COVID-19

COVID-19’s impact on your cross-border workers

Niels Dekker Niels Dekker

COVID-19 and the measures to prevent its spreads have resulted in a situation where most countries have closed their borders. Consequently, cross-border movement hardly occurs and foreign employees are forced to work at home in their home country. Such circumstances may have impact on the tax and social security/immigration position of the employees and might cause additional payroll obligations for the employer.

We would like to illustrate the possible impact based on a few examples deriving from our Global mobility services practice. We emphasize that eventually the consequences depend on the specific situation and therefore need to be determined on a case-by-case basis.

Tax consequences

Return to the home country

A certain number of foreign employees – normally working in the Netherlands for Dutch companies – have returned to their home country just before the Dutch government announced the COVID-19-virus measures. In their home country, they are currently working from home for the Dutch company, pending their return to the Netherlands. Regarding these employees the following has to be taken into account:

  • In many cases the Netherlands are no longer allowed to tax the salary, related to the working days in the employees’ home country. In their home country the employees need to pay (more) personal income tax. This has impact on the employee’s net income or in case of net salary arrangements, more costs for the employer. However, the Netherlands recently made arrangements with Germany to temporarily avoid such consequences on a voluntary basis. We expect that the Netherlands will make the same arrangement with Belgium.
  • A re-application of the 30%-ruling (if granted by the Dutch tax authorities) may be necessary to avoid a deduction on the maximum duration of the 30%-ruling in case the employee returns to the Netherlands.
  • The Dutch company may have to deal with payroll obligations in the home country.

It is also possible that the employee returns to his home country, but not work there whilst the employer keeps paying salary e.g. because the employee is ill, or to be entitled to the support from the Dutch government to compensate loss revenue caused by the COVID-19-virus measures. In this case, the Dutch tax authorities may argue that the Netherlands still may be entitled to tax this salary, despite the return to the employee’s home country.

If the employees’ tasks and responsibilities change, working at home in the home country can also have other tax consequences. Special attention is therefore required in case of supporting activities for the local business of the Dutch company in his/her home country - or in case of setting up business in the home country on behalf of the Dutch company. This might trigger corporate income tax obligations (in the home country). In such situations, we advise to contact your corporate income tax advisor.

Longer stay in the Netherland

A longer stay in the Netherlands, caused the by COVID-19-virus measure, might trigger (more) Dutch personal income tax and payroll obligations. This depends on the specific circumstances of the case, but should definitely be further investigated.

Social security consequences

Foreign employees might be covered under the Dutch social security system, when they work in the Netherlands. It is possible that these employees fall back to the social security system of their home country if they temporarily work/reside there as the result of the COVID-19-virus measures. As a consequence, contributions to the home country’s social security system may be due for both the employee and the employer, with payroll obligations for the Dutch company as a consequence.

The current situation might also affect the social security position of (cross-border) business travelers. Normally, their travel pattern determines in principle in which country they are covered under the social security system. Compulsory working from home changes this travel pattern, so that they can become subject to social security contributions in another country.

Please note that the Dutch social security authorities have announced that working in another country - caused by the COVID-19-virus measures - will temporarily not change the current employee’s social security position. This applies on employees who normally are working abroad or are resident of an EU/EEA country (including Switzerland). According to our information, such policies are also announced in other EU/EEA countries. We therefore assume that the Dutch policy is based on arrangements between these countries.

This policy seems not to be applicable on foreign employees who normally work in the Netherlands, but remain resident of a non-EU/EEA country. In other words: the social security position might still change if these employees are currently working from home in their (non-EU/EEA) home country.

Immigration considerations

Many Dutch companies have hired non-EU workers. Many of these employees are working and residing in the Netherlands on the basis of an immigration sponsorship of their respective companies as highly skilled migrants or as an intracompany transferee. Moreover, many of these employees have their families with them. As of March 17, 2020 the EU restricted all non-essential travel within the Schengen area. In case of travelling, the necessity of the trip must be demonstrated upon request. These restrictions are not in place for the following groups:

  • EU citizens and their family members.
  • Holders of a valid Dutch residence permit or an MVV (long stay) visa.
  • Holders of a valid residence permit of another EU member state.

Note that many embassies across the world are currently open for extremely urgent matters only. Cases are considered urgent when an employee, highly skilled migrant or a researcher can meet all of the following three criteria:

  • S(he) can prove that s(he) can travel to the Netherlands at this time. This means that there are no physical restrictions and that the borders are open.
  • His/her work or research is considered an essential profession or vital process as long as the COVID-19 outbreak lasts – for more information see: https://www.government.nl/topics/coronavirus-covid-19.
  • S(he) can prove that that the urgency relates to an essential profession and vital process.

This situation will at least last up to and including April 28. Visitors/employees travelling to the Netherlands or one of the other Schengen states, cannot collect their MVV visa during this period unless the above criteria are met.

In case the deadline to collect the visa or to travel to the Schengen area approaches ends on a short term, please send a message to your contact person at Grant Thornton Expatriate Services to request for an extension of the visa issuance deadline. However, it remains possible for employers to apply for MVV visas for new employees. Obviously, also the closing of borders and cancellation of flights has a big impact on the ability to travel.

In case an non-EU employee has left the Netherlands before the closing of the borders started and is currently residing outside of the Netherlands, we advise to follow the local/Dutch news as to when it will be possible to re-enter again. The employee must keep a valid residence permit when travelling back to the Schengen area. In order to keep a valid residence permit, it is important (not) to do the following:

  • In case the employee works under a company immigration sponsorship: payments of salary must be done as usual and the legal salary threshold must be taken into account. Not making payments – or lower than usual payments – to the employee, gives the Dutch Immigration and Naturalisation Service (IND) the right to revoke the permit and could bring the Dutch companies’ status as recognized sponsor in discredit.
  • Highly skilled migrants are allowed to stay outside the Netherlands for up to 8 months per year and still be allowed to keep their residence permit; the employee cannot deregister from the municipal administration during this period.
  • In case the residence permit is expiring while being outside of the Netherlands, please get in touch with your immigration service provider to request an extension. It is of importance that the provider explains the situation in detail to the IND and guides the Dutch company and the foreign employee in order to legally travel back to the Netherlands.
  • In case the employee will not return to the Netherlands, immigration rules require the residence permit to be cancelled within a timeframe of 4 weeks before/after the leave.

Up to and including April 28, 2020 all IND offices in the Netherlands will only remain open by appointment for newly arrived people who need their residence permit e.g. for registration in the city hall or taking out a healthcare insurance. Schengen Visa are extendible per telephone call with IND only (T: +31 88 043 04 30). All other issues are currently on hold. After April 28, 2020 the Dutch government will re-assess the situation to lift/extend the current measures. This will also affect the services/opening hours of IND.

As the situation changes on a daily basis, you may always reach out to your immigration specialist to ask for specific up-to-date advice. We are more than willing to further advise you in this matter.

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