The tax legislation impacting Europe’s contractor market

2nd May 2017

Governments across Europe have put compliance firmly on the political agenda and for agencies and contractors operating in the region, navigating the evolving legislative landscape can be a daunting task. Legislation changes surrounding temporary and contract workers have been vast in recent times and at a time when the penalties being served for non-compliance are incredibly severe, staying on the right side of the law is critical.

This blog looks at three of Europe’s contractor hotspots where recent tax legislation has made an impact

The UK

Last year saw radical changes to travel and subsistence expense claims affecting those employed through umbrella companies. And the changes to IR35 legislation for the public sector recently implemented is set to be a heavy burden for contractors.  While the government has said that the private sector won’t be subjected to the same changes it remains to be seen what future legislation will be implemented – with many believing that the public sector is being used a testing bed for future changes within the private sector.

With Brexit negotiations still to be finalised one thing is for sure – the UK’s departure from Europe will further complicate the legislative landscape. While it remains to be seen what will happen to freedom of movement laws, there will almost certainly be new rules relating to placing flexible staff in EU countries post Brexit.


Change is also afoot in Germany where the rules regarding staff leasing engagements are changing.  Any organisation that leases contractors to a company in Germany and which does not meet the Contract Model criteria to be classified as a Contractor must operate under an AUG licence.  This means that anyone working through a PSC or umbrella company faces the risk of being non-compliant. In the past, under an AUG licence, there was no restriction on the length of the engagement. Under the new rules, contractors will be deemed as employees of the client they perform services for after 18 months. This is having a knock on effect on the classification of certain types of workers – and particularly freelancers – who will likely have to demonstrate that they are genuinely independent workers – and not open to being reclassified as deemed employees.

This further complicates an already challenging employment landscape. Recruitment firms placing contractors into Germany already have to wrestle with existing German legislation to ensure that the worker is compliant. Essentially it will be vital for recruitment firms to clearly – and correctly – define the employment model at the start of the contract.

The Netherlands

Prior to May 2016 any self-employed professional could provide their clients with a Declaration of Independent Contractor Status (Verklaring Arbeidsrelatie – VAR) as proof that there was no employment relationship. However the rules around VAR certified workers changed last year with both parties now sharing responsibility for evaluating the employment relationship via the use of Model agreements. This means that contractors will need to be extra vigilant if they are not to fall foul of the new law.

While all this may sound onerous, the opportunities across Europe are plentiful. And, if you’re unsure of the legal landscape, ensure you partner with an international contractor management company that keeps you on the right side of the law

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