When you hire an employee who is living outside of Germany (e.g. Netherlands), it is important to know, among other things, where the wage tax must be paid and where the employee is covered by social insurance.
The rules and conditions on this are extensive and complex and depend on the individual situation.
Performing activities in Germany & other countriesIf the employee actually performs the activities in Germany, the wage tax must normally be paid in Germany. If the activities take place in the Netherlands, the employee must pay tax in the Netherlands.
However, if the Dutch employee works in different countries, the tax liability is split. For example, an employee works partly in Germany (e.g. 30 percent), partly in the Netherlands (e.g. 50 percent), and partly in Belgium (e.g. 20 percent). Then, simply put, he has to pay tax on over 30% of his income in Germany. In most cases, the tax must be paid in the Netherlands on the other income. This can be processed in the monthly payslip. The German and Dutch wage tax is then deducted from the salary each month.
Social security for the employeeIf the Dutch employee performs more than 25 percent of his work in the Netherlands, Dutch social security legislation applies. This means that as an employer you must register with the Dutch tax office for the monthly wage tax return and the payment of premiums and taxes. Dutch social security premiums must be calculated and paid over the employee's entire salary.
If the employee lives in the Netherlands and works mainly in the Netherlands, he or she needs Dutch social insurance.
Exemption from German taxationThe employee must spend no more than 183 days in Germany in order to be exempt from taxation in Germany. He must be employed on the basis of an employment contract to which Dutch law applies. The insurance contributions (SV) are also paid in the Netherlands. However, he must apply for an A1 certificate in the Netherlands, which will indicate employment in Germany.
Equivalence of studies/diplomas is required for certain professions. There is a European Directive (EC 2005/36) on mutual recognition of professions and studies. Some Dutch degrees are recognized without further ado. Others require equivalence.
If residents of the Netherlands have a non-EU nationality, further formalities will be necessary (work permission).
It is important to find out in detail what needs to be arranged before hiring a Dutch employee - this way there will be no problems afterward.
ConclusionFinal conclusions, which should be taken into account when hiring a person outside of Germany:
- work permit required or not
- confirmation of studies
- employment contract agreed with Dutch law
- registration with the Dutch tax authorities for the payment of taxes, in case the worker is active for less than 183 days in Germany
- registration for Dutch social security
- A1 certificate