On 1 January 2025, the moratorium on enforcement measures under the Employment Relationships Deregulation Act (DBA Act) will be lifted. The government announced this in a letter to the House of Representatives on 6 September 2024. This means that from 1 January 2025, the Dutch Tax Authorities has the power to impose a correction to employment status, additional tax assessments and penalties in cases where it identifies false self-employment.
What does this mean and how can you prepare for it?
Background
In 2016, the DBA Act was introduced and the Declaration of Independent Contractor Status (VAR) was abolished. The DBA Act aimed to combat falseself-employment, but led to significant unrest and discussion, resulting in the introduction of a moratorium on implementation of enforcement measures by the Dutch Tax Authorities. Since then, efforts have been made to clarify the distinction between self‑employment and employment. The Clarification of Assessment of Employment Relationships and Legal Presumption Act (in Dutch abbreviated as VBAR) is currently with the Council of State for advice and is not expected to come into force until 1 January 2026 at the earliest, following approval by the Lower House and Senate.
Letter to the House of Representatives of 6 September 2024
It is widely understood that the government is seeking to restore balance in the labour market and make the rules regarding self-employment more sustainable. The government is focusing on three approaches to achieve this:
Approach 1: Creating a more level playing field between different types of contracts.
Approach 2: Enhancing the functioning of the labour market, including providing greater clarity on when a person should be classified as an employee or a self-employed professional.
Approach 3: Improving the enforcement measures that can be taken against falseself-employment. The lifting of the enforcement moratorium on 1 January 2025 falls under this approach. The government does not want to wait for the introduction of the VBAR Act.
Lifting of the enforcement moratorium as of 1 January 2025
If the Tax Authorities identify cases of falseself-employment after 1 January 2025, they have the power to impose a correction to employment status, additional tax assessments, or penalties retroactively for cases prior to that date. Different rules apply in cases of malice or if a previously issued warning has not been adequately followed. In these cases, a correction to employment status or additional tax assessments may be imposed retroactively for the five-year period (maximum) prior to the occurrence of the malicious event or from the date of the first warning issued by the Tax Authorities.
The identification of falseself-employment will be assessed based on current legislation and case law, whereby the Tax Authorities evaluate the employment relationship based on all the circumstances of the case (a holistic approach).
Transitional period of 1 year
The Tax Authorities will be cautious in imposing penalties where there have been demonstrable efforts to reduce falseself-employment within the organisation. In such cases, no penalties will be imposed for correcting the employment status during the first calendar year following the end of the enforcement moratorium. This applies to both employers and employees. There is still the option of imposing penalties for non-compliance.
Model agreements
The letter to the House of Representatives of 6 September 2024 announced that model agreements will be phased out starting 1 January 2025. From 6 September 2024, the Tax Authorities will no longer consider new applications for model agreements or extensions to existing ones. The government decided this because using model agreements provides only conditional security. The correct classification of the employment relationship always depends on how work is actually performed.
Implications under labour law
Naturally, decisions taken by the Tax Authorities also impact the classification of the employment relationship by civil courts. The Arnhem-Leeuwarden Court ruled at the end of 2023 that even if the Tax Authorities consider that a job meets the legal description of an employment contract, this does not necessarily mean a civil-law employment contract exists. Although the civil court still needs to assess this, the employer may now be at a disadvantage and could face retroactive claims from employees for wages, holiday pay, holiday allowances and benefits in accordance with the collective labour agreement.
Pension funds
If the employer falls within the scope of an industry-wide pension fund or has made pension commitments for employees, they may also be required to pay pension contributions retroactively. Claims by an industry-wide pension fund are subject to a limitation period of five years, dating from when the fund was aware or should reasonably have been aware of compulsory participation based on objective criteria.
What can you do?
We advise mapping out all employment relationships in your organisation as soon as possible and separately assessing and, if necessary, revising them using the Tax Authorities’ web module, the Payroll Tax Handbook and current case law. We also recommend formulating a future-proof hiring policy to demonstrate during an audit by the Tax Authorities that you have started to address falseself‑employment within your organisation. We are happy to assist you with this.