor can I access the internet to post on social media or open my private email.

 

This had nothing to do reading meters, this is taking security serious. 

Thanks MGC1969, that perfectly describes my situation. Companies these days handle lots of data, so they won't risk using your own laptop to access it, regardless if you're their employee or a contractor for them. 

 

On 19/11/2021 at 01:41, TwaBla said:

There is not a lot of consulting happening and certainly nothing independents. Are you allowed to suggest anything else than 'implementing software' that is supplied by your contractor?

Well, 'implementing software' is a high level term. In reality it involves a lot of consulting around how you think a certain product should be designed, implemented and then what kind of insights you can provide to the business with that software. So that requires a lot of research and is not a simple instruction provided by them such as 'carry box from A to B'. 

19 november 2021 aangepast door cheese_fanatic

[TwaBla]

Op 19-11-2021 om 09:03, cheese_fanatic zei:

Well, 'implementing software' is a high level term. 

 

It is also a posh word for 'installing'.

 

I do not doubt that being a specialized implementor of for instance complex systems for insurance companies or banks is a highly skilled job, but the way it is explained here on HL leaves a lot of questions open. Like for instance now I read something about 'how the product is designed' and again I wonder: what product? The design of software is not changed when it is implemented. It might be customized. But then it is probably designed to be customized. Tweaked to serve the specific needs of the customer.

 

Op 19-11-2021 om 08:02, MGC1969 zei:

This had nothing to do reading meters, this is taking security serious. 

 

That explanation is easy to follow. Cheese's story is not so evident. He needs a secure device to get access to 'their information'. But he might be refering to user info that is related to implementation and support. The whole thing is probably self-explaining in the context of the service that is provided by the installed systems.

 

Anyway. Just think you can better have some debate here than with the Belastingdienst. 

 

19 november 2021 aangepast door TwaBla
reactie op mgbgt

[Maxn]

Op 19-11-2021 om 12:41, TwaBla zei:

It is also a posh word for 'installing'.

 

Eh, in software development "implementation" more commonly refers to the phase in which new software is actually programmed.

Not to deploying software that already exists.

 

Design comes before that and is more a theoretical plan how and what you are going to implement.

Subject to change to whatever bumps you run into during progamming...

19 november 2021 aangepast door Maxn

[TwaBla]

Op 19-11-2021 om 13:54, Maxn zei:

Eh, in software development "implementation" more commonly refers to the phase in which new software is actually programmed.

 

Now breaks my clump. This may have happened in the 70s when cash registers were programmed on location. I have seen the pons cards.

 

Nowadays implementing is tweaking already programmed software to fit in with the organization, or even tweaking the organization to work with that software. If the software is complex, implementation is difficult. If the software is easy, implementation is not so hard.

 

Wiki is our friend.

 

And I am not questioning the skills of Cheese-fanatic. Taxmen in the UK are happy with anyone making a living as an independent contractor, but the Dutch bureaucrazy has many checks and balances. Just to make sure you are not getting any tax advantage that you are not entitled to. The German bureaucrazy is even worse. Dass ist kein Implementierung!

 

[Norbert Bakker]

Op 19-11-2021 om 15:38, TwaBla zei:

And I am not questioning the skills of Cheese-fanatic.

 

But what is the relevance of this "implementing" debate with regards to the questions of topic-starter?

 

You seem to imply that a meter-reader or software-instealler can't be or makes it lesse likely to be an independent contractor / entrepeneur?

 

[TwaBla]

Op 19-11-2021 om 15:50, Norbert Bakker zei:

You seem to imply that a meter-reader or software-installer can't be or makes it less likely to be an independent contractor / entrepeneur?

 

Just signaling a few inconsistencies and inaccuracies in the job-description and later explanations. Like 'independent consultant' and 'sole responsibility' when the contractor obviously has to work within the frame of an implementation method and with tools supplied by the one supplier. I am aware that a job-description is also a way to sell a job to contractors, so there might be some language inflation. That is not easy to determine without context.

 

There is a reason why topic starter is getting conflicting advice from many tax advisors. 

 

But I am also aware that many contractors are hired as 'independents' like for instance solar panel installers that work within a framework and with tools as described by their supplier.

[Norbert Bakker]

Op 19-11-2021 om 18:51, TwaBla zei:

There is a reason why topic starter is getting conflicting advice from many tax advisors. 

But that reason is not the job description

[TwaBla]

Op 19-11-2021 om 21:03, Norbert Bakker zei:

But that reason is not the job description

 

First of all: we don't really know. I am just reacting to the explanations here on this forum and I did mention the importance of context. On top of that I did say that in England (where I worked as an independent contractor) this would be no issue at all. 

 

And a last remark. This job offer does not seem important enough for the employer to adjust their job description to match typical Dutch circumstances. There is no mention of any such flexibility.