Enforcement of Act DBA further suspended until 1 July 2018
On 1 May 2016 the Deregulation Assessment Labor Relations Act (“Wet Deregulering Beoordeling Arbeidsrelaties”) came into force. This Bill has replaced the VAR-certificate. The VAR-certificate served as a tool for assessing whether or not an employment relationship exists. However, it offered independent contractors less legal certainty.
Under the new Bill, both a company and an independent contractor will have a shared responsibility insofar as it concerns the tax status of the relationship between both parties. The Tax Authorities provide model consultancy agreement formats, which, if used, will provide parties with a degree of certainty that no wage tax or social security contributions will be due. Provided of course that actual practice is in line with the contents of the consultancy agreement. In addition, the parties themselves may submit contractual agreements to the Tax Authorities for approval.
If the Tax Authorities subsequently find that an employment relationship exists between the principal and the contractor, the principal must pay wage tax and social security contributions retroactively. Furthermore, the Tax Authorities may impose in addition to statutory interest a fine on the principal.
However, the government decided that, since the new regulations do not have the desired effect, enforcement will be temporarily be suspended until 1 July 2018. This means that principals and independent contractors will not be confronted with additional tax assessment or fines. Be that as it may, if parties intentionally enter into a consultancy agreement which is in fact an employment relationship, the Tax Authorities will take action. In the meantime, the government will investigate whether, in view of the current practice of principals and independent contractors, the regulations regarding this subject have to be amended.
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