As is the case in most other countries, Dutch workers can provide their work or services to other parties under various legal titles, of which the employment agreement and the services agreement (i.e. the worker acting as a self-employed contractor) are the most common.
If work is being performed under an employment agreement, the employer must withhold wage taxes and pay social premiums to support the Dutch welfare state. If work 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.
This has contributed to a large number of self-employed contractors in the Netherlands. According to the government, almost 1 million workers were registered as self-employed contractors in 2014, which is one in seven of the Dutch workforce.
Typical reasons for employees to start a career as a self-employed contractor are:
(i) more flexibility around working hours and work output; and
(ii) better money, provided that there is enough billable work for them to do.
This second reason (i.e. potentially better money) is the result of the Dutch tax system which provides substantial tax cuts for a time to workers who start their own business under a services agreement.
To date, most self-employed contractors are able to give their client a ‘labour relationship statement’ provided by the tax authorities; this means that the client is off the hook for withholding wage taxes and paying social premiums and has no obligation 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 ‘false self-employment issue’ has become a serious political topic. The government has now announced legislation which is aimed at cutting down the number of false self-employed contractors.
The most recent legislative initiative will:
- Terminate the practice of the labour relationship statements.
- Introduce a system whereby clients and self-employed contractors may:
- submit their own services contracts at 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.
- Come into force as of 1 May 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.
In order 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.
If you fail to do so, you won’t have any certainty upfront with respect to the client’s obligation to withhold wage taxes and pay social security contributions.
Unfortunately these model agreements are only provided in Dutch, but we would be happy to assist you with any questions you might have.