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November 25, 2016 – DBA ACT: IMPLEMENTATION TERM EXTENDED AND ENFORCEMENT SUSPENDED

After extensive criticism, the State Secretary of Finance decided on November 18, not to allow enforcement of the DBA Act to come into effect on May 1, 2017, as was intended, but to suspend it until at least January 1, 2018.
 

The State Secretary cites the great unrest and uncertainty among clients and contractors as the reason for this suspension. He wants to remove this unrest and uncertainty as quickly as possible and believes that a number of bottlenecks should first be examined more closely and a number of existing (legal) concepts should be recalibrated. With this, the State Secretary hopes to be able to better define, explain and apply the terms “employment” and “entrepreneurship”. The results of the evaluation of the Boot committee of the DBA Act are included in this process. This committee has been quite critical of the DBA Act and the approach and working method of the Tax Authorities with regard to the various model agreements. At the same time, the Boot Committee does not believe that the model agreements should be deleted.
 

Further investigation
 

In any case, the following bottlenecks will be examined in the coming period:
 

  • The concepts of “authority relationship” and “free replacement” must be recalibrated.

  • Another role for the tax authorities. The Tax and Customs Administration will not enforce this until at least 1 January 2018. Instead, the Tax and Customs Administration will play a coaching role towards clients and contractors. It is not yet known how this role will be fulfilled.

  • Making exceptions in the chain provision in the Work and Security Act more possible. For eg the broadcasting, art, media and culture sector. Incidentally, the parties to the collective labor agreement can now also jointly make changes to the chain provision if this is desirable or necessary for their sector.

  • The general model agreements will receive a clearer explanation, as will their use and the way in which the tax authorities view them.
     

The aim of these measures is that clients become less constrained in hiring freelancers. The DBA Act has a valid background and approach, ie the prevention or termination of bogus constructions. But it has gone beyond this. As a result, people at the bottom of the labor market are too quick to conclude to entrepreneurship through the interpretation of the concept of “free replacement” (think of the postmen). And at the top of the labor market, an employment position is taken on too quickly due to the interpretation of the concept of “authority relationship” (think of consultants, interim managers, etc.).

Enforcement with malicious parties
 

The State Secretary makes a clear exception to non-enforcement until at least January 1, 2018. The group of obvious malicious parties will indeed be tackled. For them, the (repressive) enforcement policy will not be suspended, but will come into effect from 1 May 2017. The State Secretary's definition of "malicious" is rather vague and will undoubtedly lead to discussion. The State Secretary said in the Senate on 23 November about this that it is not possible to put the definition of a malicious person in hard criteria on paper. According to him, this only concerns a limited group of companies that operate mainly at the bottom of the labor market.
 

No enforcement with well-intentioned
 

With regard to non-enforcement among benevolent taxpayers, the State Secretary has said that it is not appropriate in the current situation to enforce repressively as yet and that the client and contractor therefore do not have to worry about this, provided they are well-intentioned. Incidentally, the latter seems to offer even better protection than the earlier VAR. The VAR only offered the client indemnification and not the contractor. The State Secretary's statement that he will not return to clients and contractors until at least 1 January 2018, provided that they are well-intentioned, in theory offers a greater indemnity.
 

Conclusions
 

In short, clients and contractors now have until December 2017 to review existing situations and get their agreements in order, if that hasn't already happened.
 

In the meantime, the State Secretary of Finance and the Minister of Social Affairs and Employment will look at the reassessment of the concepts of relationship of authority and free replacement. It must then also become clear how the Tax and Customs Administration views the model agreements and their use in practice.

Actions needed

Despite this postponement until at least January 1, 2018, clients and contractors cannot rest on their laurels. It is still important to make an inventory of current situations and contracts. And where necessary, an adjustment will have to be made in the contracts and/or the actual work situation in order not to qualify as (fictitious) employment. In situations that fall in the gray area, it will usually be necessary to wait until the Tax and Customs Administration provides more clarity about the concepts of “authority relationship” and “free replacement”. But here too it is important to make an inventory, to identify any problems/risks and to take action as far as possible. In this way, the qualification "well-intentioned" will in any case continue to apply and (repressive) enforcement will not be necessary until at least 1 January 2018.

 

For questions or more information:

feel free to contact Fabiënne Hol-van Goethem (fabienne@werque.nu or 06 22 89 39 26).


 

September 23, 2016 – KEY POINTS FROM THE 2017 TAX PLAN

On Budget Day, the cabinet presented the Budget Memorandum, the 2017 Tax Plan and a few other tax documents to the House of Representatives. The proposals included herein must of course still be passed by the House of Representatives and the Senate, so they are not yet law. The tax changes will normally come into effect on 1/1/2017. Below is a brief summary of a number of important changes in the field of payroll tax, income tax, social insurance and pension.

Payroll tax

  • the fictitious employment of the statutory auditor is terminated. So the company no longer has to keep payroll records for the auditor and pay payroll tax. The Commissioner himself will be responsible for this. After the end of the tax year, he/she will therefore have to process the commissioner's remuneration in the income tax return and pay the income tax, national insurance contributions and the income-related contribution for the Health Insurance Act on this on the assessment.
    This poses a problem for foreign supervisory board members with the 30% facility, because a withholding agent for payroll tax is required by law for the application of the 30% facility. This would mean that the 30% ruling could no longer be applied. This can be solved by choosing “opting-in”: the company and the supervisory director report to the tax authorities that the company does act as a withholding agent and will therefore pay payroll tax.
    Supervisory directors without the 30% facility can also opt for “opting-in” with the company: in that case nothing changes and payroll tax is withheld and remitted.

  • the transfer of the withholding obligation at group divisions will be expanded. The condition that the group member must mediate will lapse. As a result, the withholding obligation of each foreign group member can be transferred to the Dutch group part will be relocated. However, both group entities must request the transfer in writing. In the case of postings of foreign employees to the Netherlands, the Dutch group company can now easily take over the withholding obligation and all associated formalities.

  • the possibility for the tax authorities to request an annual wage request has expired. That sounds positive, but can also have negative effects in case of corrections for old years; this will always require a correction message.

  • the usual wage for start-ups that carry out research and development work and qualify as starters for the R&D contribution can in principle be set at the statutory minimum wage.

  • the Wage Domain Allowances Act will come into effect on 1/1/2017 (was previously approved). This allows employers to claim various wage cost subsidies.

  • the car letter 2 is further elaborated: among other things an increase in the addition percentages as of 2017 and the introduction of the so-called “Tesla tax” (addition of fully electric cars only 0% up to the catalog value of € 50,000, above that the normal addition of 22%).

  • not mentioned in the documents but in the General Considerations: should the 30% ruling be capped at the Balkenende norm? The cabinet thinks not (because it is not good for the Dutch business climate), various political parties think so. This discussion will no doubt continue.