Work­ing with inde­pend­ent con­tract­ors is receiv­ing sig­ni­fic­ant atten­tion as the Dutch Tax Author­it­ies will start enfor­cing reg­u­la­tions on pseudo self-employ­ment from 1 Janu­ary 2025. Even inde­pend­ent con­tract­ors who reside abroad but work for Dutch organ­isa­tions are sub­ject to this scru­tiny. Many organ­isa­tions are cur­rently map­ping their inde­pend­ent con­tract­or pop­u­la­tion and assess­ing exist­ing employ­ment rela­tion­ships. Below are the most import­ant devel­op­ments and points of atten­tion for enga­ging inde­pend­ent con­tract­ors across bor­ders.

 

Abol­i­tion of the enforce­ment morator­i­um

Since the abol­i­tion of the VAR declar­a­tion in 2016, cli­ents have been respons­ible for assess­ing wheth­er a work­ing rela­tion­ship should be clas­si­fied as an employ­ment rela­tion­ship. The suc­cessor to the VAR, the DBA Act, ini­tially provided little clar­ity, which led to the intro­duc­tion of an enforce­ment morator­i­um. This meant that the Dutch Tax Author­it­ies did not con­duct audits or impose addi­tion­al assess­ments unless mali­cious intent was involved. How­ever, from 1 Janu­ary 2025, this morator­i­um will be lif­ted, and the Dutch Tax Author­it­ies will enforce the reg­u­la­tions more strictly.

As of 1 Janu­ary 2025, organ­isa­tions risk addi­tion­al assess­ments and pos­sible fines if it is determ­ined that an inde­pend­ent con­tract­or is actu­ally an employ­ee. There­fore, it is import­ant to review and, if neces­sary, adjust work­ing rela­tion­ships with con­tract­ors in a timely man­ner. This is par­tic­u­larly rel­ev­ant because, from an employ­ment law per­spect­ive, no enforce­ment morator­i­um exists, and employ­ment law risks already apply ret­ro­act­ively. You can read more about this in our previous blog.

 

Cross-bor­der issues

Work­ing with cross-bor­der inde­pend­ent con­tract­ors presents addi­tion­al chal­lenges. When an inde­pend­ent con­tract­or from abroad works in the Neth­er­lands, the first ques­tion is wheth­er they fall under Dutch labour law. For the pur­poses of this blog, we assume that they do. The Dutch Labour Inspect­or­ate cur­rently assesses (based on the Deliveroo criteria and Sec­tion 7:610 of the Dutch Civil Code) wheth­er the con­tract­or is genu­inely self-employed. If the con­clu­sion is that the con­tract­or is falsely self-employed, then the for­eign inde­pend­ent con­tract­or, like Dutch con­tract­ors, can claim employ­ee rights upon reclas­si­fic­a­tion. These rights include con­tin­ued pay­ment dur­ing ill­ness, hol­i­day pay, dis­missal pro­tec­tion, poten­tial pen­sion con­tri­bu­tions, and more.

This can intro­duce addi­tion­al com­plex­ity, espe­cially if the per­son in ques­tion, due to their res­id­ency abroad, is not socially insured in the Neth­er­lands and/or has not con­trib­uted to pen­sion funds here.

In cross-bor­der situ­ations, the ques­tion always arises in which coun­try the work­er is sub­ject to tax or social secur­ity con­tri­bu­tions. In such cases, we need to exam­ine tax treat­ies and social secur­ity agree­ments to determ­ine how the alloc­a­tion of tax and social secur­ity rights and oblig­a­tions is arranged. Almost all treat­ies, wheth­er for tax­a­tion or social secur­ity, dis­tin­guish between employ­ees and the self-employed.

There is case law, both in tax and social secur­ity legis­la­tion, that indic­ates the coun­try where the work is per­formed has the author­ity to clas­si­fy the work, and that this art­icle in the treat­ies applies. In the Neth­er­lands, we have not seen any legis­lat­ive changes in recent years, although enforce­ment has been lack­ing. Inter­na­tion­ally, this can lead to unique situ­ations. If we strictly fol­low this the­ory, we must assess the rela­tion­ship with a for­eign work­er accord­ing to the cri­ter­ia for an employ­ment rela­tion­ship, and if the con­clu­sion is that they are an employ­ee, we must also fol­low the treaty pro­vi­sions that apply to employ­ees.

Addi­tion­ally, in some cases, a work per­mit or a com­bined res­id­ence and work per­mit (GVVA) may have been required, and there is a more extens­ive report­ing oblig­a­tion under the Wag­wEU for employ­ees com­pared to inde­pend­ent con­tract­ors.

 

How can you pre­pare?

Work­ing with inde­pend­ent con­tract­ors, both with­in and out­side the Neth­er­lands, remains a com­plex and risky area, espe­cially now that enforce­ment will tight­en from 1 Janu­ary 2025. To min­im­ise risks, it is cru­cial to care­fully review agree­ments with inde­pend­ent con­tract­ors and assess wheth­er an employ­ment rela­tion­ship exists. Clearly doc­u­ment­ing the con­trac­tu­al arrange­ments con­cern­ing how the col­lab­or­a­tion is executed is of great import­ance. Fur­ther­more, it is advis­able to con­duct a risk ana­lys­is of the inde­pend­ent con­tract­or pop­u­la­tion with­in your organ­isa­tion, includ­ing cross-bor­der con­tract­ors.

The tax sec­tion of this blog was writ­ten by Miri­am Michiels, tax advisor at EY Belastingad­viseurs. The employ­ment law inform­a­tion was writ­ten by Jeannet van Vleuten, employ­ment law attor­ney at HVG Law. In the Neth­er­lands, HVG Law has a stra­tegic alli­ance with EY Tax Belastingad­viseurs. We approach issues from a mul­tidiscip­lin­ary per­spect­ive.

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