In our previous article, we introduced the Dutch regular employment residence permit, arbeid in loondienst, which refers to residence based on paid employment as an employee. For many foreign nationals who have worked in the Netherlands for several years, the next common step is to convert their residence permit from one that is still subject to work permit restrictions into a residence permit bearing the labour market endorsement "Arbeid vrij toegestaan, TWV niet vereist" on the back. This is often informally referred to in some expat communities as a "freedom card". In this article, we will refer to it as the work permit without labour market restriction, or the unrestricted labour permit.
Strictly speaking, an unrestricted labour permit is not an official term under Dutch immigration law. It refers to a labour market endorsement meaning that the holder may work in the Netherlands without the employer having to apply separately to UWV for a TWV work permit. Under the Dutch Foreign Nationals Employment Act (Wav), a foreign national who has held a valid residence permit with work rights in the Netherlands for five consecutive years may no longer require a TWV and may apply for the labour market endorsement "Arbeid vrij toegestaan, TWV niet vereist".
This type of employment-based residence permit, or work permit without labour market restriction, may be issued for a maximum period of five years at a time. However, it is important to note that it remains a temporary regular residence permit. It is not permanent residence.
This distinction is crucial. Many people assume that once the back of their residence card states "arbeid vrij toegestaan", they are free to open a shop, start a business, or work for their own company or a family's company. In practice, this interpretation carries considerable risk. We often see cases where individuals obtain an unrestricted labour permit and then open their own restaurant, establish a company, or work for a company owned by their spouse, parents or children got their residence status withdrawn several months or years later, that their actual work situation no longer matches the residence purpose of their permit.
This article explains what you may and may not do after obtaining an unrestricted labour permit, and why "free access to work" does not mean "free access to entrepreneurship".
Unrestricted labour permit is still based on arbeid in loondienst
The first point to understand is that the core meaning of "Arbeid vrij toegestaan, TWV niet vereist" is that employment is no longer subject to a TWV work permit requirement. It removes the work permit restriction, but it does not change the underlying residence purpose.
If your residence purpose remains arbeid in loondienst, meaning paid employment as an employee, you must still satisfy the basic conditions of employment. There must be a genuine employment relationship: you must actually perform work, you must receive salary, and your salary must meet the applicable income requirement. When assessing income, the IND usually looks at SV-loon, meaning social insurance salary: the gross salary used as the basis for social insurance and payroll tax. The IND may also verify your salary, employment and benefit information with other government bodies, such as UWV or the Dutch Tax Authority.
In other words, the labour market endorsement on an unrestricted labour permit releases you from the TWV requirement, and your employer no longer needs to apply separately for a work permit. However, it does not mean that you may completely depart from the residence purpose of paid employment as an employee.
Can you open your own shop or establish a company?
In general, if your residence purpose is still arbeid in loondienst, self-employment or entrepreneurship should not become your main form of work. Opening a sole proprietorship, entering into a general partnership, or relying mainly on a company that you control as your source of income may be inconsistent with the residence purpose of arbeid in loondienst.
If your main activity has shifted from paid employment to running a business, the correct route is usually not to continue relying on arbeid in loondienst. Instead, you should consider whether you need to apply for, or change your residence purpose to, arbeid als zelfstandige, meaning residence as a self-employed person.
The Dutch Aliens Circular (Vreemdelingencirculaire) also makes clear that a director-major shareholder may be regarded as a self-employed entrepreneur rather than an ordinary employee if they hold 25% or more of the company's shares, bear entrepreneurial risk, and are able to influence the level of their own salary.
Therefore, if a holder of a work permit without labour market restriction wishes to establish a BV, it may in theory be possible to hold a small shareholding. However, if the shareholding, management powers, salary influence and actual operational control together show that the person is in fact the real entrepreneur behind the company, the IND may take the position that the work is no longer employment, but self-employment.
In practice, we remind clients not to look only at the percentage of shares. Actual control is equally important. For example, even if a person holds less than 25% of the shares, the IND may still question whether they are genuinely employed if they are in fact responsible for the company's day-to-day operations, determine their own salary, bear the main commercial risks, or indirectly control the company through a spouse, family member or contractual arrangement.
What are the risks of working for a spouse's or family member's company?
Another common issue is where the holder of an unrestricted labour permit works for a company owned by their spouse, parents, children or other relatives. Such an arrangement is not automatically sham employment, but the risk is much higher than in an ordinary employment relationship.
Under the Dutch legal interpretation of employment, a genuine employment relationship usually consists of three core elements: the employer has authority to give instructions and exercise supervision, the employee has obligation to perform the work, and the employer pays salary. Of these elements, gezagsverhouding, meaning the relationship of authority or subordination between employer and employee, is particularly important.
The Dutch Tax Authority has also stated that whether employer authority exists must be assessed on the basis of all facts and circumstances, such as who determines the way in which the work is performed, the working hours, the workplace, and whether the employer can give instructions and supervise the results of the work.
The problem with working for a spouse's or direct family member's company is that this hierarchical relationship can easily become unclear. Spouses are usually in an equal family relationship, rather than a typical employer-employee relationship. Between parents and adult children, the family relationship may also make it difficult to prove genuine authority and supervision.
In the Netherlands, it is not absolutely impossible for an employment relationship to exist between spouses. However, the family relationship will be taken into account in the overall assessment. Courts and UWV will examine on a case-by-case basis whether there are genuine work instructions, a real organisational hierarchy, salary arrangements, working hours, job duties and daily supervision.
For the IND, this raises a more practical question: is the employment real, or is it an arrangement created mainly to maintain residence rights?
The IND may suspect sham employment
If the holder of a work permit without labour market restriction works for a spouse's or parent's company, and the job duties are vague, the salary does not match the market level, there are no clear working hours, there are no day-to-day management records, or the position did not exist before the family member joined the company, the IND may doubt whether the employment is genuine.
Common risk factors include the following:
1. Whether the position serves a genuine business need.
Does the company genuinely need this position? If the foreign national were not available, would the company be able to recruit another employee for the same role on the open labour market?
2. Whether the salary is reasonable.
If the salary is significantly higher or lower than the market level for the same position, this may raise questions. A salary that is too low may suggest that the work is not genuine full-time employment. A salary that is too high may be viewed as an arrangement designed merely to meet the immigration income requirement.
3. Whether the work is actually performed.
An employment contract, payslips and bank transfers may not be sufficient. The IND may request further evidence, such as work records, email correspondence, client contact, time schedules, work output, internal instructions, meeting minutes and other supporting documents.
4. Whether a genuine hierarchical relationship exists.
If the so-called employee can in fact determine their own job duties, working hours and salary, or participates in the company's core decision-making, their role is closer to that of an entrepreneur than an ordinary employee.
Therefore, working for a family company is not simply a question of whether it is "allowed" or "not allowed". It is primarily a question of evidence. The applicant must be able to show that the employment was not artificially created because of the family relationship, but is a genuine employment relationship with real duties, real salary and real management authority.
The shareholding must not be too high, and you must not effectively control the company
For shares in a BV (limited company), the key threshold to watch is 25%.
Holding a small number of shares does not necessarily create an immediate problem. However, if the holder of an unrestricted work permit owns 25% or more of the shares, acts as a director, bears business risk, or can determine their own salary, they may easily be regarded as a DGA: a director-major shareholder. In that situation, it becomes very difficult to argue that the person is merely an ordinary employee.
If both spouses hold shares in the same company, the risk also increases. Even if one spouse's shareholding is not high in name, if the spouses together hold a significant shareholding and can jointly control the company, the IND may examine more closely whether the foreign national is actually involved in controlling the company, whether they can influence their salary, and whether they bear entrepreneurial risk. Such arrangements should be legally assessed before shares are transferred, directors are appointed, or an extension application is submitted.
Can self-employment be a side job?
Some holders of unrestricted labour permits may ask: if I have a normal job during the day, can I take freelance assignments in the evenings or on weekends?
This requires a case-by-case assessment. In general, if the person still has stable, genuine paid employment that meets the income requirement, and the self-employed activities are only limited side activities, the risk is relatively lower. However, if the side activity gradually becomes the main source of income, or if the person's actual work focus has shifted to their own company, the situation may no longer fit the residence purpose of the work permit without labour market restriction.
Therefore, the key question is not merely whether the person has a KvK registration with the Dutch Chamber of Commerce. The overall facts matter: where does the main income come from? Where is most of the working time spent? Is there still a genuine employer? Does a real employment relationship still exist? Has there been an interruption of paid employment for more than three months? If the answers show that the person is no longer an ordinary employee, they should consider in good time whether a change of residence purpose is necessary.
The three-month unemployment period must also be considered
Holders of an unrestricted labour permit must also pay attention to interruptions in employment. If a person holding this type of employment-based residence permit loses their job, they will usually receive a three-month job search period. If no suitable new employment is found within those three months, the IND may withdraw the residence permit. This three-month period starts from the date on which the employment contract ends.
Therefore, the fact that the card states "TWV niet vereist" does not mean that being unemployed has no consequences. An unrestricted labour permit is still not permanent residence. As long as the residence purpose remains arbeid in loondienst, employment status remains one of the core conditions for keeping the residence permit.
What should be avoided after obtaining an unrestricted labour permit?
In summary, a person holding a residence permit with the endorsement "Arbeid vrij toegestaan, TWV niet vereist" should be particularly careful to avoid the following arrangements:
- Do not use an unrestricted labour permit as if it were a self-employment residence permit. If your main activity is opening a shop, starting a business or operating a company, you should consider a self-employment residence permit instead of continuing to rely on arbeid in loondienst.
- Do not present yourself as an employee in a company that you effectively control. If you can determine your own salary, job duties and business direction, the IND is likely to consider that you are not an ordinary employee.
- Do not work for a company owned by your spouse, parents or children without scrutiny. Employment in a family member's company requires particular proof that the work is genuine, the salary is reasonable, the position is necessary, and an actual hierarchical relationship exists.
- Do not allow your paid employment to be interrupted for more than three months. Even without a TWV restriction, the residence purpose still requires you to perform paid employment as an employee.
- Do not focus only on the word "unrestricted" in the labour market endorsement. The unrestricting condition mainly refers to freedom from the TWV requirement, not freedom from the residence purpose itself.
How can Pathway Partners help?
Issues surrounding an unrestricted work permit may appear simple, but in practice they often involve immigration law, employment law, corporate shareholding structures, salary arrangements and evidence preparation. This is especially true for individuals who intend to open a company, transfer shares, join a spouse's company, work in a family business, or gradually move from paid employment into entrepreneurship. Such persons should assess their immigration risks before taking actions.
Pathway Partners can assist clients in analysing whether their residence position remains secure, assessing shareholding percentages and company control arrangements, reviewing whether the employment relationship is strong enough to be regarded as genuine paid employment, and, where necessary, preparing lawyer's letters to the IND or court for explanations and supplementary evidence, or an application to change the residence purpose.
If you have already obtained a work permit without labour market restriction, or are planning to apply for one, but you also wish to open a shop, start a business of your own or join a company owned by your family, please contact Pathway Partners so that we can assess the most suitable approach for your situation.