2025 tax changes: Are you a true freelancer or just pretending?

Viviënne Wormsbecher from Blue Umbrella presents this comprehensive guide to help you determine if you are truly self-employed according to Dutch labour laws.

Starting January 1, 2025, the Dutch Tax Office will begin fully enforcing regulations on false self-employment, a move that could significantly impact expats working as freelancers or independent contractors in the Netherlands.

What is false self-employment?

False self-employment, or schijnzelfstandigheid in Dutch, occurs when an individual presents themselves as self-employed but is, in fact, working in an employee-employer relationship according to labour law.

This practice has been a concern for the Dutch government, as it can lead to unfair competition and reduced social security for workers.

Key changes and implications

From 2025, the Dutch government is making dealing with false self-employment a priority, and introducing the following changes:

• Stricter enforcement: The tax authorities will have the power to impose fines and back taxes on companies that hire self-employed individuals for work that is not genuinely independent.
• Transition period: A one-year transition period will be in place, during which employers and workers will not face severe penalties if they can prove they are taking steps to address false self-employment issues.
• Retroactive corrections: The tax office can impose back taxes for up to five years, but only dating back to January 1, 2025.

The impact on expats and companies

For expats working as freelancers or independent contractors in the Netherlands, these changes could have significant implications:

• Reassessment of work arrangements: Both expats and the companies hiring them will need to carefully evaluate their working relationships to ensure compliance with the new regulations.
• Potential shift to employment contracts: Some companies may opt to convert freelance positions into permanent employment to avoid potential penalties.
• Decreased flexibility: The new rules might reduce the flexibility that many expats value in freelance work.

How to determine genuine self-employment

To help expats and companies navigate these changes, here are some key factors that distinguish genuine self-employment:

1. Clear project-based work: Assignments should be specific and project-based rather than ongoing general work.
2. Control over work: Self-employed individuals should have significant control over how and when they complete their work.
3. Use of own equipment: Using personal laptops and other necessary tools for work can indicate genuine self-employment.
4. Separate from company culture: Avoiding integration into the company's social fabric (for example, not attending company events) can help maintain a clear distinction.

How to prepare yourself for the changes

As the enforcement date approaches, expats working as freelancers in the Netherlands could take the following steps:

1. Review current arrangements: Evaluate your working relationships with clients to ensure they align with genuine self-employment criteria.
2. Communicate with clients: Discuss the upcoming changes with your clients and work together to ensure compliance.
3. Seek professional advice: Consider consulting with tax professionals who specialise in expat taxation to understand how these changes may affect your specific situation.
4. Stay informed: Keep up-to-date with any further announcements or clarifications from the Dutch tax authorities regarding these new regulations.

The bigger picture

These changes are part of a larger effort by the Dutch government to improve labour market conditions and create a more level playing field between different forms of employment. Other measures include the introduction of mandatory disability insurance for self-employed individuals and the gradual reduction of tax deductions for the self-employed.

While these new regulations aim to protect workers and ensure fair competition, they have raised concerns among some self-employed individuals and industry associations. Critics argue that the strict enforcement might negatively impact sectors relying heavily on freelance work, such as healthcare.

As the implementation date approaches, it's crucial for expats working as freelancers or independent contractors in the Netherlands to stay informed and prepare for these significant changes in the Dutch labour market landscape.

Are you worried about your status as a freelancer? Blue Umbrella can help clarify your situation and it's tax implications. Make an appointment now or give them a call on +31 (0)20 4687560.