The tax office is going to start cracking down on sham self-employment from January 2025. If you work for yourself, or if you use freelancers in your business, what will the new approach mean to you? Seliz Demirci from GMW Lawyers explains.

Legislation which determines who is “really” self-employed from those who have one employer and should be on contract was introduced eight years ago but has never been fully enforced.

In the meantime, the civil courts have regularly been asked to rule on what defines an employment contract as opposed to a contract for services. The best-known example of this is the Deliveroo riders, who turned out to be employees although they had a contract to provide services as self-employed.

The legislation states that someone is presumed to be self-employed if they carry financial risks, have their own tools and other equipment, have specific expertise that the company renting them does not have and presents themselves as a freelancer while working.

If the contract is for a short period, and the freelancer has multiple clients, makes investments and is responsible for their own administration the presumption that someone is not an employee but a freelancer also holds true.

What does this mean in practice?

The rules cover all economic sectors, not just those in which sham self-employment is rampant, such as the health service, parcel deliveries and construction. This means everyone who is registered at the Chamber of Commerce as self-employed – a ZZP’er – needs to comply.

Another relevant point is that, if someone else decides how you should do your job, then you could well be an employee, not a freelancer. Think, for example, about being required to work at certain times or at a certain place. If you use a laptop provided by your client, use their email address and wear company clothes, for example, then to the outside world, you are an employee.

However, some of the rules are still open to interpretation. How long is a long contract, for example? The current legislation does not give a specific limit. It is the facts and circumstances in a specific case that determine whether someone should be classified as a freelancer or an employee.

What happens if the tax office brands you as sham self-employed?

The tax office has indicated that it will first focus on employers. If they are found to be using freelancers who should be employees, they can be fined and also ordered to pay all the taxes and  premiums they would have been liable for as well as other costs.

After all, one of the problems with sham-self employment is that freelancers do not pay social insurance premiums, and that means the state pension system and invalidity benefit fund are short of money.

As a freelancer, the law states that if you are found not to be an independent contractor, you can be forced to pay back any tax breaks you may have had, such as the starters tax deduction or value-added tax.

So what should you do now as a freelancer?

Freelancers should first discuss the issue with their clients and ask what their plans are to deal with the sham self-employment issue. That can also mean in cases where there may be an employment relationship, shaping the collaboration in a different way so that the (Deliveroo) conditions are met. In any case, make sure you have your own website, use your own email address and try and increase the number of clients you work for.

Ensure that you can decide for yourself how you do the job, and that you are not included in the company on a structural basis. Make a proper agreement about when you work, and who replaces you if you are ill.

Are any changes likely before January 1?

The previous cabinet had drawn up amendments to the legislation which clarify to what extent a company can “manage” a freelancer. They also planned to introduce an hourly tariff, above which people would be considered to be self-employed. At the moment, this is being put at around €33.

Why is the tax office cracking down now?

Freelancers are cheaper for employers because they do not have to pay income tax and social insurance premiums on their behalf, and they are not entitled to holiday or sick pay.

This, the unions argue, has led to a surge in sham self-employment as employers try to get out of their responsibilities for their staff, and is putting undue pressure on people who are in permanent jobs. It is also depleting social insurance premium income.

The Netherlands has some 1.7 million registered self-employed, according to Chamber of Commerce figures. According to national statistics agency CBS, some 13% of the working population primarily earn most or all of their income as a freelancer.

If you need legal advice about your position as a freelancer or as a small business owner, feel free to contact GMW Lawyers. We are here to assist you.