From January 1, 2025, the Dutch tax authorities (Belastingdienst) are set to start enforcing the Employment Relationships Deregulation Act (DBA Act). This means that checks will be done to determine whether false self-employment is taking place and corrections to prevent the exploitation of freelancers will be enforced.
Monitoring employment relationships in the Netherlands
The number of freelancers in the Netherlands rose by 85 percent in the past 10 years with the Chamber of Commerce (KvK) counting 1,7 million registered self-employed people. To ensure that these workers are protected against exploitation, the Dutch government introduced the DBA Act in 2016, but has not actively enforced it unless there is a case of deliberate rule-breaking.
However, as of next year, the self-employment law will be enforced to level the playing field between employees with salaries and those who are self-employed. The tax office will check on employment relationships between freelancers or ZZP’ers (self-employed people) and their clients to see whether they are "falsely self-employed". Someone could be considered "falsely self-employed" if they are working for a single client and should instead be directly employed by the company. The checks will first focus on companies rather than self-employed persons themselves.
According to the new legislation, a person is considered self-employed if they carry financial risks, have their own equipment, have specific expertise that the company needs and are identified as a freelancer while completing their work. Furthermore, freelancers should have more than one client and should not have long-term contracts with clients.
How will the Dutch self-employment law be enforced?
Until enforcement of the law at the beginning of next year, the Dutch tax authorities will give companies a warning if there is no evidence of malice. However, if there is evidence of deliberate false self-employment or if warnings are ignored then the tax office will require the company to correct the situation with the possibility of a fine or back-paying payroll taxes.
From January 1, 2025, when the enforcement moratorium has ended, the tax authorities will no longer issue warnings, but will immediately enforce corrective obligations, fines and additional assessments for the company to retroactively pay taxes from the start of the enforcement date. If there is deliberate skirting of the rules, the tax office could even retroactively levy a company up to five years back.
Some concerns over enforcement of employment law
13 percent of all self-employed people in the Netherlands are expected to be classified as sham self-employments, with the highest number in government, IT, media and communication sectors.
Exploitation of freelancers occurs because they are cheaper than employees as companies don’t have to pay income tax and these workers are not required to have paid holiday and sick leave. According to unions, this causes a surge in false self-employment when employers try to get out of their responsibilities.
A survey by online Dutch bank Knab of more than 3.000 self-employed individuals revealed that many freelancers do not want or need enforcement from the government. There are self-employed workers who are concerned that they could lose their independence and revenue with the tax office cracking down on employment relationships.
Organisations representing freelancers have also claimed that some members have lost contracts with clients because they are worried about not meeting the new regulations. Because of this, the VVD has urged the tax office to focus on sectors where workers are forced to become freelancers and ZZP’ers for a company to work for them.