As in most countries, in the Netherlands workers can deliver their work or services to another party under various legal titles, of which the employment agreement and the services agreement (i.e. the worker acting as a self-employed contractor) are most common.
If the labour is being performed under an employment agreement, the employer must (as in countries like the UK) withhold wage taxes and pay social premiums to support the Dutch welfare state. If the labour is performed under a services agreement by a self-employed contractor, the client (i.e. the recipient of the work) has no obligation to withhold wage taxes or pay social premiums.
As in many other countries the growth in use of self-employed contractors in the Netherlands appears to be unstoppable. According to the government almost 1 million workers were registered as self-employed contractor in 2014 which is a ratio of 1:7 compared to the Dutch labour force.
Typical reasons for employees to start a career as a self-employed contractor are – inter alia – (i) more flexibility, both in terms of working hours as in the delivery of the work and (ii) better money, provided that there is enough billable work for them to do. This second reason (i.e. potentially better money) is probably at least partly a result of the avoidance of tax.
To date, most self-employed contractors are able to submit to their client a so-called labour relationship statement provided by the tax authorities as a result of which the client is off the hook for withholding wage taxes and pay social premiums, without any obligation for the client to double check if the independent contractor is really independent (for example has other clients and is genuinely operating as an entrepreneur). As a result of this system, and the fact that self-employed contractors do not have access to the Dutch welfare system in case of illness or unemployment, the so called false self-employment issue has become a serious political topic. As in many other countries, the government has therefore announced legislation aiming to cut down the number of false self-employed contractors.
This most recent legislative initiative will:
- Terminate the practice of allowing clients to rely on labour relationship statements.
- Introduce a system whereby clients and self-employed contractors may:
- submit their own services contracts to the tax authorities in order to get a ruling on how this contractual relationship will be treated from a tax perspective; or
- use template services agreements made available online by the tax authorities.
- Most likely come into force from 1 April 2016. The term of existing labour relationship statements will be extended until that date.
- Introduce a transition period until 1 January 2017 for workers and their clients to make the adjustments required.
This will all be associated with increased risk for clients and staffing companies who use self-employed contractors. Clients will put themselves at risk if they use the incorrect contracts.
To to be prepared for this legislation, it is important to start assessing if your current services agreements are compliant with the template services agreements that can be found on the tax authority’s website (Belastingdienst.nl). Unfortunately, these model agreements are in the Dutch language only, but our specialist Dutch team would be happy to assist you with any questions you might have.