Vastrecht provides temporary housing for a Ukrainian refugee
As from tomorrow our office will provide temporary housing for a Ukrainian refugee. Our guest is HR manager for a Ukrainian company that is still fully operative. The company is in a digital business and now continues to operate with all employees working remotely from where-ever they are. The company continues to pay salaries as well. So the question arose if “our” Ukrainian is taxable in The Netherlands for her salary now that she is earning it by working in The Netherlands. Here is what the tax treaty between The Netherlands and Ukraine says about such a situation, in short:
- Wages earned by a Ukrainian resident are taxable only in the Ukraine unless the work is done in The Netherlands. If the work is done in The Netherlands.
- The Netherlands may tax;
- If the employee is present in The Netherlands for more than 183 days in the pertinent tax year;
- And the wage is paid
- by a company residing in The Netherlands (which is not the case) or
- at the expense of a Dutch permanent establishment of the company.
So the relevant questions here are:
- whether “our” refugee is considered to live in The Netherlands now, according to Dutch tax law;
- and if not: whether the presence of our HR manager in the Netherlands may constitute a permanent establishment for her employer.
The issue of where people have their residence is one that comes up in every cross border family situation. And it is not simple if one has a home in both countries. Decisive is than with which country onE has closer ties, where one has his/her “centre of vital interests”. We hope to provide our Ukrainian a place that feels like home. However, she (and her son) are lodging as guests. They do no pay rent, and in any case they would not be eligible for a housing permit from the municipality. Also their centre of vital interests is in Kiyv: their house still stands (the neighbours tell so every day), her husband and parents are in Ukraine, and the kid follows Ukrainian school online. So I am confident we would win the argument that she is not a Dutch tax resident.
The issue of the permanent establishment comes up whenever a foreign company hires someone (whether or not Dutch tax resident) to represent the company here. If the representation is considered a permanent establishment of the company the tax consequenes are wider than just the taxation of the employee: it is then also about taxation of the company’s profit that can be allocated to the Dutch representation. Most of all I trust the Dutch tax office will not wish or dare to consider taking such a position in view of all the help our country wants to give Ukraine. And thus leave the salary of our guest and her employer untouched.