Agriculture: Dutch tax authorities issue covenant on secondary activities


The Dutch tax authorities and the Dutch Agri-and Horticulture Organisation concluded a covenant on the 10th December 2010. The covenant contains agreements on agricultural standards and the definition of secondary work. In addition, a permanent consultation platform has been set up to discuss tax issues. As of April 2017, agreements on the qualification of secondary work have been updated.

Many farmers perform secondary activities in addition to their core business. Such activities are typically an extension of core activities but are, in terms of time spent, subordinate to a farmer’s main work. This is called ‘secondary work’.

For example, if a dairy farmer (contractor) performs milking for another dairy farmer (client) and is paid, both parties have entered in an employment relationship.

From a tax perspective the question may arise whether the compensation stemming from these activities are qualified as business profit, income from employment or otherwise. In most cases the income will qualify as business profit, and is in any event the case if:

  • The agreement between the contractor and the client is qualified as a service agreement or an employment agreement,
  • The activities at the client are subordinated to the core activities of the contractor, and;
  • The activities as described in the above mentioned agreement are in line with the core activities of the contractor.

Subordinated activities

The activities performed at the client are qualified as subordinated activities in case the activities are less than 30% of the total time with a maximum of 600 hours.

Partnerships and similar activities

When activities are carried out through a partnership, which are similar to the activities of this partnership, it is required that the proceeds thereof are allocated to the partnership.

Value added tax

The treatment of VAT on secondary activities based on an agreement (service or employment) is similar to the regulations of the core activities. In other words: in cases where an entrepreneur opted to be subject to VAT on their core activities, the secondary activities will automatically be subject to VAT.

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