End of the VAR declaration
As of 1 May 2016 the VAR (Declaration of Independent Contractor Status) will be terminated. When hiring independent contractors, you will want to prevent having to pay wage taxes to the Dutch Tax Authority. How can you do this in the new situation?
Independent contractor status deregulation Law (Wet DBA)
In the independent contractor status deregulation Law (Wet DBA), the employer is no longer automatically exempt from the obligation of withholding wage taxes as in the current situation when the contractor you hired is in possession of a VAR WUA.
In future, you will have to determine per each individual contractor based on the agreements made if it involves an employment which requires you to withhold wage tax. You are to establish these agreements in written form and it is also your responsibility to work according to these agreements in practice. In this new situation, both the employer and contractor are responsible for honouring the agreements made.
Employment relationship or not
If the Dutch Tax Authority determines during a later investigation that there is an employment relationship, the Dutch Tax Authority may require that you still pay the wage taxes owed. Subsequently, you will be required to pay the wage taxes owed by your employer. The risk of hiring independent contractors and later being confronted with an assessment for the wage taxes is considerably higher in this new situation.
How can you limit your risk?
We can submit your agreements with current and future contractors to the Dutch Tax Authority for approval. This way, you will have prior assurance concerning the question of whether or not you need to withhold wage taxes on the amount you pay to the contractor. In addition, it is also possible to work with model contracts that have been published on the Dutch Tax Authority’s website. In doing so, you must carefully consider if the situation in practice corresponds with what has been established in the agreement. Many of the model contracts will not be applicable to your particular situation. Accon International can help you find the right contracts.
The fact is, that hiring independent contractors will become much more formalised. The requirements are stringent.
There will be an implementation period for the independent contractor status deregulation Law (Wet DBA)
The Dutch Tax Authority has agreed not to perform focused investigations regarding the contracts made with contractors until 1 May 2017.
The independent contractor status deregulation Law (Wet DBA) white paper
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