Chain Liability 

Use

Background

The Dutch Law on Chain Liability (Wet Ketenaansprakelijkheid) makes main contractors fully liable for any income tax and social security contributions of invoiced wages that their sub-contractors fail to pay to the tax and social security authorities.

Every signed contract between a main contractor and a sub-contractor stipulates how the income tax and social security contributions will be paid. The main contractor normally prefers to pay the income tax and social security contributions directly to the authorities and so takes on full responsibility for making the payments. In this case, the law requires the main contractor to submit payment advice notes to the tax authority, the social security authority, and the sub-contractor, when the payments have been made.

However, sometimes it is not possible for the main contractor to pay the authorities directly and so they pay the amounts to a blocked account belonging to the sub-contractor. The sub-contractor, in turn, makes the payments to the authorities from this account. The chain liability, in this case, means that the main contractor must ensure that the sub-contractor can be relied on to pay the contributions. Therefore, the sub-contractor has to provide the main contractor with a number of certificates proving their registration with the authorities and their reliability to pay their contributions. 

Functions

The functions to cover the chain liability requirements in the Netherlands enable you, as the main contractor, to determine the income tax and social security contributions of invoiced wages, and to post them either directly to the authorities or to your sub-contractor’s blocked account. If you are posting the amounts to a blocked account, the system is able to check the validity of your sub-contractor’s certificates and, if necessary, enforce a payment block. For internal controlling purposes, a report is available that enables you to check the document flow of purchase order line items.

Additionally, if you are posting the income tax and social security contributions directly to the authorities, there is a report you can run to generate the payment advice notes that you are legally required to submit to the authorities and the sub-contractor.

Prerequisites

See also Note 513455, which contains overview information and describes the import conditions.