The Deregulation of Assessment of Employment Relationships Act (Wet DBA) came into effect on January 1, 2016, and was intended to give clients and contractors more clarity in advance as to whether there is false self-employment, including through the use of model agreements approved by the Tax Office. In situations where a “genuine self-employed person” is hired and there is no doubt about the qualification of the relationship, the use of an approved model agreement is not necessary.
In principle, the Wet DBA applies only to tax enforcement and not to the civil-law qualification of whether there is an employment contract within the meaning of Section 7:610 of the Civil Code. Thus, a contractor working according to and on the basis of an approved model agreement can still take the position that there is an employment contract. However, the civil-law qualification of the employment relationship – which is based on a weighing of all the circumstances of the case taken together – is in principle also leading for tax purposes and must therefore be taken into consideration.
If there is a contractor, the principal does not have to withhold or remit payroll taxes, unlike in the case of employment in the sense of the payroll taxes. These payroll taxes consist of (i) income tax, (ii) national insurance contributions and employee insurance contributions, (iii) the employer’s contribution for the Healthcare Insurance Act (Zorgverzekerinswet), possibly the (iii) employer’s portion of the pension premium and (iv) any other obligations arising from an applicable collective bargaining agreement.
The client is responsible for the correct assessment of the relationship. An incorrect assessment may result in the principal being confronted (retroactively over a period of five years) with an additional assessment for payroll taxes, whether or not increased by a penalty and/or interest. The contractor must then declare his income as wages from employment instead of profit from enterprise/result from other activities, is not entitled to the tax entrepreneur facilities and may be required to join a pension fund or pension insurer.
In January 2021 – in order to give more clarity by the legislator on the unclear Wet DBA – the pilot for the “Webmodule Beoordeling Arbeidsrelatie” (Webmodule) was launched, which gives employers an indication of whether an assignment to a natural person can be performed outside employment or not. The outcome is not a legal assessment, and no rights can be derived from it, but it can provide more practical insight into how work (should) be performed.
Lifting of enforcement moratorium
In principle, the Wet DBA has been enforced by the Dutch Tax Authority since January 1, 2023. If there is malicious intent on the part of parties, correction obligations or additional tax assessments for uncollected and remitted payroll taxes with tax interest and possible penalty may already be imposed. There is malicious intent if the parties “intentionally create or perpetuate a situation of evident false self-employment because the parties know – or could have known – that there is in fact an employment relationship”. If there is no malice, directions are first given. If the parties do not (sufficiently) act on this within a reasonable period of time and there is still a (fictitious) employment relationship, then correction obligations (with retroactive effect to the time when the instruction was given) can also be imposed at this time.
For now, the idea is that from January 1, 2025, onwards the enforcement moratorium of the Wet DBA will be completely lifted in cases of false self-employment. The Dutch Tax Authority can then again enforce immediately in all cases when an incorrect qualification of the employment relationship is detected by imposing correction obligations and additional tax assessments, possibly with a fine (from January 1, 2025). Criminal sanctions may also follow. The current ‘designation’ (aanwijzing) will thus lapse.
Motion
The intention to lift the enforcement moratorium and the uncertainty about how the Tax Authorities will subsequently assess, is currently causing great unrest in the market. Clarity is being sought from the market about how the lifting of the enforcement moratorium will work in practice and how this should be handled within organizations.
Recently, on September 6, 2024, an attempt was made to provide (somewhat) more clarity through a Parliamentary Letter from State Secretary Idsinga (Taxation and Fiscal Affairs) and Minister Van Hijum (Social Affairs and Employment) (Parliamentary Letter). It follows from the Parliamentary Letter that after January 1, 2025, there will be a transition period of one year in which employers and employees will not yet receive a penalty if they can prove to have taken steps against false self-employment. This would entail a ‘soft landing’ The Parliamentary Letter also states that model agreements are already no longer being approved by the Tax Authority. However, it does state that current model agreements will still be honoured until their expiration date.
The Parliamentary Letter has led to much criticism from inter alia its own parties in the House of Representatives. Various coalition- and opposition parties are not opposed to lifting the enforcement moratorium, but fear that the framework in which hiring can occur is not yet clear enough to get it right. This could lead to genuine self-employed workers losing contracts unfairly. These parties are calling for, at least in the first year, changes to the enforcement strategy. With that in mind, a motion has now been filed in which, among other things, three of the four coalition parties request that the enforcement strategy be changed by becoming “risk-oriented” in terms of enforcement, focusing on “forced self-employment, underpayment, obvious sham self-employment and labour migration constructions.” In doing so, the parties request that “in other cases, the choice of use of enforcement instruments, including a prior warning, take into account the human dimension and customization as much as possible.” The motion will be voted on October 1 in the House of Representatives.
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