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Netherlands – Indemnification introduced for clients of “bona fide agencies”

04 July 2012

From 1 July 2012, companies selecting a certified temporary employment agency will be allowed to apply for indemnification regarding liability for failure to contribute wage tax and VAT, the association of employment agencies, ABU, confirmed in a statement to Staffing Industry Analysts. This indemnification rule is an extra incentive for companies hiring temporary workers to do business only with “bona fide agencies”. Simultaneously, the rule makes it easier to offside rogue agencies.

The new indemnification comes as a result of an agreement reached among the Ministry of Finance, the Tax Authorities, the Ministry of Social Affairs and Employment, the sector boards of temporary employment agencies (ABU, NBBU and VIA), the employers’ organisations (VNO-NCW, LTO and COV), the trade union FNV, and SNA (labour standardisation foundation).

But it took years of negotiations before the agreement could be signed, which allows temporary employment agencies to offer their customers the certainty that the Tax Authorities will not present them with any surprise bills.

The temporary employment agencies must be registered in the SNA register, comply with the NEN standard (payment of wage and social premiums and contributions) and be prepared to have 25% of the invoiced amount (inclusive of VAT) paid through a frozen account. This so-called G-account offers the Tax Authorities a guarantee that some of the invoiced sum is directly reserved for tax payments.

A separate regulation agreed with the Ministry of Finance applies to listed temporary employment agencies, ensuring indemnification of user companies. In addition to the benefit to the user companies, this also provides the Tax Authorities with a better view of who complies with the rules. This will help to distinguish good from bad agencies, allowing for the Tax Authorities’ inspections to be focused on the “mala fide section” of the sector.

The indemnification of user companies’ liability is the final piece of the so-called ‘seamless approach’ of combating rogue agencies. This comes after a mandatory registration of temporary employment agencies has already been enforced from 1 July to tackle the issue, which requires temporary employment agencies to register with the Chamber of Commerce as failure to do so will result in a penalty amounting to €12,000 per employee for both the agency and the user company. 

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