It’s not always easy to communicate the financial completion of your work. What is the difference between performance fee, gross salary and nett salary? What is cost dispensation and when do you have to apply this? These and other questions regarding salary are answered in this blog.
Performance fee, gross salary or nett salary?
The most common question we receive is what the terms performance fee, gross salary and nett salary mean. It’s actually quite simple: performance fee is the all-in price you agree upon with your client excluding VAT. It is the most common of the three and includes payroll taxes and premiums for social insurances. Gross salary does not contain premiums which will be paid by your client on top of this amount. Nett salary is the salary after deduction of taxes and premiums, the amount that you receive on your bank account. In the rare case you agree upon a nett salary, payroll taxes and premiums will be paid by the client. Gross salary agreements are quite uncommon. In short, nett salary is the performance fee minus taxes and premiums and gross salary is the performance fee minus the premiums.
Cost dispensation, or not?
Cost dispensation (’kleine vergoedingsregeling’), can be regarded as a tax free deduction for professional expenses, up to € 163 tax free daily. This cost compensation can be only applied in the artist arrangement. During annual tax return in March, you specify your professional expenses in order to use these as tax deduction. Please keep in mind that the total amount of cost dispensation should equal the total amount of professional expenses each year. If you annually apply more cost dispensation than your total amount of professional expenses each year, you probably have to pay more income tax afterwards, depending on your other deductions. This could be a well-considered decision, because you don’t pay premiums when you fully apply cost dispensaton in case your daily performance fee does not exceed € 163. If you are already employed somewhere else, this prevents paying double premiums.
What about VAT?
VAT stands for Value Added Tax: a 6 percent consumption tax added to goods and services, such as our invoice to your client. An often-heard question is if VAT is part of the salary. No, it is not! When you make agreements with your client please make sure it excludes VAT. Otherwise, you have to pay for this yourself, which will result in a lower nett salary. In case your client is not subject to (pay) VAT, we will send an invoice without VAT which leaves your salary unchanged.
The Dutch Tax Office requires us to register your identification documents because we are your (fictitious) employer for your payroll assignments. We only accept passports and ID cards, not driver’s licenses. Please make sure you send a clear and valid copy without anything written or printed on it. Unfortunately, we often receive incomplete (half) passport copies. We need both pages of your passport (when you open it and put it on a scanner). If you have an ID-card, we need a copy of both the front and the back side.
Payrolling may seem difficult at first, especially if you have never done it before. If you have any questions, we are happy to help you!