Netherlands: Important Notice: Starting 1 January 2025, the Dutch Tax Authority will Resume Enforcement of False Self-Employment

Starting 1 January 2025, the Dutch Tax Administration will lift its enforcement moratorium and start actively enforcing the DBA Act (Deregulation of the Assessment of Employment Relationships). This means that the tax authorities will start to fully enforce measures against false self-employment. This article clarifies the enforcement process and the criteria the Tax Administration will use for assessment.

Developments in Legislation and Enforcement of False Self-Employment

The government aims to prevent the hiring of self-employed individuals who are effectively working under an employment contract (false self-employment). In 2023, the draft bill for the Clarification of Employment Relationships Act was published. The aim of this act is to address the issue of false self-employment. This bill was initially set to take effect on 1 January 2025, but its implementation has been postponed until at least 1 January 2026. Despite the delay in legislation, the Dutch Tax Authority has decided to begin enforcement in 2025.

What is Known So Far About the Dutch Tax Authority’s Enforcement Process?

Starting 1 January 2025, the standard rules will apply for imposing correction obligations, additional tax assessments, and fines regarding the qualification of the employment relationship for payroll taxes. Below are the key points summarized:

• Focus on Payroll Taxes: The Tax Authority will primarily focus on payroll taxes with respect to clients. If an employment relationship is found to be a regular employment contract, both the client and the self-employed individual may be jointly liable for paying back taxes and social security contributions.
• Retroactive Corrections: For periods prior to 1 January 2025, corrections can only be imposed in cases of wilful intent or if previous instructions from the Tax Authority were not followed or insufficiently followed. In these cases, corrections can be made from the time of the wilful intent or from the date the instruction was given.
• Leniency in the First Year: The government aims to prevent well-intentioned clients from facing penalties immediately after the moratorium ends. Therefore, leniency will be applied to the imposition of penalties in the first calendar year following the end of the moratorium, provided that clients are demonstrably working to reduce false self-employment within their organizations.
• Model Agreements: The Tax Authority will stop reviewing model agreements, but approved model agreements will remain valid until their approval expiration date, and parties can continue using them as long as they comply with the agreed terms.

Explanation of the Tax Authority’s Decision-Making Framework

On 1 November 2024, the Dutch Tax Authority published guidance on the assessment of employment relationships, which includes a decision-making framework. This framework clarifies how the Tax Authority will assess the relationship between clients and contractors, based on the Supreme Court’s ruling in the Deliveroo case. The assessment will focus on the actual situation rather than just the wording of the contract. The relationship must be assessed as a whole, taking all relevant circumstances into account. The following factors may indicate an employment relationship:

1. The nature and duration of the work
2. How work and working hours are determined
3. The integration of the work and the worker into the organization and its operations
4. Whether there is an obligation to personally perform the work
5. How the contractual relationship between the parties was established
6. How remuneration is determined and paid
7. The amount of remuneration
8. Whether the worker bears commercial risk
9. Whether the worker behaves or can behave as an entrepreneur in the market, for example, in terms of reputation, client acquisition, tax treatment, and the number of clients the worker works for or has worked for, and the typical duration of engagements with a particular client.

What Does This Mean for Employers and Self-Employed Individuals?

Given the upcoming enforcement by the Tax Authority, it is crucial for employers to assess potential risks. This may require reviewing existing agreements, especially when there is doubt about a contractor’s self-employed status. If your organization uses multiple contractor agreements, it is advisable to evaluate each one to determine if false self-employment could be an issue. Our firm’s lawyers can advise on potential risks and help assess each agreement to determine how to minimize these risks.