Three steps to freelancing as a BV in the Netherlands
Amsterdam is profiling itself as the startup capital of Europe. While Rotterdam claims the title of Gateway to Europe. Judging by the many co-working spaces springing up in various Dutch cities, the Netherlands is certainly considered a popular destination for international freelancers, entrepreneurs and contract workers.
If you have ambitions to join them - or employ them - there are advantages and challenges to both going the self-employed and limited liability company route. Which option is best depends on your own specific circumstances. But, if you plan to work as an employee or hire someone in the Netherlands through a limited liability company, here are four questions you should ask yourself beforehand.
1. Freelance consultant or employee?
All freelancers, zzp'ers and contractors (plus their clients and recruitment agencies) should make sure how their working relationship is assessed by the Dutch Tax Authorities. Is there an employer-employee relationship or not? This is an important question with regard to tax obligations and also applies if you use a private limited company.
Freelancers and contractors can run the risk of so-called false self-employment. This is a real risk when contractors work in a team and their situation is very similar to that of a salaried employee. According to the Dutch law Ketenaansprakelijkheid, if a working relationship is considered employment, everyone in the chain - client, recruitment and selection agency and contractor - is considered liable for payroll taxes and VAT if the company fails to pay them.
You can avoid the risk of the employment relationship being classified as employment by using a model agreement that clarifies the status of your income tax and payroll taxes. As long as the employment relationship meets the conditions of a model agreement, the recruitment agency or the client cannot be held liable for any payroll taxes unpaid by the company.
In summary, the conditions are as follows:
- The company is registered in the Register of the Dutch Chamber of Commerce as a foreign entity that must comply with the Dutch Law on Allocation of Labor by Intermediaries (WAADI).
- The management of the company is registered and has a Non-Resident Citizen Service Number (BSN).
- The company has professional liability insurance.
2. Have you requested the A1 form?
If you work in several EU countries, you need to apply for an A1 certificate to show which social security legislation applies to you. You can only be covered by the social security system in one EU country. There are numerous rules for this, but one that applies to many contractors is the 25% rule. Basically, this means that if you spend 25% or more of your working time in your home country, you will be covered by the home country's social security schemes.
3. Do you comply with the customary wage rule?
In the Netherlands, directors and shareholders employed by their own companies must comply with the following rules for minimum and gross annual income:
- The salary must be at least 75% of the salary of a comparable employee.
- In practice, it is difficult to find a comparable salary of a similar employee. With a salary amounting to 70% of invoiced time, you will always meet the customary wage rule.
As a freelance consultant or contractor, your choice of business structure will depend very much on your individual circumstances. Therefore, it is always a good idea to seek professional advice before starting a business. If you have any questions please contact us. We are happy to advise on the best options for Dutch employment contracts.