Since the so call VAR statement has been abolished this year, the tax office will determine what is the relation a ZZP entrepreneur has with his or her client. What is the situation?
Too many ZZP entrepreneurs
In the Netherlands we have 1.000.000 entrepreneurs that operate without employees. The so called ZZP entrepreneur. Out of those 1 mln 300.000 ZZP entrepreneurs earn less than EUR 15.000 per year. That is below the minimum income you need to survive in the Netherlands. The 1 mln ZZP entrepreneurs are an issue. Not only do most not earn enough to pay the rent, but they certainly do not earn enough to pay for a disability insurance. Hence the majority of the 1 mln ZZP entrepreneurs is not insured for disability. And if they have money for a disability insurance, they are often such an insurance denied by the insurance company. And if they are not denied and have paid for such an insurance, the insurance company nearly always declines a claim based on a silly piece of information that was not clearly requested for.
Moreover, most ZZP entrepreneurs are not entrepreneurs. They only have one client and that one client makes them dependable. For instance, a TNT package delivery person is a ZZP entrepreneur, but he only has one client, being TNT. The person delivering has no alternative, as TNT does not hire these persons as an employee.
Basically they are an employee, should be paid a salary meeting the minimum income requirements and that salary makes them socially insured, which implies also for disability insurance.
ZZP entrepreneur versus Social premiums
Now you might understand why the Dutch tax office is very keen to investigate each of the 1 mln work relation ZZP entrepreneurs have with their client to determine whether or not it is employment. If yes, then social premiums are due. When 1 mln persons do not contribute to social security premiums, that is a substantial deficit. Of course not all 1 mln are actually employees and not ZZP entrepreneur. But a lot should be employees.
The VAR statement did not solve this issue, as it was common knowledge that when you complete the questions, which are always the same, in the desired order, an automated permit was issued by the tax office stating you were an independent entrepreneur.
As per May of this year a new system is in place: the model agreement.
No more VAR – introduced is the ZZP entrepreneur model agreement
If you have only one client or one client with whom you earn about 70% of your turnover, then you need to clarify the relation. It is either employment or assignment. If employment, then your client needs to put you on their payroll. If assignment, you need to sign with this client an agreement based on entrepreneurship. If the agreement is set up correctly, both the ZZP entrepreneur and the client are free guarded from social premiums plus penalty over the invoice value, should it turn out to be an employment nevertheless.
ZZP entrepreneur model agreement up front approval
Out of the 1.000.000 only 4.481 ZZP entrepreneurs actually send in a model agreement for validation by the Dutch tax office. Out of these 4.481 only 370 were approved, 1.033 were denied and 1.964 are still pending. These are the details we received from the Government. If you do the math you see that 1.117 applications are missing in action.
Why were only 370 approved and 1.033 denied? That is an interesting question so we can learn how to send in a correct model agreement. But the tax office has not made notes of that. It could be a simple misspelling enough for denial.
Why have 1.964 not been processed yet. The answer is that the tax office does not have the capacity. That was a surprising answer. If you know and advertise that 1.000.000 ZZP entrepreneurs are too much, you introduce a system and only 4.481 applications are made which the tax office cannot handle, someone within the tax office was not aware what they were doing. If such a new system is introduced, you should expect at least 20% of the 1.000.000 to respond. Now only 0,4% responded and that was already too much for the tax office to handle.
The tax office states in a reply that they expect the entrepreneurs to either solve the situation by taking up employment or make an agreement themselves without asking for approval. Here is a cap between reality and silly rules introduced. An employment is never offered to a ZZP entrepreneur, if that was true, there would not have been so many ZZP entrepreneurs. And working on a basis that is not approved is never accepted by either party.
Orange Tax Services
Our experience is that neither the ZZP entrepreneur nor the client understands the issue. If you then state we should have informed our ZZP entrepreneur clients better, then our response is that this topic you do not discuss with your client as it might very well spook your client. When you read that the average income is EUR 15.000 under at least 300.000 of the ZZP entrepreneurs, you need every client.
The clients of the ZZP entrepreneur are not aware of the consequence of the issue, being a social premium charge with a penalty. Either because they are not aware their service provider is a ZZP entrepreneur and they are his only client or the information of this model agreement system simply is not arriving with these clients.
What would be a solution? Maybe the ZZP entrepreneur should be subject to social premiums just like any employee. I think that would solve the whole issue. This solution has been mentioned in a politic discussion, but then it was immediately stretched with adding an obligatory pension to the social premiums. That should still be a free choice. First solve the disability, then the difference in costs between employment and entrepreneurship is already smaller and the 1 mln ZZP entrepreneurs will slowly reduce to a healthy number and the tax office can do its core business: collecting tax.