Update on regulations for Self-employed (Independent) contractors
The evolution of the DBA
At the end of June the state secretary and the finance minister have updated the parliament about the latest developments in the legislation for self-employed contractors.
Summary of the developments:
- End client statement for independents with high rates
- Contractors and end clients provided with clarity about classification by means of end client statement
- Development of Webmodule for independents is delayed
- Moratorium on Enforcement of the DBA until January 2021
Independent contractors earning Eur75 per hour and above would be able to obtain a statement from their end client, confirming their status as self-employed and the absence of an employer/employee relationship between the two parties.
Such a statement would provide clarity about the classification of the contractor for taxation purposes and would also put the responsibility of assessing the classification squarely with the end client (opdrachtgever).
This placement of responsibility is an attempt to clarify one of the criteria of classification as self-employed, the relationship of authority. We have written a blog article about this some time ago – “DBA alive and well”
The end client statement has a number of conditions attached:
As mentioned above, the rate for the contractor may not be less than Eur75 hour;
The agreement between the parties would need to exclude any notion of an employment contract; The assignment may not exceed one year and the end client must be registered with the Chamber of Commerce.
The assignment duration would apply to all subsidiaries of the end client and all previous work carried out for that client would count towards the maximum term.
The burden of proof that all conditions of the statement and underlying agreement have been met will lay solely with the end client.
This is a harsh measure for the end clients to deal with, designed to tackle the “laissez-faire” approach these companies had adopted in the past when contracting self-employed individuals [If you’re independent you take care of your own tax and don’t pose a risk to the company]
The authorities seems to be taking a back seat in the classification of contractors and focusing solely on their role of auditing the implementation and compliance of the regulations.
The actual enforcement of the DBA by the authorities has again been postponed until early 2021. However as has been happening in the past year, the tax office may carry out audits of selected companies during the time of the moratorium.
Companies would not immediately be fined in cases of noncompliance, but rather given opportunity to correct the shortcomings.
Once enforcement is active, these companies are likely to be audited again and receive fines should the shortcomings still persist.
We can only hope the development of the webmodule for independents is not postponed as frequently as enforcement of the actual legislation.