No Dutch tax for most non-resident supervisory board members

Jun 8, 2016

Our State Secretary of Finance Wiebes in his infinite wisdom recently mentioned that the deemed employee relation of supervisory board members for wage tax purposes serves no purpose and will be abolished. By definition, there can be no authority relationship between a company and its supervisory board and therefore no regular employee-employer relation, taxable under our Wage Tax Act. Therefore, the Wage Tax Act fictitiously deems a supervisory board member to be employed by the company thus ensuring full Dutch wage tax withholding. In international situations most Tax Treaties attribute the right to tax the remuneration of the supervisory board member to the country where the company is resident (in this case: the Netherlands). If the deemed employee status for tax purposes is indeed abolished, the Netherlands will generally only be able to effectuate its right to tax the remuneration of a foreign resident supervisory board member insofar he/she carries out his/her function in the Netherlands (as the activity then needs to be attributed to a Netherlands permanent establishment/ fixed base, i.e. the office of the Dutch company). This abolishment will therefore mean fantastic news for almost all foreign resident supervisory board members as only the meetings of the supervisory board held in the Netherlands will be taxable instead of everything (including all preparatory activities taking place abroad). For the few foreign residents who carry out their entire supervisory function in the Netherlands, an unexpected disadvantage will occur: they will no longer be eligible for the 30% facility as you need a Dutch wage tax levy for this facility.

The above is clear proof that Wiebes and his Ministry do not have a sufficient international mindset and have not thought this through at all. I expect Mr. Wiebes to take back his promise to abolish the deemed employee status as it will cost the Dutch treasury money (and money is usually more important than making good on your promises in politics).