Assessment of Employment Relationships (Deregulation) Act
The Assessment of Employment Relationships (Deregulation) Act (Wet Deregulering Beoordeling Arbeidsrelaties, Wet DBA) entered into force on 1 May 2016. This Act aims to improve enforcement and reduce bogus self-employment. The implementation of the Wet DBA rendered the Declaration of Independent Contractor Status (Verklaring Arbeidsrelatie, VAR) obsolete. This development can have a significant financial impact on your operational management. To minimise the risk of tax claims, it is advisable to identify the various employment relationships within your organisation.
Self-employed or employee: the employer's risk
It is important that employers assess the employment status with freelancers to avoid possible tax claims. When entering into a working relationship with a freelancer, the employer must assess on the basis of the actual working conditions whether the relationship constitutes employment and/or an obligation to withhold payroll taxes. Even if freelancers presents themselves as self-employed, a fictitious employment relationship may still be the case. The Tax and Customs Authorities may then impose an additional assessment and a penalty on the employer. This risk also exists if a freelancer works via a private limited company (B.V.)
To minimise this risk, it was common practice to agree contractually that the freelancer was to provide a valid VAR. If the freelancer could provide a VAR-wuo or VAR-dga and met specific requirements, the employer was indemnified against additional payroll tax assessments.
On 1 May 2016, the VAR was abolished and consequently also the tax indemnity of employers. There is a transitional period during which the Tax and Customs Authorities will in principle refrain from initiating enforcement activities except in case of malicious intent. The Tax and Customs Authorities assume malicious intent if the employer 'deliberately allows a situation of evidently bogus self-employment to arise or continue, because it knows – or could have known – that there is an actual employer-employee relationship'. To avoid this situation, the employer must assess whether the freelancer potentially has a fictitious employment relationship.
Enforcement has been suspended until 1 January 2020. From that time onwards, the cabinet expects to replace the Wet DBA with new laws and regulations.
Does your organisation work with freelancers?
Do you know which measures you can take or what other options you have? The specialists at Mazars will be happy to bring you up to speed, in order for you to minimise your risks and take maximum advantage of the possibilities available.