Brexit: are you familiar with these points of attention?
Most likely you will have noticed that the United Kingdom (UK) has definitively left the EU on December 31, 2020. This has implications for the wage and income tax and social security position of employees working in the EU Member States and the UK. What these consequences mean for you as an employer or employee is discussed below.
In order to determine the exact consequences, it is first of all important to determine whether an employee is covered by the Withdrawal Agreement. This is the case if an employee is working between the EU and the UK on December 2020 and this work continues from 1 January 2021.
Wage and Income Tax
If an employee is covered by the Withdrawal Agreement, he or she will continue to be entitled to a number of schemes and benefits. For example, under the Withdrawal Agreement, an employee continues to be entitled to the tax component of the employed person’s tax credit and income-related combination tax credit. This means that the employee pays less wage and income tax in the Netherlands. In addition, a UK resident employee is a qualifying non-resident taxpayer. This means that the employee can make use of the same tax benefits as a resident of the Netherlands.
The moment an employee does not (any longer) comply with the conditions of the Withdrawal Agreement, he falls under the Trade and Cooperation Agreement between the EU and the UK (TCA). The aforementioned benefits cannot be used by the employee then.
With regard to social security, it is important to check with each new employment whether the employee is covered by the Withdrawal Agreement or by the TCA. In both cases, the main rule is that the employee is insured in the country where he works. However, different exceptions apply under the TCA than under the Withdrawal Agreement. The social security position will therefore have to be determined on a case-by-case basis.
Need help? Get in touch with us!
We hope that the above points of attention provide you with more clarity about the consequences of Brexit in the context of wage and income tax and social security. In case you have any questions or require assistance, do not hesitate to contact us. You can reach us via payroll[at]aame[d0t]nl or 015 215 88 15.