Independent Contractor Status, the new DBA Act and deemed employment relations

Jun 8, 2016

Under the DBA Act, that replaces the VAR per 1 May 2016, the withholding of payroll tax and social security contributions by principals on the remuneration, paid to their contracted parties, is not necessary under certain conditions. This will only apply if the agreement has been presented to the Dutch tax authorities for review, or if one of the published model contracts has been used. But even if this is done, are the withholding obligations really waived in all cases? Naturally, the waiver only applies as long as the actual activities are performed in accordance with the approved contract. What most people do NOT know is that the model contract or special tax ruling do not cover the “deemed employments”. The “DBA route” solely rules out real employments. The DBA rulings and model agreements expressly do not cover the deemed employment arrangements under our Wage Tax Act. When does this risk arise? For example the home workers arrangement (thuiswerkersregeling) is a deemed employment not covered by the DBA: this is when you work from home, your assignment is at least 30 days and the work earns more than 2/5 of the legal minimum wage.

Another example are the equated workers (gelijkgesteldenregeling): if the 2 last conditions mentioned above (>30 days, and >2/5 minimum wage) apply and the person involved works more than 2 days per week for the hiring party, a deemed employment also exists. In these cases the hiring entity needs to withhold wage tax and social security premiums on the amount paid to the other contracting party even if the DBA conditions are met, unless parties have specifically opted out of this deemed employment withholding in writing in advance. This should in my view be added to the agreement between contracting parties in all relevant cases.

Needless to say that we gladly want to help you with all this.