With the implementation of the Assessment of Employment Relationships (Deregulation) Act (Wet deregulering beoordeling arbeidsrelaties, or DBA), the Declaration of Independent Contractor Status (Verklaring Arbeidsrelatie, or VAR) expires from 1 May 2016. Instead of the VAR, clients and self-employed workers without employees can opt to use an example agreement drawn up by the Tax and Customs Administration to be certain in advance about their working relationship and to know that there is no employment relationship.
If the client and contractor do not wish to use or cannot use a model or example agreement, but do want certainty in advance, they can also submit their own agreement to the Tax and Customs Administration. During the parliamentary discussion of the DBA, the State Secretary for Finance promised that a guide would be published which would include the frameworks that the Tax and Customs Administration uses in the assessment of the example agreements submitted.
The Tax and Customs Administration has now published the DBA Guide. This guide contains the assessment framework that the Tax and Customs Administration uses to answer the question whether an agreement that has been submitted has consequences for deductions at source. If there is actually an employment contract the client (or actually the employer) has to withhold and pay wage tax and national insurance contributions. The DBA Guide contains four assessment 'steps'. These are the main features of the law and case law. The known elements 'authority', 'personal labour' and 'wages' form the central theme. These are the following steps:
- Is there an authority relationship between the client and the contractor?
- Must the contractor personally perform the labour?
- In the relationship between the client and the contractor, are wages being paid and is there an obligation to continue to pay wages?
- Is the working relationship designated in the law as a 'real' employment relationship (based on an employment contract) or a 'notional' employment relationship (among other things based on contracting work or based on a contract for services)?
It follows from the DBA Guide that the Tax and Customs Administration does not provide certainty in advance if, for example, the client's authority to issue instructions has not been contractually curtailed to a sufficient extent or if the obligation to perform work personally has not been arranged in the agreement.
The phased plan contains a reference to an appendix with an overview of notional employment relationships. More information on notional employment relationships can be found in the Withholding taxes manual 2016.