FAQ IC (Independent Contractor)
1. What is an IC ?
IC stands for Independent Contractor. In Dutch it is named (ZZP) and an IC performs activities based on “contracting work.”
Contracting work: perform a certain task for a certain price within a certain time. He/she works for their own account and own risk and works for several clients.
An Independent Contractor runs a normal company and must be registered at the Chamber of Commerce, have a proper administration, be compliant with VAT-rules, etc.
2. What actually is the difference between employment and independency
The difference is based on authority. An employer is exercising authority. A Client should not exercise authority on an Independent Contractor because the IC performs the work for its own account and risk, without authority and with an agreed price.
It’s agreed in advance what the activities will be, how long it will take and at what price the total work (service) will be provided. If the IC does not perform the client can hold the IC liable. The IC will (have to) be allowed to recover the problems. Imperfection is on his own expense and in his own time. The price that the IC charge is inclusive the risk of imperfection.
3. Can I ask an IC to do simple work such as picking strawberries?
Yes, a client can ask an IC also to carry out the simple work. But be careful, because the work is simple, a relationship of authority can be demonstrated. Even if the work takes place in the context of an essential part of business, one may find that there is a relationship of authority.
If there is a relationship of authority, there is an employment.
4. What is a relationship of authority?
The concept of authority is a difficult concept. In the law the power within the relationship is defined as “having control over someone else’s job content and results”. This is very difficult to interpret. Thanks to the VAR it is possible to get a statement about the relation. This judgment assumes that the application has been answered with honest and real details. On page 2 of the statement the tax-office leaves the possibility to decide different afterwards if the facts differ from (unrealistic) expectations.
5. Is it possible to make the concept of authority easily interpretable ?
The Dutch government will find this difficult to implement because every interpretation can lead to widening or narrowing of the concept.
The best thing to do is, to adhere to the concept of independent contractor. The independent Contractor performs the service on the basis of contract work: performing a certain task for a certain price for a certain time and under own policies.
6. What is a VAR ?
The VAR is a statement about the labor relation between IC and Client. The VAR is issued by the tax authorities.
With this the tax office delivers a decision about her perception with regard to the status of the activities. More information can be found elsewhere on this website and on www.belastingdienst.nl
7. Is a VAR required in case of an IC ?
No, legally it is not mandatory. It is useful to have a VAR, it can help in finding assignments. Almost all customers demand it and so it seems an unavoidable obligation.
8. Where can I get a VAR ?
The IC can apply for the VAR at the Tax Office. See www.belastingdienst.nl or www.var-register.nl
9. Can entrepreneurs from abroad (EU) also have a VAR statement?
No, they cannot. They can get a similar document by the tax authorities in Heerlen. More information can be obtained from The Compliance Factory.
10 . What types of VAR statements are there?
The taxoffice provides four types of VAR statements:
Those companies who hire Independent Contractors have a formal disclaimer with regard to premiums and wagetax in case of a VAR-WUO or VAR-dga.
Always ask your contractor a copy of the VAR-WUO or VAR-dga. Please ensure that the activities listed in the VAR match the activities to perform. Furthermore, it is recommended to always make a copy of the passport/identity of the contractor so you know who you is at work.
11. How long is a VAR valid ?
The VAR statement is valid until the end of the actual year. The VAR will end at 31-12-2015 and will be replaced by a new approach. A new Dutch law (WDBA) will be applicable and details about it and how it will handle the judgement with regard to being an Independent Contractor is yet unknown.
12. Are we completely immune to all the problems with a valid VAR VAR-WUO or VAR-DGA ?
No, you’re not. During a workplace inspection, the inspection may otherwise assess the actual situation over which the VAR WUO was issued.
The client will not be exposed to extra charges for wage taxes and employee-contributions; the VAR protects.
13. Should a foreign IC (EU) without employees have a work permit (TWV) ?
No. Since May 1, 2007 workers from the new EU countries (including Poland) no longer need to have a TWV.
14. I want my strawberries to be harvested by foreign (EU) Independent Contractors workers. I got there about 15 at a time to work. They accept the work per bed. Is that allowed ?
The Inspector believes that in this case the activities cannot be considered to be done by ICs. It is unlikely that these people are all a sustainable company and work on their own account and risk.
15. Client does not agree that, as said in previous question, the conclusion is that the Client exercises authority.
Client thinks the pickers themselves have the risk, because it may need more time to pick the strawberries.
It may be that a judge agrees with the Client. However, there are clear signs that the Inspector will impose a penalty for such construction. Only after payment one can appeal. The judgment of the Court is uncertain. Advice would be: do not take such (expensive) risks.
16. I would like to make use of a Bulgarian or Romanian Independent Contractor. Is that allowed?
Yes, you may. Bulgarian and Romanian freelancers basically have to meet the same conditions as for EU ICs. However, if they planned to stay longer than three months they need to be in the possession of a residence permit (same as an IC). A work permit is not required.
If the relevant IC stays or expects to stay less than 3 months in the Netherlands a Work permit is required! This is because the exception of the permit for IC in the WAV will not be applicable. The IND checks (in case of longer residence than three months) if the person actually is an IC and has enough possibilities to be an IC.
17. My IC has arranged everything perfectly. He has his own terms and conditions, an agreement with me, is registered at the Chamber of Commerce, has a VAT number and a VAR-WUO statement. It takes work per surface unit. Can I still get in trouble ?
Yes, you can. In a research the Inspector may conclude that there is a relationship of authority or that the rate of the IC is below the minimum wage.
18. Can I use an IC for a variety of smaller jobs, such as laying bricks a day, half a day of pruning, a day sorting etc?
The government will consider you as an employer. The relevant IC follows your instructions and so there is a relationship of authority (and hence employment).
19. What is “Dienstenrichtlijn” ?
Under this Directive free movement of services is covered. Companies from all EU countries can freely offer their services in other EU countries. They must adhere to a number of rules in the country where the services are performed.
20. What should a foreign (EU) company pay his foreign employees when this foreign company provides services here in the agricultural sector ?
The wages in accordance with the Minimum Wage and Minimum holiday. If a generally binding collective agreement is applicable, it must be observed.
21. If the foreign service is only established abroad but all sales runs in other countries, is the company seen as a serviceprovider in the context of free movement of services?
No, they will be seen as a letterbox-company. The service provider must generate at least 25% to 33% of sales in the host country.
22. How do I make good arrangements with my client/contractor?
Clients expect (in general) from contractors that they take the initiative to capture the conditions in the agreement under which the work is performed.