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Mirjam Zeldenrust
|3 min read|26 Jun 2023
DBA
Assessment of Employment Relationships (Deregulation) Act (DBA)
Clients and contractors (freelancers) wish to be sure about the type of employment relationship they enter into with each other. They must note the work to be carried out, in an agreement to provide services or an employment contract.
Contents
Until 1 May 2016, contractors could obtain this certainty by applying for a VAR (Verklaring Arbeidsrelatie (Declaration of Independent Contractor Status)) at the Dutch Tax Authorities. As of 1 May 2016, the VAR has been replaced by the Wet deregulering arbeidsrelatie (Assessment of Employment Relationships (Deregulation) Act (DBA act)).
On this page we will elaborate on the DBA act. However, we start by drilling down on the real facts, i.e. pseudo self-employment.
What is pseudo self-employment?
Pseudo self-employment exists when (on paper) a person carries out work as a freelancer/self-employed person, whereas in practice this is not the case and the employment relationship is in fact a relationship of employment.
Why do you want to prevent pseudo self-employment?
In the event of pseudo self-employment, the Dutch Tax Authorities may re-qualify employment relationships. This means that, from a tax and social security point of view, the employment relationship is classified as a relationship of employment, whereas on paper it is an agreement to provide services.
Consequences of pseudo self-employment for the client
Re-qualification may have far-reaching consequences for both the client and the contractor (freelancer). For example, in the case of a requalification, the client (in actual fact the employer) is obliged, among other things:
from the payments made to the freelancer (employee) to deduct and pay social security contributions;
to pay employee insurance premiums and the contribution to the Zorgverzekeringswet (Health Care Insurance Act), and if applicable;
to pay the employer's part of the pension contribution into any compulsory pension scheme;
to fulfil any other obligations arising from the collective bargaining agreement.
Consequences of pseudo self-employment for self-employed persons
For the freelancer (in actual fact, the employee), a requalification has consequences as well. The freelancer:
should, in principle, state in the tax return income received as pay from employment, instead of as profit of the undertaking or as results from other activities;
is not entitled to entrepreneur facilities, such as the self-employed tax deduction;
may be required to join a pension scheme or take out pension insurance. This depends on the company for which the work is carried out;
may still need to fulfil other obligations under the collective bargaining agreement.
What is the DBA act?
In order to clarify the employment relationship between a worker and an employer, the DBA act has been introduced. The incorrect classification of an employment relationship as an agreement to provide services or an employment contract, has far-reaching consequences, as you have read.
With the introduction of the DBA act, the VAR scheme has expired. The starting point of the DBA act is that clients and contractors jointly assess whether the work involves paid employment or an agreement.
Within the chosen employment relationship, they then make agreements. The model agreements approved by the Dutch Tax Authorities may provide certainty in this respect.
What should you take into account?
It is important to assess whether the relationship involves a relationship of employment. In the case of a relationship of employment, the employer must withhold and pay salary taxes to the Dutch Tax Authorities. In addition, the employer must continue to pay the salary in the event of sickness and holidays. Moreover, the specific rules for dismissal apply.
What constitutes a relationship of employment?
A relationship of employment has 3 characteristics:
employer authority;
the obligation to carry out (personal) work;
remuneration;
If these characteristics are met, a relationship of employment exists in any case
What constitutes employer authority?
Sometimes it is difficult to determine whether there is a case of employer authority. Is it mandatory for the employee to follow instructions or meet obligations imposed on him/her by the employer? This constitutes a relationship of authority and therefore a relationship of employment.
A model contract can provide certainty
If one or more characteristics of a relationship of employment are missing, there is usually no case of a relationship of employment.
In this case, there are different model contracts for situations where one or more characteristics of a relationship of employment are missing. These model agreements can be found on the website of the Dutch Tax Authorities. When you use them, you have certainty that a relationship of employment does not exist.
Please note! If the parties deviate from the agreement, this could imply that there is a case of pseudo self-employment, with all the possible consequences this entails.
Lifting of the enforcement moratorium in 2025
In order to give clients space to implement the model agreements correctly, a temporary enforcement moratorium was introduced in November 2016. During this moratorium, the Dutch Tax Authorities may issue instructions if a relationship of employment exists, but may only impose an additional tax assessment in case of malevolence.
New legislation providing more clarity regarding the case in which a worker works for you as an employee or self-employed person will not be available yet on 1 January 2025. However, the Dutch Tax Authorities will lift the enforcement moratorium and will start controlling again. The Dutch Tax Authorities may also impose an additional tax assessment in situations where the worker appears not to be self-employed. The Dutch Tax Authorities are expected to base their decision on the characteristics set out by the Supreme Court in the Deliveroo case.
Where do we go from here?
On Friday, 10 November 2023, the internet consultation on the bill closed. There were more than 1,100 responses, including from employer and self-employed organisations and the Adviescollege toetsing regeldruk (Advisory Board of Regulatory Burden (ATR)). "The law does not provide more clarity and simplicity for companies, workers and the self-employed when assessing employment relationships," the ATR states in its advice to the Minister. Nor does the bill reduce the regulatory burden.
The self-employed are not very happy with the proposal of a new law for the self-employed. Eight out of ten freelancers do not support the bill. This is according to a poll by online bank Knab among more than 200 freelancers.
Furthermore, lawyers have already pointed out to the Minister that case-law does not attribute much distinctive capacity to the concept of embedding. Many circumstances and facts indicating embedding may also occur in situations where there is no employment contract.
Whether this bill will reach the finishing line in the way proposed, remains to be seen. We will keep you informed.
Frequently asked questions about the Wet deregulering beoordeling arbeidsrelaties (DBA act)
If you have any questions about the Wet deregulering beoordeling arbeidsrelaties (DBA act), you are not the only one. There's a good chance that your question has been asked before. Below our experienced advisor answers some of the most frequently asked questions.
Frequently asked questions
DBA stands for Wet deregulering beoordeling arbeidsrelaties (Assessment of Employment Relationships (Deregulation) Act). Clients and contractors (freelancers) wish to be sure about the employment relationship they enter into with each other. Until 1 May 2016, this certainty was offered by the Verklaring Arbeidsrelatie (Declaration of Independent Contractor Status (VAR)). Since 1 May 2016, the VAR has been replaced by the DBA act.
Pseudo self-employment involves people presenting themselves as self-employed while in actual fact an employment relationship under employment law exists.
Under the DBA act, the fine may be up to 100% of the amount of non-paid salary taxes and contributions paid by the employer. The fine is higher if the employer acted intentionally.
The Dutch Tax Authorities enforce if they feel you acted malevolently, which you have when you 'deliberately create or perpetuate a situation of obvious pseudo self-employment because you know - or should have known - that an employment relationship existed'. In that case, the Dutch Tax Authorities may impose obligations to correct or additional tax assessments on you.
Following the upheaval that arose after the introduction of the DBA act, the Dutch Tax Authorities decided to suspend the enforcement of the qualification of employment relationships. This suspension is known as the enforcement moratorium.
If you have any questions about this subject or need help in assessing whether a situation involves pseudo self-employment or employment, do not hesitate to contact us.
We are happy to help you draw up the right agreement. Other questions in the field of labour law or payroll tax? We are happy to help you!
