Sequential liability

Sequential liability means that a contractor of a job is liable for the statutory payroll tax that its subcontractors/foreign subcontractors hired for the job must pay. In order to limit the risk of sequential liability, it is customary in the Netherlands for contractors to receive part of the revenue from invoices send to their clients into G-accounts (blocked accounts). This reduces sequential liability. Sequential liability does not apply only to subcontractors, but also to temps (e.g., via a temp agency). In that case, it is called a recipients’ liability.

The purpose of the regulation is that the contractors pay their subcontractors for the jobs executed and that the subcontractors subsequently use the money received to pay the Tax Authorities. In the past, the system has been subject to frequent abuse and this money has been embezzled.

G-accounts or Sequential Liability Act depot (Dutch: WKA-depot)

The contractor can decide whether to transfer a part of the invoice to the subcontractor’s G-account (blocked accounts used only for payments to the Tax Authorities) or directly to the Tax Authorities. If the latter is the case, the Tax Authorities will book the payment in the Sequential Liability Act depot in the name of the subcontractor. The subcontractor can use this money for paying the statutory payroll tax and social security contributions that the subcontractor owes.

Freelancers and Declaration of Independent Contractor Status

If a contractor employs an independent subcontractor / foreign subcontractor, it is important that the Tax Authorities recognise him/her as an independent subcontractor. Up to 2015, this could be done by submitting a correct Declaration of Independent Contractor (VAR) Status. Since 2016, the VAR statement has been replaced by agreements between the recipient and the subcontractor (Dutch: Wet DBA) which must demonstrate a working relationship. In order to ensure certainty, the agreement with the freelancer must be provided to the Tax Department in advance.

This can be of particular importance if foreign subcontractors or employees are used. Utilise the options in order to limit your own risk.

Are you familiar with the risks of sequential liability?

acconavm can advise you in the question whether sequential liability is an issue and in which manner you should and can limit your risks in this area. Contact one of the specialists in international tax advice via

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