Brexit – The People Mobility Impact in the Netherlands

The UK has left the European Union with a deal and a transition period will be in place until 31 December 2020, during which current rules on free movement of citizens will continue to apply in the UK and the EU. However new rules will apply when the transition period ends 31 December 2020. Businesses should act now in order to ensure they are prepared.

In this update you will find details on what will change and which steps need to be taken from an immigration, tax and social security perspective.

What this means for businesses in the Netherlands

While the Withdrawal Agreement ensures there is no immediate change to immigration, tax and social security rules from 31 January 2020, the rules are expected to change from 1 January 2021. In addition, UK nationals working and residing in the Netherlands and EU nationals working and residing in the UK during the transition period may be required to take action in order to secure their rights for after the transition period.

Assess the impact of the new rules

We advise employers to ensure they are aware of the new rules that will apply to their workforce. This means making sure they have an overview of the type of travellers they have – such as expats and local hires but also commuters and business travellers – and assessing how the new rules will affect each group of employees. This will also mean that employers will need to ensure they have the processes and resources in place in order to accommodate questions from employees, work and residence permit applications and new administration requirements from 1 January 2021.

The transition period

While the UK left the EU on 31 January 2020, the rules regarding free movement continue to apply until 31 December 2020 based on the Withdrawal Agreement. This means that there is no change to the rights of UK nationals to enter, work and reside in the Netherlands until 31 December 2020. The rights that UK nationals enjoyed as EU nationals in respect of immigration, tax and social security continue to apply in full during the transition period.

Dutch immigration rules

In respect of immigration rules, any UK national who resides in the Netherlands before the end of the transition period will be allowed to continue to do so after the end of the transition period. The main requirements will be that the individual is registered at the town hall of the municipality where they reside and that they have sufficient income (e.g. through paid employment). The Dutch Immigration and Naturalisation Service (IND) will send them an invitation to apply for the residence permit, with the deadline for submission being 30 June 2021. These invitations will be sent on a first-come-first-serve basis, whereby the IND will send around 4000 invitations per month, starting with those UK nationals who were registered in the Netherlands first. It will not be possible to apply without receiving the invitation from the IND and processing time from date of submission until issuance of the residence permit card will be 3 months.

UK nationals who have resided in the Netherlands for 5 years or more will be eligible for a permanent residence permit while those who have not will be able to apply for a temporary residence permit (valid for 5 years). Once these individuals have reached 5 years residence they will also be allowed to apply for permanent residence. The invitations from the IND will confirm which type of residence permit the individual is eligible for.

In this respect it is important to note that the temporary residence permits sent by the IND over the course of 2019 will not be required or valid. This is because these were issued based on the national no-deal arrangements of the Dutch government, which are now superseded by the Withdrawal Agreement and procedures outlined above.

Frontier workers

The Withdrawal Agreement also ensures that UK and EU nationals who are ‘frontier workers’ may continue to pursue their activities after the end of the transition period. This is intended to secure the rights of, for example, UK nationals who regularly work in an EU member state but do not reside there. However in the Netherlands it is not clear what the process or requirements will be for UK nationals who, for instance, commute between the UK and the Netherlands or between the EU country where they regularly reside (e.g. Belgium or Germany) and the Netherlands.

The IND has confirmed that further details on the process and requirements for ‘frontier workers’ in the Netherlands will be announced in due course. The UK government is also yet to announce what the process and requirements will be for EU nationals in this respect, meaning that any proposals could be subject to reciprocity between the UK and the Netherlands.

Social security

During the transition period, the European social security rules (EU Regulation 883/2004) will continue to apply for cross border workers coming from the UK to work in the EU or coming from the EU to work in the UK. Their entitlement to social security benefits will also remain unchanged up to 31 December 2020.

During the transition period, A1-statements will continue to be issued by the Dutch and UK social security authorities, irrespective of whether the assignment ends prior to or after the transition period. Depending on further negotiations, A1-statements with a duration after 31 December 2020 may be withdrawn at a later stage per 31 December 2020.

Tax

As of Brexit day, the UK is a third country. During the transition period, the UK will however continue to be treated as a member of the EU for tax purposes as well (in short). For employees, this means that until the end of 2020, the Dutch tax treatment will not change due to Brexit.

After the transition period

From 1 January 2021 the rights that apply to UK and EU nationals in the Netherlands and in the UK, respectively, on the basis of the Withdrawal Agreement will end unless the transition period is extended.

Dutch immigration rules

As a result, new arrivals will require will require Dutch work authorisation in order to work in the Netherlands. While it is expected that UK nationals will be allowed to enter and stay in the Schengen area for up to 90 days in 180 days without having to apply for an entry clearance visa (this will need to be reciprocated by the UK), UK nationals will require a residence permit in order to reside in the Netherlands for more than 90 days in 180 days.

Applications for a work permit and/or a residence permit will be subject to the Dutch immigration rules that currently apply to other third country nationals. In practice this will mean that employers will generally need to obtain ‘recognised sponsorship’ status at the IND and ensure their UK employees meet a monthly salary threshold of either EUR 4612 or EUR 3381 gross per month, depending on their age (amounts shown are the 2020 thresholds).

Social security

In respect of social security, the European social security rules (EU Regulation 883/2004) will no longer apply starting 1 January 2021. The intention is that a new social security treaty will be agreed between the Netherlands and the UK during the transition period, which will take effect once the transition period ends. It is expected that further details on the substance of such a treaty will come to light in the coming months.

Tax

After the transition period, the Dutch tax treatment of UK employees who are subject to Dutch taxation may partly change. This is due to certain national tax regulations that will no longer be applicable to UK nationals or UK residents from 1 January 2021 (this mainly relates to regulations that are based on EU-law). For example, from a Dutch perspective, UK residents are no longer entitled to Dutch personal deductions when earning 90% or more of their income in the Netherlands as of 1 January 2021, as these deductions are only provided to residents of the EU/EEA (in short).

From an international tax perspective, the bilateral tax treaty between the Netherlands and the UK remains applicable after the transition period and as such, the allocation of an individual’s remuneration between both countries remains unchanged per 1 January 2021.