Dutch law set to change on employer deductions for hired contractors

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Proposed changes have been put before the Dutch Parliament regarding an employer’s liability to make employment tax and social security deductions for hired contractors.

Current obligation

Currently, a company hiring a self-employed person is fully exempt from paying employment tax and social security contributions if a valid ‘Declaration of Independent Contractor status’ (‘VAR’) is in place.

What’s changing?

It is proposed that the VAR is replaced by the Beschikking geen loonheffingen (BGL), the ‘Decision on No Withholding of Employment Tax and Social Security Contributions’ during 2015.  Companies will be expected to decide, on a case by case basis, whether or not they need to pay tax and social security contributions, according to the information provided by the contractor in their BGL application.  Companies failing to follow this new procedure may become liable for additional tax, should the information provided in the BGL turn out to be incorrect.

The BGL will be introduced during 2015, but not before 1 June, and there will be a transitional period during which both the VAR and BGL will be valid. 

Commentary

Although it will not be obligatory for companies to use the BGL, it will provide a useful tool for companies unsure of their withholding obligations.  To be most effective, companies should introduce monitoring procedures to ensure the contractor’s actual hours and working conditions throughout the contract period are those described in the BGL and that they are not required to withhold tax and social security contributions.

Resources

Information on the VAR – Dutch Tax Authorities’ website (in Dutch language)

Information on the BGL – Dutch Government’s website (in Dutch language)

Information on the BGL – Dutch Tax Authorities’ website

For further information or to discuss the consequences of the above, please contact Hans van Ruiten on +31 10 224 6418 or Rina Driece, on +31 10 224 6 424 at Loyens & Loeff Rotterdam – www.loyensloeff.com.

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