Self-employed workers and their clients are worrying too much about the full implementation of the DBA Act on 1 May 2017. That is the gist of the First DBA progress report which State Secretary Wiebes recently sent to the House of Representatives.
ZZP-er
A ZZP worker is a self-employed person without staff who does not wish to work as an employee for their client. These people are concerned because, following the definitive introduction of the DBA Act, their clients are less likely to opt for the services of a ZZP worker. This is because these clients do not want to run the risk of the tax authorities subsequently demanding that payroll taxes and social security contributions (plus interest and penalties) be paid on the amounts paid to the ZZP-er.
DBA
The abbreviation DBA stands for ‘Deregulation of the Assessment of Employment Relationships’ and essentially amounts to nothing more than the abolition of the Declaration of Employment Relationship (the VAR) on 1 May 2016. The self-employed person and their client are expected to assess their employment relationship jointly. Only where the self-employed person is freely replaceable and/or there is no relationship of authority may the deduction of payroll taxes and social security contributions be waived.
To provide guidance, it is possible to submit agreements to the Tax and Customs Administration for approval. It is also possible to make use of general or (sector-specific) agreements approved by the Tax and Customs Administration sample contracts. Where work is subsequently carried out in accordance with such an approved agreement, the parties may rely on the Tax and Customs Administration not to impose additional payroll tax and social security contributions retrospectively.
Commotion
The DBA Act has been causing quite a stir for some time now, both amongst self-employed workers and their clients. This is evident, amongst other things, from various articles in the press and the AVRO/TROS programme Radar In its programme broadcast on 19 September 2016, it devoted considerable attention to the problems faced by self-employed people.
Wiebes has tried on several occasions to allay these concerns with reassuring words. The progress report that has now been published also reflects this tone. A quote: “In short: there are worrying and persistent rumours circulating about a ‘wave of fines’ that is set to hit well-meaning Dutch business owners after 1 May, with hefty fines being imposed on clients who, so to speak, have merely lent that hammer to their contractors. I cannot put it any more clearly than this: this is not going to happen.”.
Despite these reassuring words, in practice, of course, everything will depend entirely on how the Tax and Customs Administration enforces the scheme from 1 May 2017. It is clear that the Tax and Customs Administration assesses the situation retrospectively, even where a pre-approved (model) agreement is in place.
It goes without saying that there will be no mass back-tax assessments or fines. If only because the Tax and Customs Administration does not have the manpower to investigate the actual circumstances under which the many self-employed workers operate. But imagine being the entrepreneur (self-employed person and/or client) who happens to be singled out. The court will then assess the employment relationship against the law, taking into account the extent to which confidence can be placed in the words of the State Secretary in (among other things) this progress report.
Generous
The progress report certainly conveys a generous tone. According to Wiebes, in many sectors and in many situations following the abolition of the VAR, self-employed people without staff are still regarded as self-employed. The obligation to deduct tax applies only in cases where it is evident that all the criteria for an employment relationship are met.
Wiebes gives as an example a situation where such a clear employment relationship exists in the sector of the building and installation engineering: “workers who, day in, day out (without being replaced), carry out all the work required on the building site, using the client’s equipment, tools and the like.”.
A similar example from the transport sector: “It is unlikely that drivers without a car or a licence are working on a self-employed basis, as there is effectively no, or virtually no, distinction between them and employees carrying out similar journeys. Most transport operators already employ this type of driver on a salaried basis.”.
Peace
We will have to wait and see whether Wiebes’ reassuring words will bring about the desired sense of calm. Our feeling is that both the self-employed person and their client are looking for greater certainty than Wiebes offers through the (model) agreements approved by the Tax and Customs Administration and his reassuring words.