Decree on the VAT consequences of seconding staff updated

The decree on making staff available was updated on 14 June 2024. We pick out the main clarifications, from pooling arrangements to secondments in education.

The Dutch decree on making staff available sets out the State Secretary for Finance's policy on the VAT consequences of doing so. It concerns the situation in which a lender makes staff available to a hirer, with those staff working under the hirer's supervision or direction.

Lending or seconding staff for more than a symbolic charge is normally subject to VAT. In the decree the State Secretary has accepted that, subject to conditions, it can be done without VAT. That matters for organisations in the social and cultural sector, education and healthcare, and for lending staff to public authorities such as municipalities, provinces and water boards.

On 14 June 2024 the decree of 5 July 2022 was updated, with a number of important clarifications.

Broadening the decree

The decree clarifies in which situations staff can work at other businesses without VAT arising, alongside the cases where an exemption or concession already applies. That is so, for example, where no charge is made, or where a member of staff has separate employment contracts with several parties. The latter is not, in our view, a case of making staff available at all and therefore does not really belong in this decree.

VAT can also be avoided under a pooling arrangement in which gross wage costs are shared through a joint bank account, provided strict conditions are met:

• the member of staff is employed by all parties under a joint employment contract
• the gross wage costs are paid from a joint bank account into which each participating party pays a share
• how much each party contributes is determined in advance
• the joint account is not intended to generate a joint financial gain

Other cost-sharing arrangements are taxable, unless they are shared as costs for the common account. VAT also does not arise where staff are deployed within a VAT group, for which the businesses concerned must be linked financially, organisationally and economically.

Costs for the common account

The doctrine of costs for the common account likewise leaves room for the shared use of staff and other business assets, provided costs are shared according to a key agreed in advance.

The lead party, which pays the costs and recharges them to the other participants, must bear part of them itself. The allocation must reflect each party's share of the goods and services taken. Deduction is available in proportion to each party's contribution, no VAT is charged on the settlement, and the allocation key must be set in advance and cannot be changed. Fluctuations in consumption cannot be passed on without breaking the arrangement.

Changes to the concessions

Staff regularly work temporarily at another institution in the healthcare sector as part of medical vocational training. Under the new decree, medical specialist practices are no longer treated as institutions within the meaning of the relevant provision of the VAT Act. In practice that makes no difference, because secondment to such a practice has been accepted as exempt.

The exemption for making staff available where this is closely linked to exempt education has been explained further. It applies where a seconded member of staff gives subject-specific support and advice to teachers at another educational institution, and where support workers who assist children with disabilities in class are lent by one school to another. Facilities, financial and administrative support is not regarded as essential.