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 pay the invoices of their subcontractors 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 temps 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, there was abuse by embezzling the funds received by subcontractors.

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 he/she owes.

Freelancers and Declaration of Independent Contractor Status

In case 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 Status. As of 2016, these declarations will be cancelled and – in order to obtain certainty in advance – the agreement with the freelancer must be submitted to the Tax Authorities.

If you work with foreign employees or subcontractors, it is certainly in your best interest to limit any risks involved.

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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