What does Brexit mean for your (future) employees?
The transition period as stipulated in the Withdrawal Agreement between the EU and the UK will soon end. What does this mean for your (future) employees? We are happy to inform you from an immigration, social security and tax point of view.
Immigration
Most UK nationals and their family members who want to continue living in the Netherlands or for those moving to the Netherlands within the transition period (until 1 January 2021) fall within the scope of the Withdrawal Agreement.
After the transition period they will require a residence document in order to continue to stay in the Netherlands. They will, however, continue to have an advantageous position in the Netherlands and therefore a work permit will not be required in order to be allowed to work.
Our advice is to apply for such a permit before 1 January 2021. It is no longer required to await the invitation letter of the IND in this respect. These letters are therefore not being sent by the IND anymore.
UK nationals with a permanent EU residence document (EU duurzaam verblijf) will be invited to exchange it for a replacement residence document. They do not need to submit an application online.
UK nationals who have a permanent Dutch national residence permit or another EU nationality in addition to their UK nationality, do not need a (new) residence document.
UK nationals moving to the Netherlands after the transition period and not coming for the purpose of family reunification under the Withdrawal Agreement do not fall within the scope of the Withdrawal Agreement and will therefore in principle need to apply for a regular Dutch permit (residence and/ or work).
All communication from the IND will be sent to the address which is registered in the Personal Records Database (Basisregistratie Personen, BRP). It is therefore of the utmost importance that this registration has been completed in time and personal details have been registered correctly.
For cross-border commuters (those living in the UK and working in the Netherlands) things will change too. Starting 1 January 2021 they will also require the correct permit. Cross-border commuters who started their employment in the Netherlands prior to 1 January 2021 fall under the scope of the Withdrawal Agreement. Our advice is to submit the application for their permit as soon as possible and no later than 1 January 2021.
For those who start working in the Netherlands after 1 January 2021 a regular permit will in principle need to be applied for.
Please be informed that we are happy to assist with local registrations and/ or submission of applications. Should you desire more information in this respect, please do not hesitate to reach out to us (immigration@exterus.nl).
Should you have queries in respect to the consequences for your employees in the UK we are happy to bring you into contact with our partner there.
Tax
Brexit will not have any effect on taxing rights in case of cross-border activities. The division of tax liability in such cases is determined on the basis of tax conventions between the Netherlands and the UK. As tax conventions are only applicable between two countries and generally are not influenced by other agreements, the stipulations in the tax conventions between the Netherlands and the UK will remain in force.
On a personal level, however, Brexit will have some consequences. Currently, individuals who live in the UK and generate more than 90% of their total income in the Netherlands, can be considered as so-called “qualified non-resident taxpayers”. Qualified non-resident taxpayers are allowed to take personal deductions into account in the Dutch income tax return, such as mortgage interest and partner alimony. After Brexit, it is not possible for residents of the UK to be considered qualified non-resident in the Netherlands. As a result, personal deductions are no longer available to them. Furthermore, residents of the UK are no longer entitled to a part of the general tax credits which elevates their tax burden in the Netherlands. In the payroll administration, this should be taken into consideration by processing residents of the UK as third-country residents.
The above consequences will only apply to employees who start working in the Netherlands after the transition period has passed. Employees who already received taxable income in the Netherlands before the end of the transition period, remain eligible for the qualifying non-resident taxpayer status as well as the tax component of the general tax credit.
Social Security
At this moment, the implications of Brexit with regard to social security legislation are not clear.
As you may know, there is a social security coordination treaty in place within the EU/EEA/Switzerland. In case employees are seconded to another Member State or if an individual carries out work in two or more Member States, this coordination agreement specifies in which country the employee is subject to social security. If no agreement will be reached, the UK will no longer be a party to the convention. Consequently, an employee who is posted in the UK from another Member State or vice versa cannot remain socially insured in the country from which he/she was posted. There is therefore a risk of double insurance (in the Member State and the UK). Also, the SVB (in Dutch: Sociale Verzekeringsbank) policy on employees working from home in the UK rather than the Netherlands in connection to COVID-19 may no longer apply. In that case, the employee working from home in the UK due to COVID-19 will no longer be subject to Dutch social security legislation but rather that of the UK which would result in compliance obligations towards the UK.
However, negotiations are still ongoing. It is possible that the UK will remain a party to the coordination agreement or that another agreement will be reached. Whether the above “worst case scenario” will actually come into effect will need to be seen. We will of course keep you informed in this respect.
For tax and social security related questions you can contact our colleagues Jahir Dijks and/or Dennis von Oven.
We hope to have informed you sufficiently. If you have any questions and / or comments, please do not hesitate to contact us. Follow us on LinkedIn for regular updates.
