What is the DBA Act?
The Deregulation of Assessment of Employment Relationships Act (DBA) was introduced in the Netherlands to address false self-employment and provide clarity about the employment relationship between freelancers, or zzpp’ers, and their clients. The law replaced the Declaration of Employment Relationship (VAR) and is intended to guarantee that there is no disguised employment.
The DBA Act arose from the need to get a better grip on the growing number of freelancers and the tax risks involved. It gave the tax authorities more opportunities to assess employment relationships and check whether the correct tax payments are being made. The goal was to make both clients and freelancers aware of their responsibilities and encourage them to work together in an honest and transparent manner.
Why is the DBA Act important for freelancers?
For freelancers, the DBA Act is of great importance because it determines how they can shape their working relationship with clients. The law provides a framework for freelancers to demonstrate that they are working independently and not in a disguised employment relationship. This is crucial for maintaining their independence and the associated tax benefits.
In addition, the DBA Act protects freelancers from unjustified claims from the tax authorities. By making clear agreements with clients and recording them in contracts, freelancers can demonstrate that they meet the requirements of the law. This helps them maintain their position as self-employed and prevents possible additional taxes and fines.
What changes will the DBA Act bring for clients?
Clients must take a more critical look at how they work with freelancers because of the DBA Act. It is important to make clear agreements about the employment relationship and to lay them down in contracts. Clients must ensure that there is no sham construction, where the freelancer actually functions as an employee.
The DBA Act requires clients to take responsibility in preventing false self-employment. This means that they must ensure clear agreements on matters such as working hours, continued payment of wages during illness, and the possibility of replacement. By paying attention to this, they can avoid legal and financial risks.
What are the risks if you don’t comply with the DBA Act?
Failure to comply with the DBA Act can expose both freelancers and clients to significant risks. For freelancers, failure to comply with the law could result in their employment relationship being recharacterized as employment, resulting in them losing their tax benefits and potentially having to pay back taxes.
Clients run the risk of fines and retrospective levies if it turns out that there is a sham construction. Moreover, they can be held liable for taxes and contributions that have not been paid. It is therefore in the interest of both parties to ensure that the employment relationship meets the requirements of the DBA Act.
How can freelancers prepare for the DBA Act?
Freelancers can prepare for the DBA Act by becoming well informed about the requirements of the law and adjusting their working methods accordingly. Drafting clear contracts that emphasize the freelancer’s independence and responsibilities is an important first step.
In addition, it is helpful for freelancers to highlight their entrepreneurial risks, such as working for multiple clients and bearing their own liability. By incorporating these elements into their business practices, they can substantiate their position as self-employed and remain compliant with the DBA Act.
Closing
The DBA Act has significant implications for both freelancers and clients. Understanding and complying with the law helps create a healthy and fair working relationship where both parties know and acknowledge their responsibilities. By acting proactively and making clear agreements, freelancers and clients can maximize the benefits of their collaboration. At WerfSelect, we are ready to support you in navigating this complex matter and ensure that the right match is established between talent and organization. Read more about this in our whitepaper.