Now that the date of implementation of the “Sample Agreement” regime has been pushed back from the first of January to the first of April 2016, the old system based on the Declaration of Independent Contractor Status (in Dutch: “VAR-verklaring”) is to survive into the new year, as the State Secretary for Finance, Eric Wiebes, in a letter has advised the Upper House of the Dutch Parliament.
Some time ago we devoted attention to the then impending abolition of the VAR-based system in the context of the newly adopted DBA Act, this being the Assessment of Employment Relationships (Deregulation) Act of the Netherlands. The new system is to enable employment contracts being submitted for the scrutiny of the Tax and Customs Administration, so as to clarify to principals and contractors alike what the status of a particular employment relationship is.
The State Secretary in his recent letter explained that a greater level of comfort should first be achieved where it concerned the elaboration of the new legislation and the transitional arrangements. He has now suggested a transitional model along the following lines:
- The new regime is to take effect on the first of April 2016.
- Assessment of employment contracts having been submitted for the scrutiny of the Tax and Customs Administration before the first of February 2016 is to have been completed by the first of April 2016, with publication following at the earliest opportunity for those agreements that have indeed been found to be non-employment contracts. The sooner the parties present the Tax and Customs Administration with their (sample) agreement(s), the more time this will free up for consultation and implementation.
- The implementation term is set to expire on the first of January 2017, as the deadline for principals and contractors where necessary to bring their modus operandi into line with the new sample (or model) agreement based requirements. Although the Tax and Customs Administration will keep its finger on the pulse, at this early stage it will merely issue warnings and point out to the parties in which respects their approach warrants adjustment in order to satisfy the non-employment requirements rather than clamping down with repressive enforcement measures.
- As the draft legislation did not boast any retroactive effect, it follows that principals may continue to avail themselves of the safeguards offered by the VAR-based system until the new legislation has taken effect. If it were establishment beyond said effective date that an employment situation applied, the enforcement measures taken (if any) could not address the period of time throughout which the principal still had the safeguards as per the VAR-based system to rely on. Enforcement by the tax authorities will be an option in connection with working relationships having been confirmed as having de facto employment status, with the safeguards as per the old system ensuring that only the period from the first of April 2016 onwards will be liable for enforcement.
- It goes without saying that the Tax and Customs Administration will always crack down on any evidently fraudulent scenarios that may come to light.
Do you want to know more about the Declaration of Independent Contractor Status? Please contact your Tax Consultant!