The moment a company’s people start working in another European country, a set of obligations activates that has nothing to do with the company’s tax structure and everything to do with employment, social security and immigration law. A group that has carefully built its corporate and tax architecture, and then sends employees to work across borders without addressing these rules, has left a gap that surfaces as fines, back-contributions and, in the worst case, a taxable presence it never intended to create.
The posted worker rules
When an employer sends an employee to work temporarily in another member state, the posted worker rules apply, and they are protective of the host country’s labour standards. The posted worker is generally entitled to the host country’s core employment conditions, minimum pay, working time, holidays, and the employer must usually notify the host authorities before the posting and comply with local requirements. These rules are enforced, and enforcement has tightened, because they exist to prevent the undercutting of local labour through cheaper foreign postings.
The instrument is Directive 96/71/EC, reshaped by Directive (EU) 2018/957. Article 3(1) of the consolidated posting of workers directive speaks of remuneration rather than minimum rates of pay, as set by the host state’s law and its universally applicable collective agreements. The benchmark is the local agreed rate, not a national minimum wage.
Duration changes the answer. Under Article 3(1a) a posting beyond twelve months attracts all the terms and conditions of employment applicable in the host state, bar the formalities of concluding and terminating the contract, including non-competition clauses, and supplementary occupational pensions. A motivated notification extends that to eighteen months, and Article 2 of the Dutch Posted Workers in the European Union (Working Conditions) Act requires it in the last three months of the first period.
Notification before the first day
Directive 2014/67/EU is the enforcement layer. Article 9 of the posting enforcement directive lists what a host state may require: a declaration by the time the service begins, identifying the provider, the posted workers, the contact persons, the anticipated dates, the workplace address and the nature of the services.
The Netherlands does this through Article 8 of its Act and an online notification portal run by the Ministry of Social Affairs and Employment. The filing precedes the work and states the contribution for the applicable social security schemes. The provider hands the Dutch client a copy, and the client has to check it within five working days of the start.
Rail, water and air transport, postal work, public administration and extraterritorial bodies are exempt, as are defined occasional activities, but none of it applies where the posted worker is a third-country national. Where the duty applies, the Dutch penalty policy in force since February 2025 prices it: 1,500 euro for failing to notify fewer than ten workers, 4,500 euro at twenty or more, 1,500 euro for a client that does not check, 8,000 euro for missing workplace documents.
Social security and the A1 certificate
Separately from tax and from employment law sits social security: which country’s social security system the worker remains in while abroad. The default is the country where work is performed, but a genuine temporary posting can keep the worker in the home-country system, evidenced by an A1 certificate obtained in advance. A worker abroad without an A1 is exposed to a claim for social contributions in the host country, and the certificate cannot be conjured retrospectively with the same ease it is obtained in advance.
The rules are in Regulation (EC) No 883/2004. Article 11 allows one system at a time, by default the country of work. Article 12(1) is the posting exception and is narrow: the employer must normally carry on its activities in the sending state, the anticipated duration must not exceed twenty-four months, and the worker must not replace another posted person.
The certificate follows that analysis rather than creating it. Article 15(1) of Regulation (EC) No 987/2009 has the employer inform the competent institution in advance where possible, and that institution issues the attestation described in Article 19(2). Decision No A2 of the Administrative Commission adds the tests, chiefly a continuing direct relationship with the posting employer.
Once issued, the certificate binds: Article 5 of the implementing Regulation obliges other institutions to accept it until the issuing state withdraws it or declares it invalid. The limit is fraud. In Altun, Case C-359/16, the Grand Chamber held, on the predecessor E 101 certificate, that a national court may disregard it where the issuing institution has ignored evidence of fraud and the court itself finds fraud.
The corporate structure and the payroll obligations are different problems. A group can get the first perfect and still be fined for the second, because the people crossed a border the structure did not.
When local payroll becomes unavoidable
A short, genuine posting can often be run from the home payroll with the right certificates. A longer or more permanent presence, an employee who relocates, a local hire, a team that becomes established, generally requires a local payroll, local withholding and local social contributions. The point at which a posting becomes a local employment is a judgement with real consequences, and getting it wrong in either direction, running local payroll unnecessarily or failing to run it when required, is costly.
The judgement becomes tractable once the three clocks are separated. Employment law turns at twelve months, or eighteen with the motivated notification. Social security turns at twenty-four anticipated months, and going beyond that needs an Article 16 agreement between the states concerned. Tax follows neither: under Article 15 of the OECD Model Tax Convention the host state may tax employment income exercised there unless the employee is present for no more than 183 days in the aggregate in any twelve month period commencing or ending in the fiscal year concerned, the pay comes from an employer not resident there, and no permanent establishment there bears the cost.
Who withholds is a further question. Under Article 6 of the Wet op de loonbelasting 1964 a non-resident withholds only so far as it has a Dutch permanent establishment or permanent representative, or opts in. The tax authority is blunt: a company that lends, seconds or posts an employee to work in the Netherlands is a withholding agent for that employee, including a posting into its own Dutch group company, as anyone employing staff across the German and Dutch border knows.
What an inspection actually looks at
Article 4 of the enforcement directive tells an inspector what to test. On the employer’s side: the registered office and administration, where taxes and contributions are paid, where the posted workers are recruited, and the turnover realised in the state of establishment.
On the worker’s side: whether the work is for a limited period, the start date, whether the worker is expected to resume work in the sending state, who bears travel, board and lodging, and any earlier period in which the post was filled. No element decides alone, and Article 10 bases inspections primarily on a risk assessment.
On site, the ask is narrower. Article 9 of the Dutch Act requires the payslip, the contract, records of hours worked and proof of the wage actually paid to be available at the workplace, and the Netherlands Labour Authority states that A1 forms belong in that set and that the documents remain available for five years after the work ends.
The permanent establishment trap
The gravest risk is that people working in another country create a taxable presence for the company itself. An employee with authority to conclude contracts, or a fixed place of business, can constitute a permanent establishment, bringing the company within the host country’s corporate tax net for the profits attributable to that presence. This is the point where an employment question becomes a corporate tax question, and we deal with it in our note on permanent establishment. A group can create a permanent establishment through its people long before it intended to establish anything.
Two presences are worth keeping apart. Article 6 of the Wet op de loonbelasting 1964 decides whether a foreign company must withhold Dutch wage tax, and for that purpose it treats the business of placing people who perform paid personal labour in the Netherlands with the party for whom that labour is performed as a permanent establishment in its own right.
The two analyses speak to each other: the Commentary on Article 15 of the OECD Model notes that a state treating the individual as employed by the host enterprise should logically also conclude that the individual is not carrying on the business of the formal employer, which bears on whether that employer has a permanent establishment there, the pattern traced in our note on remote employees and a European permanent establishment.
The 30 per cent ruling and inbound talent
The flow runs the other way too. A company bringing talent into the Netherlands can, in defined circumstances, access the favourable regime for incoming employees, which we cover in our note on hiring your first employee in the Netherlands and the 30 per cent ruling. Inbound and outbound mobility are two sides of the same discipline: people crossing borders carry obligations that have to be planned, not discovered.
The frame is set by statute. Article 31a(8) of the Wet op de loonbelasting 1964 treats reimbursements for residence outside the country of origin as extraterritorial expenses up to 30 per cent of the designated part of the wage, for at most five years, and caps the amount per employee against the maximum remuneration set by the Wet normering topinkomens.
One gate catches foreign employers in particular. The facility runs through the Dutch payroll, so a company with no Dutch withholding obligation cannot reach it at all until it elects to become a withholding agent.
Building it into the plan
The lesson is that workforce mobility is a structuring question in its own right, parallel to the corporate and tax structure rather than subordinate to it. A group expanding across Europe should map, in advance, where its people will work, under whose employment law, in whose social security system, and with what risk of creating a taxable presence. Done in advance it is administration; discovered later it is liability.
The order is short and fixed. Settle the applicable social security legislation and obtain the certificate before departure; notify the host state before the first day and check the copy where the group is the recipient; settle who withholds and register the employer where that is the host state; and diarise the twelve, eighteen and twenty-four month thresholds against the real start date.
Montclare builds and operates European structures with the substance and documentation that these rules require. Our services are set out on our services page.
This article is informational and does not constitute tax or legal advice. Rules of this kind evolve and their application depends on the facts of each structure. Each engagement is subject to scope and applicable regulation.