The sector is still grappling with the issues surrounding self-employed workers without staff (ZZP). This is confirmed by the report recently sent to the House of Representatives by the Ministry of Finance Report on the Labour Relations Monitoring Plan.
Current situation
We outline the current state of affairs regarding this matter in our article Self-employed workers: the current situation at the end of 2018. Nothing has changed in this regard to date. We are awaiting the introduction of new legislation. This is scheduled for 1 January 2020 (though it has already been cautiously suggested that it may well be 1 January 2021).
Until then, there is what is known as an ‘enforcement moratorium’. In other words: the suspension of enforcement of legislation and regulations. The Tax and Customs Administration’s efforts are primarily focused on providing information. Only clients acting in bad faith may face additional tax assessments and fines.
More than half
The Tax and Customs Administration carried out 104 specific site visits to investigate clients’ knowledge and working practices. These investigations revealed that, in 59 cases, incorrect procedures had been followed to a greater or lesser extent. In 12 of those cases, the employment relationship had not been correctly classified.
The surveys show that clients find the current situation regarding self-employed workers without employees (ZZP-ers) complex and time-consuming. The Tax and Customs Administration notes that most clients are keen to apply the rules correctly, but face a dilemma in terms of maintaining their competitive position. They are struggling with the tight labour market, and self-employed workers are often unwilling to work in any capacity other than as self-employed individuals. A key factor here is that the (tax) benefits of self-employment for self-employed individuals outweigh the (social) security provided by employment.
Regular supervision
In addition to the aforementioned site visits, the Tax and Customs Administration has, of course, also carried out routine supervision. This involves routine audits (accounts inspections) in the context of payroll taxes (of which approximately 5,600 are carried out each year). In these audits, the nature of the working relationship is first examined. Subsequently, an on-site assessment is carried out to determine how the client and the self-employed person actually structure their working relationship.
Where it is established that the working relationship with a self-employed person without employees qualifies as an employment relationship, the Tax and Customs Administration will also investigate whether there is any evidence of bad faith. Even after 1 July 2018, this places a heavy burden of proof on the Tax and Customs Administration. In its letter to Parliament, the Tax and Customs Administration states that, as part of its regular monitoring, further investigations into bad faith are currently underway in relation to eight clients.
In practice
It will have to proceed on the basis of the current legal and regulatory framework, as it stands, and the enforcement moratorium currently in force.
Most business owners are well-intentioned, but are forced by legislation and regulations to act as they do. This is clearly confirmed by the Tax and Customs Administration in its report. It also confirms that the problems are largely caused by the favourable tax treatment of business profits compared with wages from employment.