The G account is an solution for subcontracting. When the client subcontracts a job, this client remains liable for any tax and social premiums due by the subcontractor. How can this client than be certain the subcontractor pays the tax and premiums to the Dutch tax office? He cannot.
Social premium liability
For that issue the G account has been invented. The client is invoiced by the subcontractor. The client does not pay the subcontractor the full invoice, but pays for instance 50% or 40% of the invoice to the G account and the balance directly to the subcontractor.
Who controls the G account? The G account is controlled by the Dutch tax office money can only be paid from this account to the Dutch tax office to settle tax and social premiums. However, if the client paid too much into this account, the subcontractor needs to substantiate this and then the too much amount can be paid to his bank account.
Audit
Our experience is that the tax office will not do the pay out due to overpayment without an audit. The audit is to determine there was actually too much in the G account. That is not the case when the subcontractor for instance had not identified its employees or has not complied with any other of the labour rules.
Bureaucratic setup G account
The G account is set up in a triangle with the bank, Dutch tax office and the subcontractor. The bank firsts needs to accept you as a client. The policy of the Dutch national bank is not to grant bank accounts to companies where the ultimate owner lives abroad, or to individuals living abroad. Only when the bank accepts you as a client, the formalities to set up a G account can start.
The bank issues a form that first needs to be signed by the Dutch tax office and then by you. I hope you can understand that this is rather time consuming. Moreover, the bank will charge for their services.
WKA account
The solution for this hassle is the so called WKA account. This is a bank account with the Dutch tax office. It is very efficient and opened the easiest way possible: the client pays to a certain bank account number of the Dutch tax office using the wage tax number of the subcontractor and the account is opened. The subcontractor receives overviews and can make tax payments from that account. Tax payments immediately, paying an overcompensation of the client to the private bank account of the subcontractor is only done after an audit.
No bank in between, no bank charges and for the client it is very clear he paid to the tax office, so he cannot be held liable for not paying social premiums and tax caused by the subcontracting.
What happens when something works perfectly? Yes, it is terminated.
G account 1.5
As of January 1, 2016 the WKA account can no longer be used as such, it will be fully abandoned and a new G account 1.5 is the method to set this up. They do not use the more commonly used G account 2.0 expression, but 1.5. In other words, even they believe it is not the best solution. We have been promised the G account set up will be more easy and less complex.
Orange Tax Services
We very much appreciated the swiftness and the simplicity of a WKA account with the Dutch tax office. It was a rather clear situation without additional costs. We regret it is terminated and we look forward what the G account 1.5 will bring. If you need assistance in the set up or understanding the principle of a G account, do not hesitate to contact us.
