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September 2021

IB56 Card - Some considerations with respect to work performed not being employment and.....

Recently, the Inspectorate of Taxes has increased its efforts to obtain information from businesses with respect to work performed by persons not employed (included in payroll) and with respect to services procured during the previous year(s). The obligation to do so is (presently) described in the General Ordinance Federal Taxes (GOFT) and applies to all Administration Obliged Persons (AOP); individuals and entities that are obliged to keep administrative records (individuals who are independent professionals or operate an enterprise, individuals who qualify as withholding agent for wage tax purposes, and (all) entities). This obligation was first introduced as article 56 of the Income Tax Ordinance (ITO) and was transferred to the GOFT upon introduction thereof.

The forms, historically called IB56 cards, to be filed with the Inspectorate of Taxes, used to be provided in the package of forms (containing the tax returns for the upcoming year, the summary wage statements and IB56 cards) sent to employers at the beginning of every year. When the Inspectorate of Taxes ceased to provide hard copy tax returns, the issuance of IB56 cards also stopped. For some years the Inspectorate of Taxes did not actively pursue the filing of this information. As stated above, that has changed. Hence this newsletter.

Based on the explanatory notes to article 56 ITO, the information to be provided is very broad. For instance, these explanatory notes mention that services provided by an auditor with respect to the audit of financial statements, whether performed by an individual or an entity, should be included in the information provided. As such, it appears that the regulation goes too far, because it results in a massive volume of information. While it could be argued that it enables the Inspectorate of Taxes to verify, for example, whether the various service providers fully accounted for their revenues, the sheer volume of information to be provided would most likely be quite overwhelming. More efficient verification methods are available to the Inspectorate of Taxes. As a result of this, the interpretation of the similar rule applicable in Aruba, Curacao and the BES islands has been adjusted to an obligation of AOP’s to file the information only for those persons that are not obliged to keep administrative records (non-AOP’s).

While the information provided appeared to be intended to be used for reviewing other parties than the business providing the information, the Inspectorate of Taxes used the information, in the past, for a completely different purpose than the one described in the explanatory notes. In the late 80’s and early 90’s the Inspector of Taxes started verifying whether the persons and service providers included in the IB56 cards were registered as entrepreneurs or independent professionals with the Inspectorate of Taxes or not. For those that were not registered, they claimed that an employment relationship existed between the business filing the IB56 cards and the individuals (and sometimes entities) listed, and established wage tax and social security assessments accordingly. According to the Inspector of Taxes, it was up to the entrepreneur to prove that the professional relationship with the persons providing the work and services did not qualify as an “employment relationship” in accordance with the Wage Tax Ordinance.

Eventually, this led to a court case. As per the accepted evidentiary rules, a reasonable allocation of the burden of proof meant that it was up to the Inspector of Taxes to prove that the relationship should be treated as an employment relationship. The Inspector of Taxes pleaded that such allocation was in fact unfair as the Island features an open border between the Dutch and the French side, and hence a high level of uncontrolled economic cross border activities. In addition, according to the Inspector of Taxes, the (Island) Government apparatus was functioning insufficiently, making it impossible for the Inspector of Taxes to meet the regular burden of proof standard. Because of this, the Inspector of Taxes argued, the entrepreneur should carefully review, on a case-by-case basis, the character of the relationship about to be agreed to.

The Fiscal Court, in its decision dated 10 July 1992 (case# 1991/043), agreed with the Inspector of Taxes, however, on the condition that the Inspector of Taxes would provide clear and workable guidelines that would enable the entrepreneur to easily complete the required review. In the event the entrepreneur would fail to complete such reviews, the burden of proof would shift from the Inspector of Taxes to the entrepreneur. The wage tax assessment were nevertheless adjusted because the Court stated, the new guidelines of the Inspector of Taxes could not be applied retro-actively.

Given the fact that at present the Inspectorate of Taxes is understaffed, combined with the fact that Government needs to increase its (tax) revenues, it is likely that the information provided will again be used to establish wage tax and social security assessments for payments to those individuals and entities that are not registered with the Inspectorate of Taxes. The question which will have to be answered is: Will the burden of proof with respect to the characterization of the relationship shift from the Inspector of Taxes to the entrepreneur?

If the answer is yes, the entrepreneur should be able to show that the person working for or providing services to him has certain special skills or talents (for instance a musician hired by a resort), uses own tools and equipment performing the work or service (for instance a plumber) or provides ancillary services (a bus driver transporting personnel in his own vehicle). In addition, it will be helpful if the entrepreneur can show invoices for these services, that at least includes the following information of the provider:

  • the name and address
  • the Chamber of Commerce registration number
  • the CRIB-number
  • the work or services provided
  • The price to be paid for the work or service.

In our view however, there are good reasons to answer the above-mentioned question negatively. As far as we know, the Inspector of Taxes has never issued the “clear and workable guidelines” referred to by the Fiscal Court as a condition for shifting the burden of proof. In addition, Government had 29 years (the decision was issued in 1992) to improve its functioning and come up with a method to better manage the fiscal issues surrounding the cross-border activities that made the Inspector’s task so difficult. It abstained from doing so.

For more information you can contact our office via telephone +1 721 542-2379 or e-mail