This article specifically describes Dutch law
The chain liability scheme prevents contractors and subcontractors from abusing the outsourcing of work when remitting payroll taxes. Payroll taxes are wage tax, national insurance contributions, employee insurance contributions and the income-related contribution under the Health Insurance Act.
Why does the WKA exist?
The scheme makes the contractor liable for the payroll taxes that the subcontractor must remit for the work. A subcontractor can also outsource the work again, which creates a chain. Every link in the chain is liable for the subsequent links. The goal is to prevent contractors and subcontractors from abusing the outsourcing of work when remitting payroll taxes.
You can find more information on the website of the Netherlands Labour Authority or on the website of the KvK (Dutch Chamber of Commerce).
G-rekening (blocked account for wage tax)
The client can limit the risk of liability by using a company’s blocked account (G-rekening). The contractor deposits into this account the amount that corresponds to the payroll taxes that the subcontractor must remit.
Read more on the website of the Belastingdienst (Dutch Tax and Customs Administration).
When does the Chain Liability Act not apply?
The WKA does not apply in these cases:
You outsource work to a self-employed worker (zzp'er). Self-employed workers do not remit payroll taxes, so you do not run any liability risk.
Please note: Does the self-employed worker outsource the work to a subcontractor with staff? Then you and the self-employed worker are liable for the subcontractor's payroll taxes. Do not invite subcontractors through self-employed workers. This option is switched off by default in WorkpassID.
You outsource work to a subcontractor that carries out more than 50 per cent of the working hours itself. For example, a company that supplies ready-made window frames. In that case you are not liable for the payroll taxes for this work.
You enter into a purchase agreement with a supplier for an existing item, for example staircases. The supplier installs the staircases for a small additional charge. The supplier is a subcontractor only for the installation. Is the installation work no more than 7 per cent of the total price? Then you are not liable for the payroll taxes for the installation.
Please note: always consult the Belastingdienst if in doubt. If in doubt, first invite the contractors as a WKA company.
Further reading: Chain liability in the construction sector: how does the WKA work? (ondernemenmetpersoneel.nl)