‘Yet another article about the self-employed,’ you might be thinking? Yes, there’s more news on that front, but whether that news is the unrest, which we wrote about last week, takes away from the self-employed person and their clients? We don’t think so! It does, however, make a great deal of sense for the Tax and Customs Administration to give us a glimpse behind the scenes.
Assessment framework
The news is that the Tax Office the DBA Guidance Note has announced. The full title of this piece is: Guidance on the assessment framework for employment relationship agreements (DBA guidance). In doing so, the Tax and Customs Administration is fulfilling a promise made by State Secretary Wiebes during the debate on the DBA bill (concerning the abolition of the VAR) in the Upper House. After all, as a government minister, you have to come up with something to get your bill through Parliament.
In the guidance note, the Tax and Customs Administration sets out the criteria it uses to assess the (sample) agreements submitted to it, in order to determine whether a self-employed person working under such a (sample) agreement is to be regarded as self-employed. It may be assumed that when the Tax and Customs Administration subsequently checks whether the work was in fact carried out in accordance with the (sample) agreement, the same criteria will be applied.
This refers to the situation as it stands from 1 May 2016 comes into force. The VAR (declaration of employment relationship) system will remain in force until 1 May 2016.
3 elements
Naturally, the guidance refers to the well-known three elements of an employment contract (employment relationship). Where the employment relationship qualifies as an employment contract, the self-employed person is not considered to be self-employed, and the client must deduct income tax and social security contributions from the remuneration agreed with the self-employed person.
The three elements of an employment contract are:
1. the obligation to appear in person labour perform;
2. the obligation to pay to be paid;
3. in a relationship where there is a employment relationship.
Only when an employment relationship fulfils all three of these elements can it be considered an employment contract. The relationship with the self-employed person, who wishes to be classified as such, must therefore not fulfil one (or more) of these elements.
Labour
Of course, the self-employed person will carry out work. However, they are required to carry out that work personal must carry out (Step B from the DBA Guidance). The (sample) agreements do not fulfil this requirement by stipulating that the self-employed person is free to have the work carried out by someone else (free substitutability). Naturally, that other person must usually meet objectively definable criteria, thereby ensuring that the self-employed person’s replacement possesses the qualities required to carry out the assignment properly.
The DBA Guidance Note explicitly states that free substitutability does not apply if the self-employed person can only be replaced with the client’s consent. Furthermore, even if the replacement comes from a closed ‘pool’, free substitutability does not apply.
Pay
Generally speaking, a self-employed person will not be prepared to work without remuneration. The guidance confirms in Step C It is true that if no remuneration is provided in any way whatsoever in return for the work, there is no employment contract. In practice, only a volunteer would be willing to work without receiving any remuneration.
Power relationship
By far the most difficult element to assess is the relationship of authority. In Step A The DBA Guide therefore devotes by far the most space to this topic. Unfortunately, none of this is particularly specific.
A quotation from Step A, section A.1, point 5: “It is not possible to specify in general terms which factual situations give rise to a ‘relationship of authority’, as is characteristic of an employment contract. Determining this in court is the sole responsibility of the trial court, with the Supreme Court reviewing this decision only to a limited extent on appeal…”.
Conclusion and recommendations
In our view, even with the DBA Guidance, it is abundantly clear that the new system of approved (model) agreements does not provide the clarity and (legal) certainty that both the self-employed person and the client so desperately need. However, the “DBA train” is about to set off. By 30 April 2016, self-employed workers and clients must have decided whether or not to board it. Our advice is to reassess and weigh up the risks associated with all forms of employment. Naturally, VWGNijhof would be happy to act as your sparring partner in this regard.