With regard to the tax position of the supervisory director, State Secretary Wiebes of Finance, towards the end of the debate on the bill, DBA Act (the bill on the abolition of the VAR) in the Senate with a surprising commitment. This was particularly surprising because, during earlier stages of the debate on this bill, Wiebes had expressed views that were completely at odds with this.
Commissioner
The role of a supervisory director is to monitor the functioning of (the management of) the organisation (public limited company, private limited company, foundation, association, co-operative) to which he has been appointed. Such a supervisory role cannot, of course, be carried out under the authority of the institution being supervised. Consequently, there is no genuine employment relationship for the purposes of payroll tax between the supervisory director and that institution.
Fictitious employment
However, the Payroll Tax Act classifies the relationship between the supervisory director and the institution as a fictitious employment. As a result, the institution must deduct payroll tax from the remuneration paid to the auditor.
VAR
This can only be omitted without risk if the auditor holds a valid VAR-wuo or VAR-DGA demonstrates that he carries out his duties as a supervisory director in his capacity as an entrepreneur or managing director and major shareholder. However, the DBA Act, referred to above, abolishes the VAR, with the result that every supervisory director is subject to the deduction of payroll taxes.
Commitment
However, during the debate on the DBA Bill in the Senate, Wiebes reversed his earlier positions and undertook to abolish the deemed employment status for supervisory board members. This will initially be done by means of a policy decision. This will be followed by an amendment to the Payroll Tax Act.
Each director
As a result of the abolition of the notional employment relationship, the remuneration of no director is now subject to payroll taxes. Each non-executive director must declare their remuneration in their income tax return as income from other activities (ROW) or business profits (wuo). They must then pay the income tax and the income-related contribution under the Health Insurance Act as assessed.
Excluding the non-executive director’s remuneration from payroll tax also means that payroll tax relief cannot be claimed. For non-resident directors, this may include the 30% scheme (30%: tax-free allowance to compensate for extraterritorial costs). However, the mileage allowance (up to €0.19 per kilometre), for example, is now also subject to tax.
On the other hand, the actual costs incurred by the auditor in connection with the performance of their duties may, in principle, be deducted. The auditor must, however, be able to demonstrate these actual costs to the satisfaction of the tax authorities.
Statement
The organisation where the auditor carries out their work is, of course, no longer required to include the auditor’s remuneration in its payroll records. However, a declaration must be submitted by 1 February each year detailing amounts paid to third parties during the previous year (IB47/49). On the basis of this declaration, the Tax and Customs Administration checks whether the auditor has correctly included the remuneration in their income tax return.
Opting in
A director who nevertheless wishes to make use of the payroll tax relief schemes may, together with the organisation paying the director’s remuneration, opt for this via the so-called “opting in“. The parties then jointly decide to treat their legal relationship for the purposes of payroll tax as a notional employment relationship. This decision is made using a form provided by the Tax and Customs Administration form.
DBA Act
The DBA Act is all but finalised. The only thing left to do is the formal vote in the Senate, which is scheduled for Tuesday 2 February 2016. The bill is expected to be passed. The definitive abolition of the VAR, with a one-year transition period, will then take place on 1 May 2016. It is not yet entirely clear at this stage whether the notional employment relationship of the supervisory director will also be abolished on that date.
VAT
As regards VAT, there are no changes to the rules on directors’ remuneration. The non-executive director must pay VAT on the remuneration, unless they have not been registered as a VAT-registered business by the Tax and Customs Administration or the VAT due remains below the threshold for the small business scheme (KOR) (in the latter case, an application may be made to the tax authorities for exemption from administrative obligations).