As the Dutch Tax Authorities have recently announced tighter controls over freelancers and their collaborators as of 2025, today’s article delves into this topic.

The Issue of False Self-Employment and Upcoming Enforcement Changes in the Netherlands

False self-employment occurs when an individual is classified as self-employed, yet under employment law, their work arrangement should be recognized as an employment contract. This misclassification can result in the avoidance of tax and social security contributions. Starting next year, the Dutch Tax and Customs Administration will begin actively addressing these cases. But how will this be done, and how will the entire industry be brought on board in tackling this issue?

Why Was Enforcement of False Self-Employment Paused?

There is a common misconception that enforcement on false self-employment was entirely paused. In reality, since the introduction of the Assessment of Employment Relations (Deregulation) Act (DBA Act) on May 1, 2016, a shift in employment regulation occurred. This legislation replaced the former Declaration of Employment Relationship (VAR) and introduced model agreements to help clarify employment relationships. However, these agreements were not as effective as intended.

As a result, the government introduced an „enforcement moratorium“ in November 2016. Under this moratorium, while monitoring continued, no retroactive penalties were imposed unless there was malicious intent or a failure to follow tax office instructions. The government’s current objective is to lift this moratorium on January 1, 2025. By January 1, 2026, it is anticipated that a new law—’Clarification of Assessment of Employment Relations and Legal Presumption‘ (VBAR)—will be implemented to further refine the approach to managing employment relationships.

Growth of Freelancing and the Impact on Employment Relations

Over the past decade, the number of freelancers in the Netherlands has surged by 85 percent, with 1.7 million self-employed workers currently registered with the Chamber of Commerce (KvK). To protect these workers from exploitation, the DBA Act was introduced in 2016, though enforcement has been limited to cases of deliberate rule breaking.

The law will be enforced strictly to create a fairer environment for both salaried employees and freelancers. The Dutch tax authorities will assess employment relationships between self-employed individuals, known as ZZP’ers, and their clients to determine whether cases of false self-employment exist. A key criterion for false self-employment is whether a freelancer works predominantly for a single client in what should be a standard employer-employee relationship.

Criteria for Genuine Self-Employment

Under the revised legislation, a person is deemed genuinely self-employed if they assume financial risks, own their equipment, possess specific expertise that the company requires, and work as an independent contractor. True freelancers also tend to have multiple clients and avoid long-term contracts with individual clients. These factors help distinguish legitimate self-employment from situations where someone may be falsely classified as a freelancer.

How Will the Law Be Enforced?

Until the end of this year, the Dutch tax authorities will issue warnings to companies where false self-employment is identified, provided there is no evidence of deliberate wrongdoing. In cases of intentional misclassification, or if warnings are ignored, companies will be required to rectify the situation, with the possibility of fines and demands for retroactive payment of payroll taxes.

Starting January 1, 2025, the tax authorities will take immediate action against companies found to be misclassifying employees. This includes imposing fines and retroactive tax assessments dating back to the start of the enforcement. In more severe cases, where there is evidence of intentional circumvention, the authorities may apply retroactive penalties for up to five years.

Concerns Surrounding the Enforcement of Employment Law

Approximately 13 percent of self-employed workers in the Netherlands are expected to be reclassified as false self-employed. The highest concentrations of these cases are likely to be found in sectors such as government, IT, media, and communications. Freelancer exploitation occurs because employing freelancers can be cheaper for companies; they avoid paying income tax, holiday pay, and sick leave. According to unions, this financial incentive has led to a rise in false self-employment, as businesses attempt to evade their responsibilities toward workers.

However, not all freelancers support stricter enforcement. A survey conducted by online bank Knab, involving over 3,000 self-employed individuals, revealed that many do not feel the need for government intervention. Some fear that new regulations could diminish their independence and reduce their income. In fact, some organizations representing freelancers have reported that their members have already lost contracts due to clients’ concerns about complying with the new rules.

In light of these concerns, political parties have urged the tax authorities to focus their enforcement efforts on industries where workers are forced into false self-employment, rather than indiscriminately targeting all sectors.

As the Dutch government prepares to tighten its enforcement on false self-employment, companies and freelancers alike face significant changes. While the aim is to level the playing field and ensure fair treatment for all workers, the transition may be challenging for many in the freelance community. With the enforcement moratorium set to end in 2025, and new legislation on the horizon, the coming years will be critical in shaping the future of employment relationships in the Netherlands.

References

Belastingdienst. (2024, August 15). Samenwerken met de arbeidsmarkt tegen schijnzelfstandigheid. Retrieved from Belastingdienst: https://over-ons.belastingdienst.nl/samenwerken-met-de-arbeidsmarkt-tegen-schijnzelfstandigheid/

Jacobs, S. (2024, September 11). Dutch tax authorities to crack down on exploitation of freelancers from 2025. Retrieved from IamExpat: https://www.iamexpat.nl/career/employment-news/dutch-tax-authorities-crack-down-exploitation-freelancers-2025

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