Pending legislation in the Netherlands would, under certain circumstances, waive the rules with respect to withholding of payroll tax and social security contributions by principals on remuneration paid to “contracted parties.” This could also have implications for supervisory board members who currently perform their duties on the basis of an independent contractor status. Because the duties of a supervisory board member qualify as “deemed employment,” the change to the rules (effective 1 May 2016) would mean that principals must withhold and remit payroll tax and social security contributions on the remuneration paid to supervisory board members. However, the Deputy Minister of Finance has indicated that the “deemed employment” measures for supervisory board members would be repealed.
The Assessment of Employment Relationships Deregulation Act (Wet deregulering beoordeling arbeidsrelatie—“DBA Act”) was passed by the Upper House on 2 February 2016, and would replace the current Declaration of Independent Contractor Status (Verklaring arbeidsrelatie—“VAR”).
Under the DBA Act, the withholding of payroll tax and social security contributions by principals on the remuneration paid to their contracted parties would be waived. The waiver would only apply if the agreement with the contracted party has been presented to the Dutch tax authorities for review, or if one of the model contracts on the website of the Dutch tax authorities has been used. By using the model contracts, the principal and the contracted party are assured that there is no withholding obligation for payroll tax and social security contributions purposes.
The waiver would only apply as long as the activities are also actually performed in accordance with the approved (model) contract. The DBA Act limits itself solely to assessing whether a withholding obligation for payroll tax and social security contributions is embedded in the labor relationship.
Read a February 2016 report prepared by the KPMG member firm in the Netherlands: Introduction of Assessment of Employment Relationships Deregulation Act amends tax rules on supervisory board members
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