The VAR (Statement labour agreement) will be abolished. Instead the new law and regulation of the Law deregulation assessment labour relations. It is the intention that from the 1st of May 2016 no new VAR’s will be provided. From this date you can also no longer derive rights from you current VAR. In this article you will read how, as an independent, you can prepare for the new legislation. Would you like to know more as the client? Click here.

The new method

Starting from the implementation of the new legislation, probably on the 1st of May 2016, you can no longer derive rights from your VAR. In the new situation you can choose from the following possibilities as an independent.

* Working on the basis of a (current) agreement of contract

Is it abundantly clear for you that you operate as an independent and there is no matter of labour relation, or a fictitious labour relation? Then you can choose to continue working in the same manner as before. You can keep using your own agreement or draft a new agreement if you do not already have one. The only difference is the disappearance of the VAR.

* present the agreement to the Tax Authorities

You can submit an agreement to the Tax Authorities. The Tax Authorities will assess whether or not it is a matter of labour relation, also known as employment. The Tax Authorities will try to give this assessment within 6 weeks after receiving your agreement. Whether or not the Tax Authorities will succeed in this deadline is dependent of the number of agreements they will receive.

When the Tax Authorities have assessed your agreement, you will receive a written response with the assessment. If the Tax Authorities have judged that on the basis of the agreement no payroll tax needs to be paid, they will also determine the period in which this decision will apply. Probably for a term of 5 years. This means that as an independent you will have security in this for a period of 5 years.

*using the model agreements from the Tax Authorities

The Tax Authorities placed a number of so called model agreements or example agreements on their website. You can also choose one or more of these agreements, that correspond with your work as  an independent. There are general agreements and specific agreements, aimed on a certain sector. The sector agreements state the arrangements that are common in that sector and arrangements about the Working Conditions Act regulations applying  to that sector. You are free to choose the agreement that suits you best. Even if you work in a certain sector with a specific model agreement, you can still use the general model. In an e-mail or contract confirmation you can even come to an arrangement with your client with what agreement you are going to work.

If you use a model agreement, you will have the security that for 5 you will not have to pay payroll taxes. You can determine yourself what articles you want to add or remove from the model agreement. By removing or adding of a text the content of the agreement can be altered. A small alteration can lead to a new labour agreement. Therefore we advise to go about this carefully.

How you perform your activities as an independent

It is important that you work according to the agreement. Only using a model agreement, or working on the basis of an agreement assessed by the Tax Authorities is not a guarantee that payroll wages are not withheld or paid. You will need to work according to the articles of the agreement.

Nothing is mandatory

If the VAR was not mandatory, it isn’t mandatory to present your agreement to the Tax Authorities, or to use an agreement assessed by the Tax Authorities. It is allowed, if you want to have security beforehand.

Questions?

The Tax Authorities will send everyone who currently have a VAR a letter with information. If you would like to ask us something, please don’t hesitate. We can draft an agreement for you, or assess the agreement you are using.

Sources:

- Factsheet ZZp/Deregulering Beoordeling Arbeidsrelatie (DBA);

- Kamerstukken II, 2014-2015, 34 036.

Addition for private use

When a car is part of the business assets and this is used for private means as well, you must add the amount to your fiscal profit. This is also called the addition (Dutch: bijtelling). This addition is a percentage of the catalogue value and is dependent of the CO2 emission and the age of your car.

The addition for the private use does not apply when the car is not used for more than 500 kilometres annually. This must be verified by registering all your drives in a logbook. Important in this is that all commutes are considered business related.

Stricter control Tax Authorities

It can be beneficial for the fiscal profit when the private use of a car does not exceed 500 kilometres. Because, if the final kilometre administration can demonstrate that the car has been used privately for less than 500 kilometres in a year, no addition will need to be paid. It makes sense that an entrepreneur does not want to exceed this limit.

The Tax Authorities are stricter in their control of the private use of cars lately. This is to prevent misuse of the  500 kilometre limit regulation. For example, they are conducting license plates inspections at amusement parks and furniture malls. It has also recently come to light that the Tax Authorities are requesting parking information, which has led to some discussion.

Preventing addition

Because the Tax authorities are becoming more and more strict in regard to the private use of cars, it is in the benefit of the entrepreneur to register that the limit has not been exceeded.

Declaration exclusive corporate use delivery van

When a delivery van is part of the business assets. ‘Declaration exclusive corporate use delivery van’ (Dutch: Verklaring uitsluitend zakelijk gebruik bestelauto’) can be submitted with the Tax Authorities. The benefit of this declaration is that the advantage of private use does not need to be taken into account. Furthermore, a logbook is not required in this case.

There are some conditions however:

-The delivery van may not be used for private purposes

-Changes in the use of the delivery van must be reported with the Tax Authorities as soon as possible.

Continuously changing use delivery van

Generally the normal regulation for private use applies for each delivery van. However, there is an exception when two or more employees use a delivery van continuously and changing  because of the nature of the work. This is the case when the employees use the vans at random.

Example

In an enterprise seven employees use four delivery vans. With a notification, they use one of the available vans randomly.

No continuously changing use delivery van

In an enterprise two employees each use a separate delivery van. They agree to change cars each period.

The advantage of the continuously changing use delivery van is that no logbook will need to maintained and no addition will need to be paid. The downside is that the employer will need to pay €300,- as a final levy. However, this saves a lot of administrative burdens.

Restriction private use

When a lease car is made available for an employee, the addition can be prevented be means of a restriction on private use. It is agreed with the employee that the company car is only used for business means. It must show whether or not the employees are upholding the agreement by checking, among other things, the logbook administration of the drives, the amount of used fuel and traffic penalties. If not, a penalty can be imposed.

The Tax Authorities have recently published a new example agreement on the restriction of private use. You can download it here. However, the example is only in Dutch. If you have questions regarding the example agreement, you can contact us at info [at] lupacompany.com. Of course an own agreement can be used besides the example agreement.

We would like to make you aware that it is advisable to apply one of the abovementioned options. Using one of these options can lead to a lessening of administrative burdens and prevention of addition. Especially with the current check-ups by the Tax Authorities it saves a lot of hassle if you have security regarding the private use of a company car. If you have trouble figure this out for yourself, please do not hesitate to contact us so we can help you. 

What are my options?

Not all independents save for their pension, because it is expensive, difficult, the offered products are unclear and it is by no means certain what you will be left with in the end. To offer you some grip on the various options concerning your retirement, we have made a list with the forms for saving for your pension. Not only the various forms are covered, but we also explain what age suits what form of saving. There are of course alternatives to saving. You can read more about that here.

1.Bank savings

Bank savings is gaining popularity because of its simplicity. Saving with a bank is a way with which you set aside money on a special bank account, over which you do not need to pay taxes. The disadvantage of bank saving is that you can’t withdraw money in the meantime. This could also be seen as an advantage, because you can’t be tempted to withdraw money that you want to set aside for later. Furthermore, there are no additional costs for policies when saving with a bank. Another benefit.

2.Annuity scheme

The principle is the same as with bank savings, You set aside money each month or quarter in the form of an annuity premium. This money, different than with bank savings, is not placed in a savings account, but is set aside with an insurance company. The disadvantage of this is that you must pay the premium and the costs. The great advantage is that you are guaranteed of a life-long benefit. Each year after you retire you will receive a benefit through the annuity scheme, even in the unlikely event that you live up to a 120 years old. The premium that you pay now are deductible in the income tax (box 1), the benefits you receive after you retire are taxed as income in box 1.

3.Fiscal retirement reserve (Dutch: Fiscale Oudedagsreserve/ FOR)

The FOR is a facility especially for entrepreneurs that ensures that you set aside 10.9% (with a maximum of €9542,-) of your profit on a savings account and you do not need to pay income taxes over this amount just yet. On the moment you retire and the FOR is released, you will need to pay taxes over the total sum of the saved amount (dependent on the moment of retirement an additional annuity premium deduction, if you cease your enterprise). An advantage of the FOR is the extended tax payment, which in itself is also a disadvantage. Because, the more you save, the more you will have to pay in the end.

4.‘Regular’ saving

Just opening a savings account (whether or not linked to an investment account) and saving money on this account for later is of course also an option. The advantage with this is, is that it is very flexible. You always have access to your money and there are not costs for premiums or other issues. The disadvantages are that your pay for the saved taxes in box 3 (income from savings and investment) if your wealth is larger than €21.139. The disadvantage is the flexibility as well, there is no pressure to save money, which increases the risk that no money is deposited to the savings account.

5.Self-employed professional- pension savings fund (Dutch: ZZP-pensioen spaarfonds)

As of the 1st of December 2014 it is possible for independents to register with a zzp-pensioenfonds. It is up to you what your contribution will be, what benefit you want on the moment you retire and how long the benefit will go on for. The benefit can start between the age of 60 and 70 This start can be determined by you, yourself. An investment fund is dependent of your age, because each age group has their own separate risks. The expenses are dependent on your contribution.

6.BRIGHTNL

If you save for your pension as an independent through the saving fund of BRIGHTNL, you are also a direct shareholder of BRIGHTNL. You determine the contribution in the fund. The benefits after your retirement will be on a monthly basis, you can choose through which insurance company these benefits will take place. The expenses are set per year, and are not dependent of your contribution. The paid premium is deductible, which means that you pay less taxes now because your fiscal income is lower. A disadvantage of BRIGHTNL and the zzp-pensioenfonds is that they are not very flexible and are aimed for a longer period and your money is truly set aside.

What steps fit your age?

Below 40

If you are under 40, you usually have more than  thirty labour years ahead of you and your pension is far away. This does not mean that it is not important to start saving, Because it are these years in which interest accumulation (interest over interest) are doubly important. Bank saving is a good option for this. This option is more flexible and because you can keep this up for a long time, the interest can be significant over a number of years.

Over 40

Perhaps you have already built on your pension in previous employments. As someone over 40 years old it is a good time to review how much you have built up and what your wishes are for your pension. Because you still have at least twenty years of labour years to go, the options we mentioned for ‘below 40’ are also still applicable.

Over 50

If you work in employment as someone over 50 years old, you will have accumulated quite some pension. As someone over 50 years old, it can be advisable to consider how long you want to continue working and what is still required financially to achieve this goal. Issues that also play a part in this are: excess value of the house, shares and prospective inheritance.

Over 60

If you are someone over 60 years old, your retirement is quickly approaching. Whether you have built-up a lot or not that much, not a lot can be changed about that. If you do have money to spend, It is up to you how you want to spend it, depending on your wishes. An option for example is to (partly) pay off a mortgage or saving in box 3. A pension insurance or different policy is a less advantageous alternative at this age.

Source: Personal Finance, published by the FD #2, 2014. 

Because the Dutch tax system has several ways for managing income regarding artists, the question arises; Which form suits you best? There are various perspectives; as a self-employed professional, in paid employment or a combination of both. This question, however, cannot be answered definitively. Each form has its advantages and disadvantages. Ultimately, it is up to the artist which form to choose. This text will explain the fiscal regulations for each form.

1. Artist in paid employment

Just like a regular employee, an artist can be employed by an employer. In this case, we can speak of genuine employment. genuine employment has the following features:

The employee is obligated to work for the employer;

The employer is obligated to pay wages to the employee for his/her related work;

There is a relationship of authority between the employee and the employer.

The law, however, has special rules for artists. If an artist performs activities for a short duration, about 3 months or shorter, then the artist arrangement applies.

1.1 Artist arrangement

Because artists adopt a slightly different position than regular employees, the government created the artist arrangement. The artist arrangement is only applicable for short term employments of about 3 months and shorter, this includes one-time performances. On the basis of this arrangement, artists fall under the payroll tax regulation. This is somewhat peculiar considering that artists are not employees, but self-employed professionals. In this case we can speak of a fictitious employment. They fall under the payroll tax regulation and the accompanying social securities, despite them being self-employed professionals. The artist arrangement is a very tricky and complicated arrangement that brings along a lot of administrative burdens for the client. The client has to apply to the tax authorities, determine the identity of the artist, fill in a declaration of fees and a tax return and supply an annual statement. So, very tricky and annoying.

The artist arrangement does provide some advantages. Those are the small compensation arrangement and the expenses compensation arrangement. For a more expansive explanation of the arrangements, click here.

However, there are a few situations where the artist arrangement does not apply:

The artist performs his activities on the basis of a Declaration of Independent Contractor Status profit from enterprise (VAR WUO);

-A withholding statement;

-Agreements of longer than three months

-The artist performs for a natural person at one of his/her personal social affairs (e.g. weddings, birthdays etc.)

The first three exceptions are explained further

2. Artist as a self-employed professional

We can speak of this form if the artist performs his activities as a self-employed professional. The artist bills the client for his/her fee and possible expenses including VAT.

Before the artist can bill clients, he/she needs to possess a VAR-WUO. This VAR he/she receives after applying for it at the tax authorities gives the client the security of not having to withhold and pay for payroll tax. This is due to the fact that the artist operates as a self-employed professional and therefore does not need to be paid wages for his/her work.

2.1 VAR WUO (Declaration of Independent Contractor Status profit from enterprise)

Before the tax authorities issues a VAR WUO it is essential that you are considered to be a self-employed professional. The tax authorities pay attention to, among others, the following criteria:

-Not working in a relationship of authority

-Making investments

-Risk of unfulfilled payment obligations

-Insecurity regarding future income

-It is apparent that not everyone who sees themselves as an entrepreneur, is considered an entrepreneur in the eyes of the tax authorities.

2.2 advantages and disadvantages

If an artist receives profit for enterprise, he needs to declare these incomes in his report income taxes. In this, the artist can deduct his own business expenses (travel expenses, clothing, business dinners, accountancy expenses). Another advantage is that the artist is eligible for various entrepreneur facilities such as the start-up deduction, investment deduction, self-employed professional deduction and SME-profit exemption. For this the artist will owe less taxes.

For the client it is also very beneficial that he does not have to pay wages to the artist, because of added employer expenses. However there are also disadvantages to operating as a self-employed professional.

Because there is no premium paid into employee insurances, you are not insured for loss of income regarding sickness, incapacity to work or unemployment. Neither can you receive benefits.

3. Declaration of withholding (Inhoudingsplichtigen verklaring, IPV)

The artist arrangement is also not applicable in regards to an IPV. The obligation of deducting and paying payroll taxes and premiums employee insurances is transferred to the owner of the declaration. Payroll agencies make frequent use of this declaration.

With the use of the an IPV clients can be billed. They do not have to deduct payroll taxes and social premiums. This is a huge advantage. However, payroll agencies do request a percentage for their work. This percentage can turn out to be quite high, making this form less attractive.

4. Opting-in (pseudo-employee) and agreements extending three months.

What if an artist cannot be considered as a self-employed professional and neither can we speak of a genuine or fictitious employment?

In these cases the artist, together with the client, can choose to consider the working relation as an employment. Hence the word pseudo-employee. In this case there isn’t an employment, but the normal regulations still apply for the payroll taxes/premium national insurances. If you choose for opting-in the tax authorities need to be notified.

NB: This arrangement does not apply for employee insurance schemes. For possible sickness or incapacity to work you or the employee can insure privately.

If you do not have a short term agreement, then the client does not need to deduct payroll taxes. You will need to pay income taxes over the received amount from the contract. In this case you can also choose for opting-in.

Performances as an artist and  how VAT is applied in the E.U.

You, as an artist may have performed in a foreign country, or maybe you want to explore opportunities in other countries in the future. We have summarized what is important for you to take into account if you want to expand your services abroad.

As an artist you want to share your work with as many people as possible. Social network sites such as Facebook and Twitter can contribute to that. Through Youtube it is also possible to make your skills known to the world. However, this is not enough. A true artist wants to perform live for his audience. Being close to the crowd that has supported you from the beginning. To make these kind of international performances possible it is, of course, important to manage your finances. How do I bill a foreign client? Is there a distinction between entrepreneurs and private households abroad? What should I pay attention to,  if I hire a foreign artist? These are all question that you may come across.

In 2010 new regulations have been created in the area of VAT-rule making of cultural services. Below you will find a summation of the new regulation that may apply to your situation.

You give performances or hold exhibitions in a EU country.

In this case the rule making of that EU country applies. Ask the foreign tax authorities if you can shift your vat (see appendix). If you can shift your services then the main rule applies: The entrepreneur that invites you and purchases the service must declare the VAT in their own country. Other than that it is important that you:

-Write ‘btw verlegd’(vat shifted) on your invoice;

-Write the ‘btw-identificatienummer’(vat-identification number) on the invoice of your client;

-Do not declare this service in your report turn over tax;

-Do not declare this service in your report intra-community performances;

To check if your VAT-identification number is correct you can use the following site: https://www.btw-nummer-controle.nl/EU_landen

If the foreign tax authorities indicate that the service may not be shifted then you have to:

-Send  your invoice with foreign VAT;

-Register in the EU-country

-Report your turn-over tax in the EU-country

NB: If your client in the EU-country is a private household, then you cannot shift the vat. In this case the service is taxed in the country where the service actually takes place. The law of that country applies. Ask the tax authorities of that country how to report your taxes.

You, yourself hire artists.

Even when you hire artists, you are faced with these regulations. You will have to pay attention to the following

In this case as well the main rule applies: the client reports the vat in their own country.

1. The artist sends you an invoice without VAT. The VAT is shifted to you.

2. you report the intra-community service in your turn over tax.

3. If you are entitled to the VAT deduction, then you report the VAT as advance tax payments.

If you hire an artist in a EU-country then you pay the VAT in that country. You do not report the VAT on your turn over tax. You can digitally reclaim the vat from the EU-country through the site of the ‘Nederlandse belastingdienst’(Dutch tax authorities).

What other requirements are there to qualify as an independent entrepreneur?

To check if you meet the requirements you can ask yourself the following questions:

*Can we speak of market orientated operating?

*Can we speak of organisation of work and capital?

*Can we speak of risk?

*Can we speak of prospect of profit?

If you can answer the questions predominantly with yes, we can usually speak of independent entrepreneurship.
 

When am I not an entrepreneur?

You are not an entrepreneur if you are in employment or if you are a recipient of income from other activities.

When am I in employment?

You are in employment when (a) a relationship of authority exists between you and your client, (b) you receive a salary and (c) you carry out work for your client. Sometimes, however, there is no case of a relationship of authority, but we can still speak of employment.

When am I a Freelancer? (= recipient of income from other activities)

If the case may be that you are not an independent entrepreneur and you carry out assignments that cannot be considered employment, then we can speak of receiving income from other activities and you are a Freelancer.

Entrepreneurship

It does not necessarily mean that the tax authorities consider you an entrepreneur if you have your own enterprise. This is of importance when applying various fiscal regulations. Recipients of income from other activities/Freelancers are not considered as an entrepreneur. When deciding the question whether or not you are an entrepreneur a number of aspect play a part. First, the question if there is a case of employment, for this the relationship between you and your client is of importance.

The relationship between you and your client can be approached in three different ways

*In employment and fictitious employment;

*entrepreneurship: contractor and client;

*Receiving of income from other activities.

We can speak of employment if there is a relationship of authority, a personal work obligation and an obligation of paying wages. Simply put, we can speak of a relationship of authority if a boss determines how late, when, where and how you carry out your work. In this situation the client is considered an employer and he/she is the withholding entity for social premiums and pay roll tax.

Exception:

Sometimes we can speak of employment when there is no case of a relationship of authority, this a matter of fictitious employment. This applies to, for example, artist who have short (less than three months) of employment. If the relationship is indicated as fictitious employment and you own a VAR-Wuo, then the fictitious employment does not apply and you are considered an entrepreneur.

If, while carrying out work, there is no relationship of authority or fictitious employment, then possibly, we can speak of independent entrepreneurship. Requirements are set up for independent entrepreneurship, which we will discuss below.

There has to be a case of market orientation, organisation of work and capital, entrepreneurial risk and a prospect of profit. To test these criteria you can ask yourself a few questions.

Can we speak of market orientated operating?

*Can we speak of organisation of work and capital?

*Are there operating assets?

*Do you have a workspace?

*Do you have to carry out work in order to obtain profit?

Can we speak of risk?

*Is there a possibility that you cannot bring in the contract?

*Is there a risk that you cannot earn back you investments?

*Is there a risk that debtors cannot pay you?

Can we speak of prospect of profit?

*Do you aim for profit?

*Can, within reason a source of income be expected within some time?
 

If you can answer the question predominantly with yes, we can usually speak of independent entrepreneurship.

What is your information obligation?

On the grounds of art. 47 clause 1 AWR everyone is obligated to provide and make available the data and information that may be of importance for the taxation. The designated information must be, on the grounds of art. 49 clause 1 AWR made available resolutely, clearly and without delay in the way deemed suitable by the inspector, within the by the inspector set deadlines. Taxpayers can also, under burden of a penalty payment, be sentenced to disclose all information that may be of importance for a correct taxation. This obtained material may, however, exclusively be used in the benefit of the taxation. If this material is used for fiscal penalisation or prosecution of the taxpayer, then it is up to the fiscal judge or the criminal court to draw the necessary consequences. See for more information the article ‘Zwartspaarders genoodzaakt tot zelfincriminatie’ (‘Free-riders forced into self-incrimination’) on our website.

What information may be provided through third parties?

The tax authorities are licensed to obtain information through third parties in executing their work. This has also shown in the following two recent cases.

Information through a health insurance company

The question whether the tax authorities can obtain information through a third party has emerged in a case where the tax authorities used information obtained through a health insurance company for taxation. In this case it entailed a taxpayer who in her IB-declaration of 2006 claimed certain deductible medical expenses. The inspector, however, is of opinion that she is only entitled to deduction of the standard premium. Because of this the inspector contacts the health insurance company to obtain the necessary information. The taxpayer states that the information obtained through the health insurance company is unlawfully obtained. She had to be notified and the necessary information could also have been obtained through her. However The Court of Amsterdam states that the inspector on the grounds of art. 53 ARW is licensed to obtain the information through a third party (LJN CA0464, nr. 11/00134). In such there is no matter of unlawfully obtained information. This license from the inspector is not limited to the cases where the information cannot be obtained through the taxpayer. In this the tax authorities are not obligated to inform the taxpayer.

License plates are being send to the tax authorities through the police, is that allowed?

According to the NRC of July 27th 2013 the tax authorities have requested the parking information of everyone who parked at a parking meter using their license. The tax authorities wish to check with the obtained information if company car drivers submit to the regulations concerning private mileage. As a company car driver you are, if you do not wish to be subjected to an addition in your income tax, allowed to drive a maximum of 500 kilometres used for private mileage with your business car.

Not only the parking information has been requested by the tax authorities. It seems that the by the police scanned license plates are also being send to the tax authorities. This information is also obtained to check of company car drivers observe the set regulations.

Several company car drivers are confronted with license plate information that show that the by them provided logbook is incorrect. Many of these company car drivers have not enclosed certain drives or they have enclosed certain drives falsely in their administration. The tax authorities have, on this basis, imposed additional taxes of thousands of euros. A number of the company car drivers have filed a lawsuit, because they believe that the recording of their driving behaviour is a violation of their privacy. On this moment an appeal is pending in the court of Den Bosch.

Violation of privacy

The Dutch Data Protection Authority College, the CBP, recorded that the government is collecting and linking an increasing amount of personal data (CPB annual report 2012). The chance of negligence and conflict with the Law protection personal data (Wet bescherming persoonsgegevens) increases, which can lead to violation of privacy. The protection of personal data is a constitutional right, that needs to be upheld by the government.

Now that it is clear that the tax authorities are licensed to obtain information through third parties, it is essential that the law and regulation concerning protection of personal data is strictly upheld. In our opinion improper use of this license can lead to an infringement in the trust of the citizens in the government.

Based on articles from

NRC, 27th of July 2013

NRC NEXT, 7th of August 2013

To constitute as a self-employed professional the number of clients may be important. This text we will explain how the Tax authorities determine if you are a self-employed professional and that the number of clients can effect this qualification.

Self-employed professional or employee?

What self-employed professionals have in common is that they work for their own benefit and are faced with various risks. Because of this self-employed professionals and employees are treated differently for the taxation. Self-employed professionals are faced with fiscal benefits and special regulations for taxes and premiums, the following criteria are important for the qualification of the self-employed professional:

Independency

We can speak of independency if the self-employed professional determines how he/she works and therefore is not subject to the employer-employee relationships in regard to the client. This means that the client does not determine when you work nor can the client control how the work is done specifically.

Investing in enterprise

Actions are taken to ensure the continuation of the enterprise, such as acquiring own assets, building wealth and other such activities.
Entrepreneurial risk

A self-employed professional bears entrepreneurial risks such as damages to assets, unsatisfied clients and non-paying debtors.

Aiming for profit

All of the tasks conducted by the self-employed professional must be with the purpose of profit. We can speak of a profit motive if profit is intended and can realistically be expected. If for many years loss has been sustained, consequently, the expectation for profit will be low.

Number of clients

In most cases a self-employed professional has various clients and the profit made over the years varies.

Self-employed professionals can, contrary to employees, profit of various fiscal deductions in the income tax. The most important deductions are de zelfstandigenaftrek (the self-employed professional deduction) and the MKB-winstvrijstelling (SME- profit exemption). For more information regarding entrepreneurship we refer you to this page.

Verklaring Arbeidsrelatie (Declaration of Independent Contractor Status)

It is sometimes difficult to determine whether you are an entrepreneur or an employee, clarity, however, is often desired. If you are an employee your client must, as the withholding entity, deduct, for example, pay roll taxes and social contributions. An entrepreneur is, in many cases entitled to various tax-deductions. To create clarity a self-employed professional can apply for a Verklaring Arbeidsrelatie (from now on called VAR) at the Tax Authorities. This is a confirmation from the Tax authorities which fiscal status the income from your activities has. By the Tax Authorities qualified self-employed professionals receive the VAR winst uit onderneming (profit from entrepreneurship/ WUO). With this, self-employed professionals can confirm to the clients that they qualify as a self-employed professional. A VAR is valid for the maximum of one year and must be reapplied for every year. From January 1st 2015 The VAR will be replaced by the BLG. Click here for more information.

Number of clients

As mentioned before,  in some cases the number of clients is important for the qualification of a self-employed professional. However, the tax authorities do not look at the number of your client but rather to the relationship of authority between you and your client. In the case of a relationship of authority you qualify as an employee. We can speak of a relationship of authority if, simply put, your client determines at what time, when, where and how you perform the activities. In this situation the client can be considered your employer.

What if you only have one client?

It is possible that if you only have one client, you still qualify as a self-employed professional. This happens if there is no employer-employee relationship between you, as a self-employed professional and your only client. This can happen, for example, if your client does not give you instructions because the client does not have understanding of your activities. An example of such a situation is when a company contracts an ICT-manager for the automation of a company. Furthermore, it can be difficult for a starting entrepreneur to find multiple clients. Working for only one client is approved by the Tax Authorities, in some cases, at the start of your enterprise .

Agencies and your position as a self-employed professional

To qualify as a self-employed professional different rules apply than when contracts are obtained through an agency. If you have a contract with an agency while working on assignments for the final client, the agency is designated as the only client. The answer to the question whether or not remployer-employee relationship exist between you and the agency determines whether or not you qualify as a self-employed professional.

The number of clients is not always decisive

The tax authorities have determined that the number of clients for whom you work for as a self-employed professional is not decisive for the assessment whether or not you are an entrepreneur. It does need to be clear that working for one or a few clients long term could be qualified as a employer-employee relationship, causing the entrepreneur facilities to be claimed back.

It is, therefore, important to know whether or not a employer-employee relationship exists.

Usually it is so that the less clients you work for, the greater the chance employer-employee relationships exist, causing the entrepreneurship to be rendered void.