As of January 1, 2025, a significant change will take effect: the enforcement moratorium on false self-employment will be lifted. This means that from that date, the Tax Authorities will once again fully enforce situations involving false self-employment. But what does this mean exactly, and what are the consequences for sole proprietors and self-employed individuals? In this blog, we’ll walk you through the details.

What is false self-employment?

False self-employment arises when someone works as a self-employed individual (freelancer) but actually works under the conditions of an employee. In such cases, labor law dictates that there should be an employment contract.

The key question is: does the individual act as an entrepreneur or as an employee? For example:

  • Does the person work at fixed hours?
  • Does the person perform the same tasks as an employee on payroll?
  • Does the client determine how, where, and when the work is carried out?

As a freelancer, you must be able to decide how, where, and when you work. Additionally, there should be no employer-employee relationship, and you should not require training from the company you work for.

The DBA Act

The DBA Act (Deregulation of Employment Relationship Assessment) plays a crucial role in distinguishing between self-employed individuals and employees. This law, introduced in 2016, makes both the client and contractor responsible for properly defining the working relationship. From January 1, 2025, the Tax Authorities will start enforcing this law. This means tax inspectors can impose fines and additional assessments if false self-employment is found.

When are you a false self-employed individual?

To determine whether you are falsely self-employed, the requirements for entrepreneurship according to income tax law are assessed. Do you meet the requirements for entrepreneurship? In general, this means you are not falsely self-employed. Make sure you meet the important criteria listed below:

  1. Does your business generate profit? If you make only a small profit or consistently incur losses, it is unlikely that you will be considered an entrepreneur. Having a realistic profit expectation is essential.
  2. How independent is your business? If others dictate how your business should be run and how you carry out your activities, independence is lacking. This could indicate that it is not a genuine business.
  3. Do you have capital? For many businesses, capital is necessary. Think of investments in machinery, marketing, staff, or insurance. Without sufficient capital, it is challenging to be seen as an entrepreneur.
  4. How much time do you invest in your activities? It is important to devote sufficient time to your activities to make them profitable. Spending a lot of time on an unprofitable activity usually does not qualify as entrepreneurship.
  5. Do you have multiple clients? Having multiple clients shows that you are less dependent on one party. This increases your independence and strengthens your status as an entrepreneur. It is expected that entrepreneurs work for at least three different clients per year and do not spend more than 70% of their working hours on one client.
  6. How do you present your business? You should actively promote your business, for example, via a website, social media, or advertisements. This indicates that you are serious about entrepreneurship.
  7. Do you take entrepreneurial risks? Taking risks, such as dealing with non-paying clients or fluctuations in supply and demand, indicates entrepreneurship. Are you liable for your debts? That, too, can be a sign of being an entrepreneur.

What does this mean for freelancers and clients?

The lifting of the enforcement moratorium means that businesses and freelancers must carefully assess their working relationship. Clients who engage freelancers must ensure there is no employment contract. Otherwise, they risk fines and additional assessments.

For freelancers, it is crucial to meet the criteria for entrepreneurship. Ensure you have multiple clients, determine your own working hours, and make your business visible to the public.

Conclusion

With the enforcement of false self-employment rules starting in 2025, the Tax Authorities will crack down on improper freelance arrangements. Both freelancers and clients should analyze their situation and ensure the working relationship is correctly classified. Are you unsure if your approach complies? Take timely action to avoid problems. The rules are clear: independence means both freedom and responsibility.

Need help with your tax matters? Contact Luca Book for personalized advice!