News from HLB International: Secondary activities under the contract

On December 10, 2010, the Dutch tax authorities and the Dutch organization for agriculture and crop production entered into an agreement in which they agreed on agricultural standards and warnings regarding secondary activities. In addition, a permanent consultation platform has been created to discuss tax issues. As at April 2017, the cautionary agreement regarding the secondary activities has been updated.

Many farmers carry out secondary activities along with the main one. These secondary activities are usually a continuation of the main one, but, in terms of time spent, subordinate to it. This is called secondary activity.

For example: a dairy farmer (executor) performs milking for another dairy farmer (client), for which compensation (remuneration) is paid. Both parties enter into labor relations.

From the point of view of the Dutch tax authorities, the question may arise how to consider compensation in connection with such activities: as income from economic activity, as labor income, or otherwise. In most cases, such income is considered as profit from economic activities, and this approach is applied in any case, if:

– The contract between the executor and the client is considered as a service provision contract or an employment contract;

– The activities of the client are subordinate to the main activities of the executor, and;

– The actions described in the aforementioned contract correspond to the main activities of the executor.

Subordinate activity

Activities carried out within the framework of the client company are considered subordinate if their volume is less than 30% of the total working time, which is a maximum of 600 hours.

Partnerships and similar activities

When carrying out activities in the framework of a partnership, if such activity is similar to its activity, it is necessary that the proceeds of it be allocated to the partnership.

VAT

The use of VAT in secondary activities under a contract (a service provision contract or an employment contract) is very like to the rules for applying it to main activity. In other words, if an entrepreneur decided to pay VAT on main activities, VAT should automatically be accrued on secondary activities.


August 3, 2017

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