VAR statements replaced by model agreements
To ensure that they actually qualified as self-employed, freelancers used to be able to apply for a VAR statement: a confirmation from the Dutch tax authorities of their independent contractor status. The self-employed without employees (ZZP’ers, zelfstandige zonder personeel) were asked to apply for this statement to determine whether they were truly working freelance or whether they were employed in the traditional sense, which clarified whether the company they worked for should or shouldn’t be responsible for payroll taxes. As of 1 May 2016, the VAR statement is replaced by model agreements. The model agreements fulfil the same function as the VAR statements.
Freelance work versus employment
Sometimes the services you provide as a freelancer can be quite similar to the activities of an employee. However, the difference is very important. If you qualify as self-employed, your clients do not have to pay any wage tax or social security premiums such as national insurance premiums and employee insurance premiums. Do note that this also means that you have to arrange for your own insurances (e.g. disability to work) and that there is no protection from dismissal. An employee is covered for these risks and therefore an employer is responsible for payroll taxes. Read more in our Guide to Going Freelance.
Qualifying as an employee
The Dutch tax authorities will therefore always review your relationship with the client to establish whether you qualify as self-employed or as an employee. In general you will qualify as an employee if all of the following conditions are met:
- There is a relationship of authority between the client and yourself
- You have to perform all tasks yourself
- Your receive a payment for the services
As of 1 May 2016, the VARs are replaced by model agreements. Some model agreements are pre-approved by the Dutch tax authorities and published on their website (in Dutch), but you can also draw up an individual agreement. The advantage of the new system is that it guarantees that your client will not be held responsible for payroll taxes and contributions. Please note that this only applies if your actual activities are in accordance with the agreement. Although the model agreements provide a guarantee on payroll taxes and contributions, this guarantee does not see to employment protection of the self-employed individual. A self-employed individual who can claim that he or she worked under the authorisation of the client and that an employment contract was not explicitly excluded will be able to claim employment protection. In most cases employment protection means protection against termination of the contract and payment of salary for a period of two years in case of illness.
There was a transitional period of one year which has been extended to December 31st, 2017. During this period you and your client can amend your agreement(s) and no action will be taken by the Dutch tax authorities (with the exception of fraudulent activities). From January 1st, 2018 onwards, the Dutch tax authorities will actively monitor contracts.
Qualifying as an entrepreneur
Depending on certain factors, some self-employed people can qualify as an entrepreneur, which results in various fiscal benefits. These include a self-employed deduction of €7,280 per year. In addition you can make use of the small business profit exemption (14% of the profit after allowances). Please note that using model agreements does not automatically qualify you as an entrepreneur for income tax purposes. Instead, entrepreneur status depends on various factors, including the following:
- How much profit do you make?
- How independent is your company?
- How much money did you invest in your company?
- How much time do you spend on your business activities on an annual basis?
- How many clients do you have?
- Do you have your own website, stationary, business cards, etc.?
If you do not qualify as an entrepreneur for income tax purposes, your income will qualify as ‘other income’. In that case you will not be entitled to the fiscal benefits mentioned above.