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Employee or contractor?

In The Netherlands a working relationship is qualified as an employment contract if three constituent elements are fulfilled:

  1. There is a relationship of authority;
  2. There is a personal obligation to perform the job;
  3. The principal is obliged to pay wages.

The fact that a contract is regarded as an employment contract does not only mean the employee is protected by dismissal law. It also means the Dutch tax authority will claim payroll tax and social security contributions.

Especially in customary contracts for services rendered by self-employed workers (for example a web designer who is contracted by an accountancy firm to build a website) both parties do not have the intention to conclude an employment contract and want to avoid that the hiring company has to subtract and pay tax and contributions.

The Dutch government adopted an act in February 2016 that regulates the conditions under which a contract is not qualified as an employment contract according to the Tax authority: the Assessment of Employment Relationships Deregulation Act (Wet deregulering beoordeling arbeidsrelatie; “DBA Act”). The tax authority used to issue declarations that safeguarded the hiring company against any tax liability, but that practice has now ceased, making the situation more complicated. The Dutch tax authority now works with recently published guidelines for the assessment of contracts that “risk” to be qualified as employment contracts. By using the guidelines and model contracts of the Tax authority, the principal and the self-employed worker, are ensured there is no withholding obligation for payroll tax and social security contributions as long as their actual performance is in line with the text of the model contract.

How does it work?
As of 1 May 2016 the principal and the self-employed worker are advised to use one of the pre-approved model contracts the tax authority has published on its website or submit their contract to the tax authority asking for approval. These contracts must exclude the three elements of an employment contract. (1) The contract clearly states there is no relationship of authority and any rights to issue instructions by the principal are specified in the contract. (2) There is no personal obligation for the self-employed worker to perform the job personally. He can be replaced by anyone who has the same work qualifications. Replacement within an existing “pool” of workers is not allowed. (3) It is advised to define VAT is charged to indicate the remuneration is not meant to be seen as wages.
As long as the parties actually perform in accordance with their contract, the DBA Act guarantees there is no withholding of payroll tax and social security contributions.

The above seems very straight forward and easy. Unfortunately there still are many pitfalls, because the guidelines are open to several interpretations and the practical performance of a contract almost always differs from its written form. The Dutch government has promised not to enforce the new act until May 2017. We predict more discussions and hopefully better guidelines will follow.


Maartje Oliemans-Ouwehand is niet meer werkzaam bij Wieringa Advocaten. Indien u een vraag heeft naar aanleiding van deze blog dan kunt u zich wenden tot onderstaande contactpersoon van het praktijkgebied arbeidsrecht.

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Employee or contractor?

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