A private limited-liability company and its director-cum-controlling shareholder’s sole tradership are given the opportunity of concluding an agreement involving a small number of contractors, some of whom the company recruits from the sole tradership. The invoice the sole tradership raises with the company will serve internal purposes only. Fiscally speaking this is not enough to warrant the conclusion that all contractors are to be regarded as being employed by the company.
Case in point: limited-liability company in tandem with sole tradership
The director cum controlling shareholder of the limited-liability company in question additionally ran a sole tradership through which some of the company’s activities (i.e. digging and repair work in connection with malfunctions or leaks) were routed. The company employed two staff. The sole tradership by contrast had no employees at all on its payroll.
The company and the sole tradership concluded a contract for the provision of services to be rendered by a total of four operatives. Arguing that the contractors’ working conditions were similar to an employment scenario, the Tax and Customs Administration imposed additional wage tax assessments on the company, in a decision which the District Court went on to uphold as such.
Operations
The decision per se had not been the sole bone of contention between the company and the Tax and Customs Administration, as the latter had allocated all of the duties the contractors had performed to the company. This was a bridge too far in the opinion of the Court, which argued that as half of the payments made to the contractors had been invoiced by the sole tradership, only half of the total amount paid should have been allocated to the company. The Court considered it plausible that the sole tradership had made the payments to the contractors and had invoiced the company in the corresponding amount. The internal arrangements between the two were no reason for ignoring the fact that invoices had been exchanged between them. The Court thus reduced the amount of the additional wage tax assessments.
One of the contractors had been charged with income tax on the fee he had earned. However, the Tax and Customs Administration had gone on to take the fee in question into consideration in calculating the additional wage tax assessment, and had thus taxed it not once, but twice. This too was rectified by lowering the additional tax assessment accordingly.
Dutch version: Opdrachtnemers tussen BV en eenmanszaak