Covenant Secondary Activities

24 Jul 2017

The Dutch tax authorities and the Dutch Agri- and Horticulture Organisation concluded a covenant on the 10th December 2010. The covenant contains agreements on the agricultural standards and the qualification of secondary work. In addition, a permanent consultation platform is set up to discuss tax issues. As of April 2017, the agreements on the qualification of secondary work has been updated. 

A large group of farmers perform secondary activities next to their core business. These secondary activities normally are an extension of the core activities but are, in terms of time spent, subordinate to the core activities. This is called secondary work.

For example, a dairy farmer (contractor) who performs milking activities for another dairy farmer (client) for which a compensation is paid.  Both parties have entered in an employment relationship.

From a Dutch tax perspective the question may arise whether the compensation stemming from these activities are qualified as business profit, income from employment or otherwise. In most cases the income will qualify as business profit and is in any event the case if:

* The agreement between the contractor and the client is qualified as a service agreement or an employment agreement,
* The activities at the client are subordinated to the core activities of the contractor, and;
* The activities as described in the above mentioned agreement are in line with the core activities of the contractor.

Subordinated activities
The activities performed at the client are qualified as subordinated activities in case the activities are less then 30% of the total time with a maximum of 600 hours.

Partnerships and similar activities
When activities are carried out through a partnership, which are similar to the activities of this partnership, it is required that the proceeds thereof are allocated to the partnership.

Value added tax
The treatment of VAT on secondary activities based on an agreement (service or employment) is similar to the regulations of the core activities.  In other words: in case the entrepreneur opted to be subject to VAT on its core activities, the secondary activities will automatically also be subject to VAT.











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Jan Coppens Jan Coppens

Tax Adviser
HLB Van Daal & Partners

Phone: +31 (0)73 547 49 47

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