What is the DBA Act and why is it important?
The Deregulation of Assessment of Employment Relationships Act (Wet DBA) was introduced to provide clarity about the employment relationship between clients and self-employed persons without personnel (zzp’ers). This law was created to prevent false self-employment, where someone works as an independent contractor but should actually be an employee. This can lead, for example, to tax benefits for the client that are not justified.
The DBA Act replaces the old VAR declaration and places the responsibility on both the client and the self-employed person to determine whether an employment relationship exists. This is important because it affects not only the tax return, but also the rights and obligations of both parties. The goal is to create a fair labor market in which self-employed workers and employers know where they stand.
How does the DBA Act differ from the VAR declaration?
The VAR declaration was a document that self-employed people could apply for to prove that they were not employees. With the VAR, the self-employed declared the nature of their work themselves, but the tax authorities had little control over this. In practice, this led to situations of false self-employment, which the government wanted to address.
With the introduction of the DBA Act, this responsibility has now shifted to both parties: the client and the zzpp’er. Together, they must determine whether there is an employment contract. This affects the tax return because the client can be held responsible for paying income tax and social security contributions if it turns out that the working relationship is actually an employment relationship.
How does the DBA Act affect self-employed workers?
For zzp’ers, the DBA Act means that they must determine together with their client whether their working relationship can be considered independent. This requires clarity and proper documentation of agreements, so that neither party is faced with surprises during tax returns.
In addition, self-employed workers may face uncertainties in their relationship with clients, especially if they are reluctant to hire self-employed workers for fear of the risks of false self-employment. It is therefore important for self-employed workers to be well informed about legislation and their tax obligations.
What are the responsibilities of principals under the DBA Act?
Under the DBA Act, clients have the responsibility to assess, together with the self-employed person, whether an employment relationship exists. If it turns out that the self-employed person should actually be considered an employee, the client is responsible for paying income tax and social security contributions.
This entails risks for clients, especially if the tax authorities subsequently determine that there was false self-employment. Therefore, it is important that clients make clear agreements with their freelancers and ensure proper documentation of the working relationship.
How can you prepare yourself for tax returns under the DBA Act?
As a self-employed person or client, it is useful to prepare well for the tax return in relation to the DBA Act. Make sure you make clear agreements about the working relationship and put them in writing. This helps prevent any misunderstandings and gives both parties something to hold on to.
In addition, it is wise to understand the Internal Revenue Service’s criteria and check that the working relationship meets the requirements for self-employment. By keeping yourself well informed and seeking legal advice if necessary, you can minimize the risks of false self-employment and file your tax return with confidence.
WerfSelect is ready to support you with all your questions about the DBA Act and optimizing cooperation with self-employed workers. Contact us for more information and advice. Read more about this in our whitepaper.
