Providing services abroad: how to cover your bases

Very often, rules abroad  restrict export opportunities for Dutch businesses. International lawyer Hans van Velzen recommends always exploring what rules and obligations you have to comply with, even within the EU. “Entrepreneurs often underestimate how big the differences can be or even forget that different rules apply abroad. And that is before they take language differences or cultural differences into account. Careful preparation can make life a lot easier, but you have to get started on time.” 

In the EU 

In the EU, there is free movement of services and persons, which means EU nationals do not need a visa. All you need is an ID card or passport. For Van Velzen, free movement of services is a great starting point, but he also thinks there is much to be gained. “Each country has its own rules and regulations  for temporary employment in the country of employment. You may have to meet certain requirements, administrative or otherwise, or pre-register your employees on site. In some EU member states, you are required to appoint a local representative. If you intend to practice a regulated profession, you will generally need a licence.” 

Differences between countries 

If you work in a regulated profession in the country of employment, additional rules will apply. The list of regulated professions varies from one EU country to the next, and you may have to apply for a licence in the EU country where you will be working. This licence will only be issued if you have the required qualifications, which you can demonstrate with an EU declaration issued by KVK. 

The rules may vary by country or region. Construction work is often subject to additional rules, as shown by 2 examples cited by Van Velzen: 

• If you carry out construction work in Germany, your work will be permit-free or require a permit.
• If you carry out work in Belgium, you will encounter regional differences. In Flanders and Brussels, you can get to work right away, while you have to demonstrate your qualifications before you can start in Wallonia. 

Outside the EU 

If you perform services outside the EU, you need a valid passport as proof of identification and will often have to meet other requirements as well. “Most people do realise that they need a visa, but what about the duty to follow a collective labour agreement (cao), withholding tax, or registration duty?", Van Velzen says. Check the relevant embassy website for more information on licences and permits. 

To perform services outside the EU, in most countries you must apply for a temporary work visa. In your application, you have to provide a clear explanation of the work you intend to do, such as after-sales. Document this in the purchase and sale agreement between your company and the foreign contracting party. In some countries, you do not need a work visa for after-sales-related work. Such as in Canada, Japan, and Singapore, provided you meet the requirements. 

Taxes 

If you provide services abroad, there are a few general rules when it comes to tax that apply both inside and outside the EU. 

• If you work from the Netherlands, you will usually be subject to Dutch tax rules. If you work abroad, local tax rules may apply. 

• If you live in the Netherlands, you have to report your entire worldwide income in your tax returns. So your Dutch and non-Dutch income combined. 

Dennis Jongbloed is a specialist in tax law. Together with colleague Emile Klomp, he advises entrepreneurs on national and international tax issues. He explains how the rules outlined above work slightly differently in practice. 

Income tax 

“Even though you file your income tax returns in the Netherlands, you will not necessarily pay income tax in the Netherlands," Jongbloed says. “Where you pay tax depends on your so-called tax residence and where you actually do your work.” 

Tax residence 

Your tax residence is where most of your social life takes place. There are no EU rules stating where you have to pay tax on your income when you work or live in another EU country. In principle, the country of your tax residence will tax all of your income, unless a tax treaty gives another country the right to levy taxes on your income. Klomp adds: “In that case, you will have to pay tax in the country where your income came from, the so-called source country, rather than your country of residence. If part of your income is taxed overseas, the Netherlands will provide double-taxation relief.” 

Tax treaties 

The Netherlands has tax treaties  with many countries, both inside and outside the EU. These treaties state which country is allowed to tax overseas income, such as wages, pension benefits, government benefits, or profits. 

The basic principle of taxation is that you only pay tax on your income and equity once. If you receive income from a country without a treaty, the Netherlands will sometimes provide unilateral double-taxation relief. This applies to countries inside and outside the EU. 

183-day rule 

The distribution of taxing rights on earned income in cross-border cases is part of tax treaties. Taxing rights are usually allocated based on the 183-day rule. This determines which country can tax the income of your employees: the country where they live or the country where they work.

The 183-day rule has 3 conditions. Klomp stresses: “Wages are usually taxed by the country in which they are earned. Only if all 3 conditions are met will your country of residence have the right to tax your income. In all other cases, you will be taxed by the country in which the income was earned.” 

No salaried employment 

The 183-day rule applies only to salaried employment. It does not apply to, for example, zzp’ers (self-employed professionals without staff). As a self-employed person, you often have an eenmanszaak (sole proprietorship) as the legal form for your business. You work independently for different clients, without being employed by them. You perform your activities as an independent entrepreneur. And not as an employee of your company.

VAT

If you provide services to a VAT-registered company in another EU country, you will usually reverse charge VAT to your customer. Under this mechanism, your customer will calculate VAT and pay it in their own country. If you provide services to a foreign consumer or organisation without a VAT identification number, you charge Dutch VAT. This is the case whether your customer is based inside or outside the EU.

Some services are taxed in the consumer country. For example, services related to real estate or culture, the arts, and sports etc. So it is important to find out where you have to pay VAT on your service. If VAT is charged by another EU member state, you can use the Netherlands Tax Administration's  One-Stop-Shop system (Belastingdienst, in Dutch). Under this scheme, you can file your VAT tax returns for VAT owed in another member state with the Dutch tax authorities. 

If you provide services to VAT-registered companies outside the EU, send an invoice without Dutch VAT. Ask the local tax authorities whether you have to file VAT returns and, if so, how you do that.

This tool from the Tax Administration (in Dutch) can help you find out where to file VAT. 

Insurance 

Working abroad will also have insurance consequences. For example, it affects your social security and health insurance. 

Social security in the Netherlands 

Under the Dutch social security system, you may be entitled to a state pension, child benefits, and disability benefits. If the country you are working in has a social security treaty with the Netherlands, you may still qualify for social security in the Netherlands. You demonstrate this abroad with an A1/certificate of coverage. You apply to the Sociale Verzekeringsbank (Social Insurance Bank, SVB) for this certificate. The SVB can also answer any questions you may have about this topic.

In many countries, you have to provide a A1/certificate of coverage to your client before starting work. 

International health insurance 

If you end up in hospital while working abroad, you want to make sure that your healthcare expenses are still covered. Consider taking out international health insurance. This insurance will provide coverage if you are temporarily or permanently working, living, or travelling abroad. In some cases, your Dutch or local health insurance will not provide sufficient coverage overseas. Discuss your situation with your health insurance company or intermediary. 

Travelling with professional supplies 

Temporarily taking professional supplies such as tools or instruments abroad for a job is subject to free movement of goods within the EU. 

To temporarily take professional supplies to a non-EU country, you have to declare them to customs. You do this both when exporting them from the Netherlands and importing them to your destination. Use an ATA carnet. That way, you do not have to pay import duties and VAT. It also helps you avoid delays and red tape at the border. 

Consultancy subsidies

Before taking on a job in another country, figure out what arrangements you have to make. You may qualify for a government subsidy for these consultancy costs. An RVO knowledge voucher, for example, covers 50% of the costs of hiring a consultant up to €2,500.