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Important Change: The Dutch Authorities have extended the Dutch social security regulations to include the Dutch Continental Shelf, effective from 1 January 2012

Alison Sellar, Managing Director, activpayroll said, “This change will impact many North east firms, they need to take proactive action to ensure they comply whilst working on the Dutch Continental Shelf or risk legal action. Although the industry has benefited from exemptions in the past, the Dutched Authorities have clamped down, now demanding social security contributions from non-residents operating in their territory.”

Current Position

At present the Dutch authorities do not consider their Continental Shelf to be a part of the Netherlands for the purposes of Dutch social security legislation. As a result of this, non-residents of the Netherlands working offshore on the Dutch Continental Shelf do not have to make Dutch social security contributions, and are not covered by the Dutch social security scheme.

Until now, the social security position has varied from the Dutch wage tax legislation, as wage tax has had to be deducted from individuals working on the Dutch Continental Shelf. In most cases, a ruling would usually have been granted by the Dutch tax authorities to allow the employer to pay these taxes at the end of the Dutch tax year instead of having to operate a Dutch payroll or a shadow Dutch payroll.

Changes to the legislation

It has been confirmed by the Dutch tax and social security authorities that the proposed legislation to extend the Dutch social security regulations to the Dutch part of the Continental Shelf will come into force on 1 January 2012. From that date, any non-resident employees working on the Continental Shelf will be covered by the Dutch social security scheme and as a result, employee and employer contributions become payable.

These legislative changes will affect non-residents of the Netherlands working on the Dutch part of the Continental Shelf. Dependant on a number of conditions being met, these individuals and their employers could be obliged to make contributions to the Dutch social security scheme. These conditions will potentially apply unless an individual or an employer is exempted from paying Dutch Social Security under either the E101/A1 scheme or by a certificate of coverage.

If your company undertakes any activity on the Dutch Continental Shelf, this could have severe consequences for you. You must take proactive action to address this issue.

From 1 January 2012 any foreign employer that has employees working on the Dutch Continental Shelf will strictly need to administer a Dutch actual, or shadow payroll to facilitate the calculation and remittance of social security contributions. These social security contributions are capped at approximately EUR 8,000 for each employee, and the maximum employer contribution is approximately EUR 7,500. These figures are the worst-case scenario, and could be lower depending on a number of factors.

Under the A1/E101 scheme, an individual may be able to remain exclusively covered by their home country social security scheme and avoid Dutch social security. Under normal circumstances, however, a certificate (A1/E101 or Certificate of Coverage) from the home country social security authorities will need to be presented and filed with the Dutch authorities in order for them to grant an exemption from social security.

There are, however, some possible solutions available to companies operating in the Oil and Gas industry that can help to reduce the administrative burden and the financial impact of the new legislation.

On an individual employer basis, it may be possible to negotiate the following with the Dutch tax authorities:

If your employees are not covered by the Dutch social security scheme, it may be that the current payroll procedures, (reporting and remitting at the year end) can be continued.

It is understood that as long as certain conditions are met, the Dutch tax authorities may not require social security contributions to be paid even if no certificate can be presented.

Even if your employees will be covered by the Dutch social security scheme, the tax authorities may allow employers to file the information on the periods of coverage, as well as the calculation and payment of social security contributions after the end of the calendar year, which would remove the requirement for this to be done on a monthly basis.

Moving forward

If you are operating on the Dutch Continental Shelf, it is critical that you now consider the employee and employer social security implications of this new legislation.

In situations where it is not possible to be exempt from Dutch social security, employers will need to meet with the tax authorities for calculation and payment of social security liabilities.

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