Netherlands: hot topic – (employment) qualifications

in short

The Dutch government and the Dutch tax authorities recently outlined their approach to enforcing rules against false self-employment, with significant changes set to come into effect on 1 January 2025. This newsflash highlights the standards for enforcing the current rules, initiatives aimed at ensuring a smoother transition to the new enforcement regime, and key takeaways for organizations.

Until January 1, 2025, the rule will only be enforced if the tax authorities believe that the company has malicious intent. This would be the case if the company knowingly allowed an apparent false self-employment to arise or continue because it knew or should have known that an employment relationship actually existed. In this case, the tax authorities can impose corrective obligations or additional assessments on the company. To be able to do this, they must prove three things:

• (real or perceived) employment relationship
• Obvious false self-employment
• Deliberately falsely self-employed

If an investigation by the tax authorities reveals the existence of an employment relationship (real or perceived) but no bad faith, the authorities will not immediately enforce the law. Instead, they give instructions. Companies then need to comply with these instructions:

• Shape an employment relationship that qualifies for work outside of employment; or
• Report this relationship as an employment relationship on your Dutch wage tax return.

Companies typically have three months to comply. If the tax authorities determine after this period that the company has not followed its instructions, or has not followed its instructions sufficiently, but an employment relationship (real or deemed) still exists, the tax authorities can take enforcement action. In the above cases, the tax authorities may impose corrective obligations and additional assessments, which may include fines, penalties and interest.

However, recently, the Dutch government stated that starting from January 1, 2025, it will fully and actively implement the regulations against false self-employment. From this date, corrective obligations, additional assessments, fines, penalties and interest may be imposed if the tax authorities determine during the course of the audit that an employment relationship does exist. In doing so, they will not look back beyond January 1, 2025, unless there was malicious intent or a failure to comply with their instructions. There will also be a one-year transition period during which employers and casual workers should not be penalized if they can demonstrate that they are taking steps to combat false self-employment.

As the current rules are still somewhat unclear, the Dutch government is also currently working on new legislation to provide more clarity in this regard. At the same time, the tax authorities have also taken the initiative in this regard to provide employers with additional guidance (mainly in Dutch) via its website, which contains additional information and online tools to help analyze the employment relationship. Please note that this guide does not provide any certainty.

In addition, on October 1, 2024, several motions were adopted aimed at facilitating a smooth transition to the upcoming rules. The Dutch State Secretary for Taxation and the Tax Administration undertake to give serious consideration to adopted initiatives such as:

• The main focus is on serious false employment cases in the first year of implementation of the new regulations.
• Facilitate the further use of model agreements (despite initial indications that these would cease to be used) and initial negotiations of employment relationships.
• Publish a clear employee recruitment framework on the Dutch tax authority’s website by 1 November 2024 and require all ministries to use it when recruiting self-employed people.
• The central government stopped hiring self-employed people.
• If necessary, use a humane approach when enforcing rules.

The rules, which are effective from 1 January 2025, highlight the importance for Dutch employers to conduct a proper analysis of the actual situation and circumstances of their relationship with the self-employed from a Dutch payroll tax and social security perspective and seek advice on the following issues : Obey the law when necessary. In addition, we stress the importance of organizations seeking comprehensive tax, legal and pensions advice to effectively manage all associated risks. Now is an appropriate time to address these aspects, as employment relationship qualifications may raise corresponding risks and challenges in these areas. Therefore, the following key points are recommended:

• Companies should review their flexible work pools to ensure compliance and future-proof their workforce.
• It is vital to assess and address any instances of false self-employment within your organization and take appropriate action to minimize the risk by modifying working relationships or employment methods.
• Implementing risk mitigation measures and establishing or reviewing controls for monitoring and testing false self-employment are important steps in preparing for upcoming enforcement changes.

If you have any questions about how these developments may impact your workforce, please feel free to contact Mirjam de Blécourt, Maarten Hoelen and Danielle Pinedo.