When companies hire independent contractors there is always uncertainty about their tax status. Should they be treated as regular employees, in which case the company is required to withhold wage taxes and social security contributions? Or not?
To obtain certainty on this from the start of the contract, an independent contractor can apply for a statement with the tax authorities in order to confirm their tax status (Verklaring arbeidsrelatie, VAR) and the principal is not required to withhold wage taxes.
Last year, a new bill was proposed and referred to as the Deregulating Assessment Working Relationship Act (Wet deregulering beoordeling arbeidsrelaties). It is expected that this Act will come into force on April 1, 2016, abolishing the VAR.
If the VAR is abolished, parties can make use of model contracts prepared or reviewed and approved by the tax authorities. In cases where parties make use of these model contracts, they will have certainty on the tax treatment of the working relationship, and the principal is not required to withhold wage taxes.
As of the start of this year, and until the new Act comes into force, parties can either choose to apply for a VAR or make use of the model contracts that have been prepared and published by the tax authorities on its website.