• Sector Classification When Assigning Within the Group
  • July 6, 2011 | Author: Eugene Weultjes
  • Law Firm: Greenberg Traurig, LLP - Amsterdam Office
  • The tax authorities classify employers within a sector with their first registration. This sector classification is a relevant factor in determining the level of premiums for the employee insurances. The height of the sectoral contribution depends on the risk of unemployment within the industrial sector of profession exercised. For example, the sectoral contribution in 2011 for the roofing business is 4.04 percent, whereas it is 1.5 percent for the construction industry.

    In a recent case, the sector classification was in dispute for a company that assigned personnel to other companies within the group. The activities of the group consisted of the rental of climbing equipment, tools and machines. The group also rented scaffolding that were built or taken down by the personnel of the company concerned. Initially, the company was classified by the tax authorities in sector 3, Construction. Following an objection to this classification by the company, the tax authorities reclassified the company in sector 52, Temporary Employment Industry. But the company also disagreed with this sector classification, claiming that they should be classified in sector 45, Business Services III.

    The company believed that sector 45 was appropriate because it only assigned personnel within that group. Furthermore, the company stated that its personnel was employed on the basis of a regular employment agreement and not on the basis of a temporary employment contract. Also, the fact that the personnel was on-charged without profit mark-up to the other operating companies could not, in the company’s opinion, lead to the conclusion that assigning personnel had to be considered an economic activity in social and economical life.

    According to the Court of Appeal in Arnhem, the sector 52 classification was correct. In addition, the High Court declared that the Court of Appeal correctly ruled that in cases when personnel is assigned within the group, temporary employment contracts can exist. The High Court does state that a temporary employment contact requires that the work is performed under supervision and control of the user undertaking it. According to the High Court, the classification in sector 52 is correct in cases when the personnel does not perform activities where more that 50 percent of the total annual wages for social security purposes, functionally considered, can be attributed to one sector and that the condition is met that the assigned personnel is employed on the basis of a temporary contract.

    The Court of Appeal had already determined that the first condition was being met. In order to get clarity about whether the condition was met that the personnel performed the work under supervision and control of the user undertaking it, the High Court referred the case back to another Court of Appeal.