• Tax Inspector Reviewed Incorrect VAR
  • October 4, 2010 | Authors: Patrick Rietbroek; Eugene Weultjes
  • Law Firm: Greenberg Traurig, LLP - Amsterdam Office
  • A declaration of income tax status (so-called VAR) is an upfront statement from the Dutch tax authorities in which they take a position regarding the nature of the employment relationship of a taxpayer. The employment relationship can be classified as income from employment (VAR-loon), profits from business activities (VAR-wuo), results from other activities (VAR-row) or income from activities at the company's risk and expense (VAR-dga).

    A case before Court of Appeal Arnhem involved an entrepreneur who started his own company on October 8, 2007. From that date, the entrepreneur performed computer services for secondment company X BV. X BV seconded the entrepreneur to one of his clients, who transferred the entrepreneur to Y BV. The entrepreneur and X BV, and Y BV and X BV, made agreements that are set out in framework agreements.

    The entrepreneur filed an application with the Dutch tax authorities for a VAR-wuo for the year 2008. The inspector initially granted the entrepreneur a VAR-wuo, but changed the VAR-wuo to a VAR-row following a new business investigation. Based on the new investigation, the inspector concluded that the entrepreneur did not qualify as an entrepreneur for the Dutch income tax. In dispute is whether the inspector was correct in changing the VAR-wuo to a VAR-row.

    The Court of Appeal Arnhem decided that there was a breach of an independent entrepreneur and rightly concluded that the inspector reviewed the VAR-wuo correctly. The Court of Appeal is of the opinion that the entrepreneur does not qualify as an independent entrepreneur in relation to X BV and Y BV. This is evident from the agreements.

    Per the agreements, X BV has the right to give orders to the entrepreneur and the entrepreneur is obliged to implement them. Furthermore, the agreement shows that the entrepreneur can only be replaced upon approval of Y BV. Finally, the entrepreneur performed the work (almost) always at the office of Y BV, where he is obliged to perform the work during the agreed upon hours and under house rules.

    The Court of Appeal dismissed the entrepreneur’s appeal.