Individual - Other issuesLast reviewed - 28 December 2022
Immigration rules and formalities
Dutch immigration policy has been aiming to protect the Dutch labour market for decades. Over the past few years, it has introduced a less restrictive admittance policy for highly skilled employees of multinational companies who meet specific criteria.
Immigration procedure(s) apply to foreign nationals who want to work and stay in the Netherlands.
According to the Dutch Foreign Employment Act, an employer needs to be in possession of a work permit for a non-European Economic Area (EEA) national that will perform employment activities in the Netherlands.
Additionally, most nationalities require a Schengen visa in case the intended stay will be less than three months within six months. Please note that a Schengen visa issued for business does not allow the business visitor to work in the Netherlands. A separate work permit will have to be applied for.
In case the intended stay will exceed three months (within six months), a residence permit is required to legally stay in the Netherlands. Next to that, a long-term entry visa (MVV) may be required before entering the Netherlands.
Work permit requirement
According to the Dutch Foreign Employment Act, an employer needs to be in possession of a work permit for a foreign national who will perform work activities in the Netherlands. This work permit requirement applies from day 1 of any work activities taking place in the Netherlands. An exception applies to EEA and Swiss nationals, who are allowed to work in the Netherlands without a work permit.
Entry and stay
Additionally, most nationalities require a Schengen visa in case the intended stay will be less than 90 days in a rolling 180-day period. Please note that a Schengen visa issued for business does not allow the business visitor to work in the Netherlands. A separate work permit will have to be applied for in case the individual will be working in the Netherlands.
In case the intended stay will exceed 90 days in a rolling 180-day period, a residence permit is required to legally stay in the Netherlands. Next to that, a long-term entry visa (MVV) may be required before entering the Netherlands. When the purpose of stay is employment, the employer will generally apply for a combined permit for residence and work. The applicable category depends on the facts and circumstances of the case.
Economic employer concept
On 1 December 2006, the Dutch Supreme Court rendered a judgement regarding the interpretation of the term 'employer' in article 15, paragraph 2, sub b of the Organisation for Economic Co-operation and Development (OECD) Model Convention. The Supreme Court ruled that the employer concept should be interpreted economically. For inter-company assignments, the economic employer concept implies that a foreign group company that bears the risks and responsibilities of the employee's activities and that will have the authority to instruct the employee will be considered the employer if the salary costs relating to the employment activities in that country are charged individually (i.e. the actual salary costs per time unit) to the foreign group company.
In addition to the new case law of the Dutch Supreme Court, the Dutch Ministry of Finance published new policy guidelines in a decree on 20 January 2010 in reaction to questions raised about the practical application of the aforementioned judgement. The Decree addresses the definition of employership (state of being an employer) in the employment article of tax treaties and is particularly relevant for short-term assignments. It deals only with assignments to a separate legal entity in the country of employment. In other words, the Decree does not address assignments to a permanent establishment (PE) in the country of employment. The relevance, in particular for group entities, is that the Decree mentions a number of examples of commonly occurring case positions and their related tax treatment. With this, a few guidelines and tools are provided for the practical application of the Dutch Supreme Court's economic employer concept. More importantly, the Decree introduced two specific facilities, i.e., a 60-day facility and a general facility for reversing wage tax withholding from the home country employer to the Dutch company that is hiring employees. The second facility provided then has been included in the wage tax legislation per 1 January 2013 as well.
Under the aforementioned judgement of 1 December 2006, cross-border intercompany employment is subject to a test as to whether the group company in the country of employment qualifies as an economic employer. The Decree offers a relaxation for assignments to the country of employment for less than 60 days over a 12-month period in the context of an exchange programme or career development, or in situations where the employee in question has a specific expertise. In these instances it is easier assumed that no employer under a tax convention exists in the country of employment regardless of who is bearing the employment costs. This will alleviate the administrative burden for many group entities. The facility is intended in principle for group entities as referred to in the Dutch Wage Tax Act (one-third equity stake required). Groups that do not satisfy this requirement, but present themselves as a group can submit an application to the Dutch tax authorities to request treatment along the lines of the Decree.
General facility for reversing payroll obligations to a Dutch group entity
When an employee is subject to Dutch wage tax, the foreign, formal employer will in principle be liable to remit wage tax. In other words, the foreign employer will have to register in the Netherlands and operate a Dutch (shadow) payroll. However, from 1 January 2013, there is a general facility included in the legislation for reversing wage tax withholdings from the home country employer to the Dutch (host country) employer in assignment situations. As such, the Dutch employer can take over the withholding obligation from the home country employer. However, a request should be filed with the Dutch tax authorities in this respect; otherwise, the foreign formal employer should still register with the Dutch authorities for the purpose of remittance of Dutch wage tax and employee insurance premiums via a Dutch (shadow) payroll.
The scope of this legislation is expanded as of 1 January 2017. Please note, however, this facility (still) does not apply in all situations, e.g. formal salary splits are not automatically covered. In those situations, the formal foreign employer(s) may still need to register and operate a separate shadow payroll in addition to the Dutch employer.