The problems associated with the hiring of freelancers are substantial and quite unclear. The problems may be encountered in view of article 3 of the Dutch Wage-Tax Act which defines the situation whereby a person has a fictitious (deemed) relationship of employment with the temporary employer. A consequence of a fictitious (deemed) employment relationship is that tax and social security contributions are to be paid by the temporary employer as if the freelancer had an actual employment relationship with the temporary employer. The same applies to individuals who use their own limited company.
In itself, the text of the act is clear and applicable. The problem is due to the question as to when a person can be considered to be self-employed, i.e. to have independent status.
Practice shows that often freelancers are hired for several months of 40 hours a week. The freelancer is in principle working under the control and supervision of the temporary employer and is therefore accountable to such temporary employer on a daily basis. As a consequence, the tax authorities are quickly inclined to take the position that the employment relationship is in fact fictitious.
A self employed person or director-share holder of a one man (Dutch or foreign) limited company can apply for a VAR declaration. A VAR declaration (Declaration of Labour Relationship) is a declaration provided by the tax office. This declaration provides the probable self employed freelancer and the principal/company clarity regarding the withholding and payment of taxes and employers contributions.