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In the Netherlands, self-employed professionals and their contractors need to know how their business relationship will be assessed by the Dutch Tax and Customs Administration. Is there an employer-employee relationship or not? This is an important question with regard to tax liability. Employers only have to pay payroll taxes for their employees, but not for hired self-employed professional under certain conditions. Until 1 May 2016 a self-employed professional could provide their clients with a Declaration of Independent Contractor Status (Verklaring Arbeidsrelatie, VAR) as sufficient proof that there was no employment relationship.
2016 Employment Relationships (Deregulation) Act
Since 1 May 2016 the VAR has been replaced by model agreements, which were introduced in the 2016 Employment Relationships (Deregulation) Act (Wet deregulering beoordeling arbeidsrelaties, DBA). As long as the business relationship between a contractor and a self-employed professional is based a such an agreement, contractors will be exempt from paying payroll taxes for this professional for this specific contract.
Enforcement of act postponed until 2020
The Dutch government intends to replace the current Employment Relations Deregulation Act (DBA) as of 1 January 2020. Until then, its enforcement has been suspended. If you are a contractor who hires freelancers, this means that until 1 January 2020, the Dutch Tax and Customs Administration will not impose corrective fines or taxes with retroactive effect when it deems that there is in fact an employer-employee relationship at play.
However, penalties will be enforced where the Tax and Customs Administration establishes malicious intent with regard to fictitious self-employment or (obvious or deliberate) bogus self-employment constructions. Until 1 July 2018, this will only occur in severe cases and from 1 July 2018 in all other cases.
Types of model agreements
Self-employed professionals and their clients can choose to work according to 3 different kinds of standard model agreements. These have been drawn up by the Dutch Tax and Customs Administration (in Dutch only):
- General model agreements (in Dutch): these model agreements cover most business relationships which do not involve employment.
- Sector or profession-specific model agreements (in Dutch): these agreements are meant for everyone working according to certain sectoral or professional standards or conditions.
- Individual model agreements (in Dutch): these agreements have been drawn up by a specific sector of profession, anyone working in the same sector or profession may use them.
If you do not want to use one of these model agreements, you and your client can always draw up one yourselves and have it assessed by the Dutch Tax and Customs Administration.
Model agreements are not mandatory
It is not mandatory for self-employed professionals and their clients to work according to a model agreement. If they do not, the client of a self-employed professional is obliged to assess whether an employment relationship exists and therefore payroll taxes should be withhold.
When a self-employed professional and their client choose for the so-called opting-in scheme, the client is responsible for withholding and paying payroll tax and social insurance contributions for that specific contract. If so, they must notify the Dutch Tax and Customs Administration in a joint statement (in Dutch) prior to the start of the actual work.