Wet DBA – Working as self-employed professional in the Netherlands: employee or independent?
New rules in 2016 regarding the status of contractors (old VAR – new Wet DBA)
As of May 1st, 2016 new Dutch regulations are in force marking the end of VAR statements and introducing model agreements which is the so called Wet DBA.
Self-employed professionals, i.e. freelancers in the Netherlands (zelfstandigen zonder personeel, zzp’ers), can no longer apply for VAR statements to release their clients from the obligation to withhold Dutch wage taxes and social security contributions. Instead so-called model agreements can be used to illustrate their independent status.
|Subject:||VAR statement replaced by model agreements.|
|Relevant to:||Freelancers / zzp’ers and their clients.|
|Action||Assess and, if necessary, adjust contract|
|Deadline||May 1st, 2017.|
Relevance Wet DBA
Working as or hiring a freelancer instead of an employee can in many ways be beneficial for both contracting parties in the Netherlands. Freelancers on one hand can enjoy the freedoms and benefits of being their own boss. Clients on the other hand may find it more suitable to focus on their core activities instead of having workers on their payroll and causing further obligations.
The tax treatment and social security coverage of freelancers and employees are very different. Clients of freelancers pay the agreed amount (or invoiced amount possibly including VAT), while employers pay salaries, wage taxes and social security contributions.
Incorrectly assuming an independent status will thus have serious (financial) consequences. Therefore, it is of importance to the involved parties whether someone qualifies as freelancer or employee. However, in practice this is not always clear. In case of uncertainty the Dutch tax authorities could be requested to issue a VAR statement (statement of independence). As of 1st May, 2016 this practice is repealed.
Model agreements = Wet DBA
With the new regulations (Wet Deregulering Beoordeling Arbeidsrelaties, Wet DBA) in place model agreements, i.e. partly pre-drafted contracts, are introduced to reduce the risk of inconveniences due to the misinterpretation of the contractor’s status. These model agreements include pre-drafted provisions emphasizing the independent status of the contractor and leave room to specify the contract to the contracting parties’ situation.
Qualification as employee
There are three conditions to be met in order to qualify as employee, those are:
- There is a relationship of authority between contracting parties;
- Obligation to personally perform the work; and
- Obligation of the employer to pay for the work.
If any of those conditions are not met one does not qualify as employee and consequently the client doesn’t have to pay wage taxes and social security contributions. The model agreements are drafted to prevent meeting condition 1. and/or 2.). It is important, however, to understand that the qualification is based on the actual situation and not just on the signed agreement. If in fact all three conditions are met then one qualifies as employee regardless the contract.
Practical implications and further steps
For situations in which the status of the contractor is uncertain there are two approaches to reduce this uncertainty:
- The current contract under which services are provided (or the commonly used contact model) can be evaluated and adjusted if necessary.
- One of the model agreements can be used complemented with situation specific provisions.
In order to adjust to the new rules freelancers and clients have up to 1st May, 2017 to adjust their contracts. As of that date the Dutch tax authorities will start to monitor the contracts.
Need assistance with Wet DBA?
We can help you with:
- Evaluating your current contract
- Providing advice regarding adjustments to the current contract
- Advise on which model agreement to use given your situation and circumstances.
If you have any questions regarding the Wet DBA feel free to contact us from abroad at +31 (0)20 2615615 or mail us at firstname.lastname@example.org.