Any taxpayer seeking certainty on how their income from certain employment relationships will qualify for taxation, can ask the Inspector to issue a Certificate of Employment (“VAR”). Such income can be considered as profit from a business (“VAR-profit”), salary from an employment relationship (“VAR-salary”), or income from other activities (“VAR-IOA”). A director-major shareholder (“DMS”) can also be considered for a VAR-DMS for the work he or she carries out on behalf of his or her company. The fee for this work would then be attributed to the company and not directly to the DMS.
A VAR is also important to the principal in that a VAR-profit or VAR-DMS offers the principal the security of not having to deduct and remit payroll tax and social security contributions, employee insurance contributions, and the income-linked contribution under the Health Insurance Act for the relevant work. On the other hand, a VAR-salary or a VAR-IOA does not offer complete security, as the principal must establish whether the work actually qualifies as salaried employment. If so, the principal must deduct and remit all of the relevant payroll tax and social security contributions.
Automatic issue of VAR
A new VAR request must be submitted every year. In the context of lightening the administrative burden for freelancers and entrepreneurs, however, the Dutch Revenue will start issuing VARs for 2010 automatically, from mid-August 2009. A taxpayer will automatically receive a VAR if he or she:
- Has requested a VAR for the last three years;
- Has requested a VAR for the same type of work;
- Has carried out the work in comparable circumstances;
- Has received the same type of VAR from the Dutch Revenue; and
- The Dutch Revenue has not revised the VAR in the interim.
In automatically issuing VARs, the Dutch Revenue is assuming that the work for which the VAR was originally issued, and the circumstances in which the work is carried out, have not changed. Should this not be the case, the taxpayer should notify the Dutch Revenue immediately.
Further simplification of the VAR system?
At present there are four types of VAR, of which two have no actual legal effect. In April 2009, Deputy Minister of Finance De Jager and Minister of Social Affairs Donner, in an interim report from the “Simplification of the tax consequences for employment relationships” project referred to a further examination of simplifying the VAR system. The four VARs would be replaced by one VAR that would provide a decisive answer on the deduction and insurance requirements. This has yet to be elaborated into a definite Bill.