Above or below water …? A world of difference in the offshore industry!

030629-N-4790M-002 Central Command Area of Responsibility (Jun. 29, 2003) -- Commercial oil tanker AbQaiq readies itself to receive oil at Mina-Al-Bkar Oil terminal (MABOT), an off shore Iraqi oil installation.  AbQaiq is the first commercial vessel to receive a post-war shipment of crude oil for export at Mabot.  AbQaiq is scheduled to take on an estimated 2 million barrels of crude oil. U.S. Navy and coalition forces are helping to provide security, enforcing an exclusionary perimeter around the terminal.  U.S. Navy photo by Photographer's Mate 2nd Class Andrew M. Meyers.  (RELEASED)

It all sounds wonderful: you have been assigned to perform work for one of the major players in the offshore industry. Location? Norway. Why there? Because the ship the work is to be performed on happens to be there. It could have been anywhere else in the world, but let us stay for now in Norway. You hire staff and leave with high expectations. You are going to get the job done! But before you do so, do ask yourself if you considered the tax and legal aspects inherent to this work. It might become very complicated. Especially since Norway is not a member of the European Union.

You are facing a different legal system. You can have the most beautiful arrangements with your principal (say the principal is also Dutch), but you cannot disregard the Norwegian law, especially if you work with staff that is not “yours ‘. Sometimes the law matches, but sometimes it does not. It is good to be aware of that. Not only with regards to liability in general or rules regarding the import of work material, but also with regard to the hiring of personnel versus income tax liability and customs duties, VAT etc.

How all this is settled, largely depends on the nature of the work. In Norway, for example, repairs to a ship are not considered offshore work and are exempted from payment of VAT (for a certain period). But for work performed under water it can be a completely different story. To further complicate matters: under certain circumstances work performed on a vessel does fall under the scope of offshore work and is then governed by different rules. That all might sound strange to many. By now you are probably thinking: “but offshore can only have one definition, or not? !!”.

“Offshore (English: away from the coast), according to Wikipedia, is the designation of activities taking place at some distance from the coast, mostly focused on exploration and production of oil and gas, but increasingly also wind energy and aquaculture “. There is no difference between work above or below waters. Yet for lawyers and tax consultants someone or something coming into contact with the water can mean different things.

No one wants a large taxation afterwards but there is a risk there if you fail to prepare yourself beforehand. Take as example the payroll tax in Norway. If you are using temporary workers from low-wage countries, and the agency fails to pay their salaries, under Norwegian law you will be liable as principal next to the agency. No difference there with Dutch law. However, the rule in Norway (applicable after 183 work days) is that the payment is then for the same (higher) amount as the wages that would apply for their nationals. You might not have seen that coming. You would need a proper agreement and security from the agency you work with for situations like these.

And mind you: even if you sit in a different country, you can still be “found” because of agreements between countries. A judgment, or worse: an attachment or arrest can be executed in the Netherlands for foreign claims. To use nautical terms; the deeper you dive into it, the more (mess) you will find. Although the problems you might face are often tax related, legal support is certainly imminent. Only then can you have an overall idea of the differences with Dutch law and act accordingly.

So the motto is: do you have such a beautiful assignment but with matching puzzle? Grab that opportunity, but immediately surround yourself with tax and legal experts. Alius law can help you with that. Need more information? Contact Alius law.