The special feature of temporary workers is that they have a civil law employment contract with a temporary employment agency but work for another employer (hirer). However, no employment contract is concluded with this hirer. The work assignment takes place on the basis of an agreement between the employment agency and the hirer.
In the case of cross-border temporary employment relationships, the question then arises as to in which state the wage of the temporary worker is to be taxed. It does not matter with which employer the employment contract was concluded. The wage is taxed in the country where the economic employer is domiciled. This is the employer who bears the economic burden of the wage. The German and Dutch tax offices and also courts have determined that this is the hirer. This means that taxes must always be paid in the state where the hirer is resident, regardless of how long the worker has worked there.
German employee is posted to the Netherlands
If a German employeeâ€™s employment contract under civil law is with a German employer and the employee is hired out by a Dutch hirer, tax must be paid in the Netherlands. For this purpose, the German employment agency must pay the wage tax to the Dutch tax authorities.
Dutch employee is hired out to Germany
If a Dutch employeeâ€™s employment contract under civil law is with a Dutch employer and the employee is hired out by a German hirer, tax must be paid in Germany. For this purpose, the Dutch employment agency must pay the wage tax to the German tax authorities (Section 38, paragraph 1, no. 2 of the Income Tax Act).
In the case of a very short working period (a few days), taxes may still have to be paid in the country in which the employment agency is domiciled. In such cases, it is necessary to check who performs the essential employer functions: the employment agency or the hirer. This includes, for example, the authority to issue instructions or the question of who bears the risk of the work result. In case of doubt, the civil law employer (hirer) should contact the Dutch and/or German tax administration for clarification.
The question of in which country social security contributions are to be paid in the case of cross-border hiring out of workers is independent of the question of where taxes are to be paid. It may well be that social security is payable in Germany and tax is payable in the Netherlands. The Grenzinfopunkts, the Bureau voor Duitse Zaken in Nijmegen and the German legal health insurance companies can provide more information on this.