The Deregulation of Assessment of Labor Relations Act (the DBA Act) went into effect on May 1, 2016, but since then has only been enforced to a limited extent by the Tax Administration. The law - as the Cabinet now also acknowledges - did not bring the clarity and peace of mind it was supposed to bring.
For this reason, the DBA law is also only enforced to a limited extent. The Inland Revenue has worked this out in a "supervision plan" and only enforces if it can prove the following three criteria:
- There is (fictitious) employment;
- There is obvious false self-employment;
- There is intentional false self-employment.
If these criteria are met, the Internal Revenue Service can impose an adjustment obligation or additional tax assessment, possibly with a fine.
Expansion of supervision since Jan. 1, 2020
Since Jan. 1, 2020, the Tax and Customs Administration also enforces when clients do not follow instructions from the Tax and Customs Administration, or do not do so sufficiently within a reasonable period of time. During an investigation, the Tax Authorities can establish that - although the parties did not intend an employment relationship - the employment relationship is an employment relationship. The Tax Authorities can then require an adjustment of the working method and/or agreement in order to still be able to work 'outside employment' (by means of a contract of assignment). The principal must act on these instructions in order to shape the employment relationship in such a way that it is not an employment relationship or to process the employment relationship as an employment relationship in the payroll tax return.
The minimum time to follow directions is one month, although three months will be the starting point.
Sector-specific approach
Many companies in the healthcare, construction and hospitality industries, among others, feel compelled to use self-employed workers. Laborers there also prefer self-employment to employment. It often offers them more flexibility and higher financial appreciation.
In those sectors where the issues surrounding the self-employed play a major role, the Tax and Customs Administration will take a sector-specific approach. This means that the Tax and Customs Administration will contact relevant stakeholders, such as sector organizations, investigate whether similar practices are used within the sector and what the standard should be within that specific sector. In other words, the Tax Administration is trying to provide customization within the sector that suits the sector. This should create more clarity about the qualification of working relationships within the sector, allowing for better enforcement and giving clients and self-employed persons a better idea of what to do.
The first sector approaches are in healthcare (hospitals and independent clinics), large construction projects and intermediary agencies in these sectors. This approach will be extended to (one of) the following sectors in the near future: education, ICT, hospitality and retail.
If you are business owner in any of these sectors keep a close eye on our coverage. After all, we will keep you informed!
