Providing services abroad: how to cover your bases
- Sandra Visser-Meijer
- The basis
- 25 Jul 2023
- Edited 17 Oct 2022
- 7 min
- Managing and growing
If you want to start providing services abroad, you will encounter different rules than in the Netherlands. Make sure to familiarise yourself with topics such as local permits, taxes, insurance, and administrative obligations first. Three experts take a close look at the rules on services in the EU and beyond and explain why many entrepreneurs underestimate how big the differences can be.
Very often, rules abroad (CBS, in Dutch) 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 (in Dutch) 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 (RVO, in Dutch) 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, and if you intend to practice a regulated profession, you will generally need a licence.”
Differences between countries
If your work falls into the scope of so-called regulation professions 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 requisite qualifications, which you can demonstrate with a KVK-issued EU declaration.
The rules may vary by country or region. Construction work is often subject to additional rules, as shown by two examples cited by Van Velzen:
If you intend to carry out construction work in Belgium (in Dutch), you will even run into regional differences. In Flanders, you can get to work right away, while you have to demonstrate your qualifications before you get going in Brussels or 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 will realise that they need a visa, but what about a collective bargaining obligation, withholding tax, or registration duty?", Van Velzen points out. Check the embassy website for more information on licences and permits.
To perform services outside the EU, most countries will require you to 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 & 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 Canada, Singapore, and - provided you meet some requirements - Japan.
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, and 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, consisting of your Dutch and non-Dutch income combined.
Dennis Jongbloed is a tax lawyer and owner of the eponymous firm. Together with colleague Emile Klomp, he advises entrepreneurs on national and international tax issues. Scroll down to find out how the rules outlined above work slightly differently in practice.
“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.”
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.”
The Netherlands has tax treaties (Belastingdienst, in Dutch) 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.
One of the things tax treaties do is allocate taxing rights on earned income in multiple jurisdictions. Taxing rights are usually allocated based on the so-called 183-day rule, which 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 consists of three criteria. Klomp stresses: “Wages are usually taxed by the country in which they are earned. Only if all three criteria 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.”
Only for salaried employment
The 183-day rule applies only to salaried employment. It does not apply to:
A self-employed professional without staff (zzp'er).
Most self-employed professionals have an eenmanszaak (sole proprietorship) and do not employ staff. As a self-employed professional, you work for multiple clients without being employed, acting as a self-employed contractor and not as an employee.
A director and principal shareholder (DGA).
Klomp clarifies: “A natural person who owns all the shares in a bv and is employed by their own bv is called a Directeur Groot Aandeelhouder or DGA (director and principal shareholder), regardless of whether they also employee staff.”
Klomp explains: “If you are the director of a company, the country where your company is incorporated will often tax your director’s income, regardless of where you work.”
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 will - in principle - charge Dutch VAT, regardless of whether your customer is based inside or outside the EU.
Some services are taxed in the consumer country, such as services related to real estate or culture, arts, sports, and more, so it is important to determine where you have to pay VAT on your service. If VAT is charged by another EU member state, you can use the so-called 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 and ask the local tax authorities whether you have to and how you can file VAT returns.
This tool from the Dutch Tax Administration (in Dutch) can help you figure out where to file VAT.
Working abroad will also have insurance consequences, and affects your social security and health insurance, for instance.
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, which is issued by the Sociale Verzekeringsbank (Social Insurance Bank, SVB).
If you or your employee works in multiple countries and you are not sure in which country you should take out insurance, contact SVB. In many countries, you have to provide a A1/certificate of coverage to your overseas client or the recipient of your services prior to 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 questions about your own 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, exporting them from the Netherlands and importing them to your destination. If you use an ATA carnet, you do not have to pay import duties and VAT and avoid delays and red tape at the border.
Before taking on a job in another country, figure out what arrangements you have to make. You may qualify for a government subsidy. An RVO knowledge voucher, for example, covers 50% of the costs of hiring a consultant up to €2,500.