Doing your taxes as a self-employed entrepreneur in the Netherlands
A guide to tax administration and benefits for self-employed entrepreneurs in the Netherlands from the Dutch Chamber of Commerce.
If you're self-employed, a freeancer or a business owner, register in the Trade Register provides you a BTW (VAT)-number. You'll need this for tax deductions which may apply to your company.
The Tax Administration should be notified as soon as it is known when the enterprise starts doing business in the Netherlands. If you start a one-man business, a professional partnership, a limited partnership or a general partnership, you can register your enterprise for the Tax Administration and for the Trade Register at the same time. Both registrations take place at the Chamber of Commerce. A registration form for foreign companies is available on the website of the Tax Office. You can complete this form and take it and the Registration forms of your company to the Chamber of Commerce. You will have to submit the form personally.
Value added tax (VAT)/Turnover tax
It is compulsory for businesses to charge VAT (in Dutch: BTW) when invoicing their clients. There are exceptions, however. If you teach educational courses or provide educational training, you may be VAT-exempted for these activities. Services rendered by journalists, composers and authors are also VAT-exempt, just like medical services and products.
The VAT rate is 6 percent or 21 percent, depending on the type of product or service. The rate may be 0 percent if you trade internationally outside the EU.
The VAT you charge and which is paid by your client must be returned to the Tax Administration. The VAT which your suppliers charge can be offset against this. If you do not charge VAT, you cannot offset VAT. You should check with the Tax Administration if you are not sure whether you should charge VAT or not.
'Small-sized entrepreneurs' regulation
For entrepreneurs who do not have to return large sums of VAT, the regulation Kleineondernemersregeling or 'small-sized entrepreneurs' applies. If this regulation is applicable to your situation, you will pay less VAT or no VAT at all. You could also request an exemption for VAT declaration.
The regulation will apply to your business if:
- The VAT to be returned to the Tax Administration on an annual basis – after deduction of input tax – is less than EUR 1,883.
- The business you run is a one-man business, a professional partnership, a general partnership or a limited partnership.
You must meet the administrative requirements for VAT, such as maintaining invoicing records. If this regulation should apply to your business, you will have to add this advantage to your income tax declaration.
Paying Dutch income tax
The Tax Administration applies the following criteria to determine whether you are to be seen as an entrepreneur when paying income tax:
- the number of clients your business has;
- the degree of independence of your business;
- the activities performed as expressed in time and in money;
- who bears the entrepreneurial risks;
- the business’s position in the market;
- liability for debts incurred by the enterprise;
- whether profit is made, and the amount of profit made.
If you meet the standards set, you will be entitled to the 'entrepreneur facilities'. These are allowable deductions before taxes, such as investment allowance, tax-deferred retirement reserve and entrepreneur’s allowance. The entrepreneur’s allowance consists of:
- self-employed persons’ allowance and starters’ allowance;
- allowance for research and development work;
- co-working partner’s relief;
- SME profit exemption – exemption for small and medium sized enterprises;
- discontinuation relief.
To be eligible for the first three allowances you will also have to meet the 'hour criterion': you must be active in your business for at least 1,225 hours per year. This means, for example, 50 weeks of 24.5 hours per week. For persons unfit to do other work, the number of hours is 800. If you have run a business once before in the last five years, the rule is that you will have to work for more than 50 percent of your working hours in your own business.
An exception is made in case of pregnancy. For the statutory period for pregnancy and maternity leave – a minimum of 16 weeks – the Tax Administration will apply the average number of hours you worked in the period preceding the pregnancy leave.
Income tax system or opting-in ruling
Within this system, employer and employee (or freelancer) can agree that the first will submit income tax on behalf of the latter: this is the so-called ‘opting-in’ ruling. In this regime, the employee will not be able to deduct any costs, but the employer could provide the employee with certain allowances without fiscal consequences.
However, it is important to note, this system does not make the ‘freelancer’ an ‘employee’ in the common, practiced sense. The employer will not deduct any employed persons’ insurance scheme contribution. This opting-in ruling has to be announced beforehand with the Tax Administration.
If you have a private company with limited liability, a BV, you will have to pay corporation tax and dividend tax. In the event you work as an employee in your own BV, your BV will have to deduct income tax for you and pay this to the Tax Administration.
If have employees in your enterprise, you – as the employer – will have to deduct income tax at the source and pay this to the Tax Administration.
The administration of the business – keeping records
Your enterprise is legally obliged to keep clear administrative records and hang onto these records for at least seven years. You also need to keep records of invoices sent, invoices to pay, expenses connected with business activities, income and private use of goods and services.
Your invoices should be numbered in consecutive numbers. The invoices should state:
- date and number,
- name and address of the supplier or customer (and the VAT identification number when trading with another EU country),
- description of the goods delivered or service provided,
- prices exclusive of VAT,
- the VAT amounts, split into VAT rates.
Insurance for self-employed
An independent entrepreneur runs risks unknown to employees, like not having any income when unable to work due to illness or accident, or being held responsible for mistakes or damage caused. An employee’s income is guaranteed in case of illness and disability, and insurance can also cover other non-health related damages. Before starting up an enterprise, you should evaluate the possible risks in your particular line of business and insure these.
Personal insurances for self-employed
Every resident of the Netherlands pays a nominal premium of approximately EUR 1,300 per year on a basic health insurance. This premium is paid directly to the health insurance company of your choice. Extra insurance is needed to cover various risks.
Apart from the nominal premium to be paid to the insurance company, the Tax Administration collects another income-related contribution.
If you are a part-time entrepreneur and part-time employee, your salary as an employee will first be taxed in accordance with the rules that apply to employees. This contribution is paid by the employer. Then the income-related contribution you have earned as an entrepreneur is calculated.
If your entrepreneurial income is below a certain standard, you will receive a ‘care allowance’ from the government, which can be applied for at the Tax Administration
You can read information on the Dutch health insurance system and the contributions to be paid, as well as the care allowance (private individuals health insurance).
Incapacity for work and invalidity
Full-time independent entrepreneurs are covered by compulsory invalidity insurance in the context of the Work and Income Act (the WIA ). Thus, they are not entitled to a benefit if unable to work as a result of illness or disability. A part-time entrepreneur will be covered partially, so, he will receive a pro rata benefit.
To cover this financial gap risk, an entrepreneur could take out invalidity insurance, either a private invalidity insurance or a voluntary invalidity insurance.
Private invalidity insurance
Before taking out private invalidity insurance, the allowance needed on an annual basis should be determined, for which 80 percent of income is the rule of thumb. The amount can be changed during the insurance term, or you could stipulate for payment to be increased by a certain percentage every year. It has to be decided when the insurance starts making payments and when payments should end. You could choose to have the payments start within a couple of weeks after you get ill, but you may also have certain resources of your own that will keep you going for some time without relying on your insurance right away. Any time between 14 days and three years is possible, and the payments could end any time between your 50th and 65th birthday. The sooner the insurance starts making payments, the higher the premium.
Voluntary invalidity insurance
If you meet the requirements posed by the Employee Insurance Agency (UWV) you could take out voluntary invalidity insurance at the UWV to cover illness and invalidity. These insurances are similar to the employee insurances for illness and disability, the Sickness Benefits Act (ZW) and the Works and Income Act (WIA). The voluntary ZW insurance pays up to a maximum of 104 weeks (two years); after this period you can take out WIA insurance. The maximum payments under both insurances are based on the daily income you earn as an independent entrepreneur.
A voluntary insurance can only be taken out if you previously had a compulsory insurance against the financial consequences of illness – for at least one year, for example as an employee. For taking out a voluntary insurance, you have to report to the UWV within 13 weeks after the compulsory insurance has ended. After this the UWV will no longer be obliged to insure you.
Further information can be obtained from the UWV website: www.uwv.nl. The Ministry of Social Affairs and Employment has a website in English: english.szw.nl.
An accident insurance pays out a lump sum if you become partially or completely disabled as a result of an accident.
Pension insurance and annuity policies
Every inhabitant of the Netherlands aged over 65 (soon to be age 67) receives AOW, a national old age pension. This is a basic pension, which may not be sufficient to live on. Therefore, be advised to build up a supplementary pension through a pension insurance scheme. You could take out an annuity policy or another type of savings scheme.
Entrepreneurs and pregnancy
Female entrepreneurs are entitled to a pregnancy and maternity benefit for a minimum of 16 weeks. This is the Maternity Benefit Scheme for the Self-employed (ZEZ) and the female entrepreneur is entitled to the statutory minimum wages. Independent female entrepreneurs, who worked at least 1,225 hours in the year preceding their application for a ZEZ benefit, will receive a full benefit. For entrepreneurs who worked fewer than 1,225 hours, the ZEZ benefit will depend on their income during the year preceding their application for the ZEZ benefit. The benefit is paid under the Work and Care Act (Wazo) and administered by the UWV.
Business and professional liability insurance
An entrepreneur runs specific risks when doing business. A client may hold you responsible for the delivery of defective goods or for not having performed the services correctly. If actually liable for the damage caused by defective goods and services, you will have to pay compensation.
Liability for damages is not restricted to purely material damages; you may also have to compensate for damage caused to your client’s property while working for him, or employees might claim loss of income if they can no longer generate their own income as a result of an accident happened while working for you. You may also be held responsible for environmental damage, as ‘the polluter pays’ has taken root in Dutch jurisdiction.
Business liability insurance
Business liability insurance covers the damage occurred while running a business. For example, if you are a building constructor and drop a brick on a parked car, the insurance will pay for the damage for which you are responsible. The insurance, however, does not cover all damages you are responsible for. If the construction you have built turns out to be of bad quality and the client claims compensation, you cannot recover this from your insurance company. Claims arising from breach of contract will not be compensated by the insurance company either.
Professional liability insurance
If you are a professional – consultant, lawyer, civil-law notary, physiotherapist, etc. – your client may suffer (immaterial) damages as a result of inaccurate acting or incorrect information on your part. If you, being a consultant, should advise a client to undertake specific action, which has adverse effects, your client may suffer considerable damages. If the client holds you responsible for these damages and you are actually liable, your insurance will pay the compensation, because it is a professional risk. The premium depends on your profession and the size of your enterprise.
Legal expenses insurance
Conflicts and disputes easily arise in business. This may lead to unexpected expenses, especially if the dispute ends up in court. If you have legal expenses insurance, your insurer will see to it that you are assisted by a lawyer. The expenses incurred will usually be paid or reimbursed by the insurance company. Not all legal assistance is covered by legal expenses insurance; do check with the insurer which type of disputes are included and which costs will not be reimbursed.
Insurance for goods, machinery and equipment; buildings insurance
At your own risk are all goods and products you have in store, all machinery, equipment, office inventory and computers at your premises. A fire breaks out, or your business premises are burgled, are the things that could bring about a considerable loss. Analyse the existing risks, take out proper insurance and check the conditions of the insurance company carefully. Security or fire prevention measures, like sprinklers, are usually required.
If you are the owner of the building, you probably wish to insure the premises themselves with a building insurance that covers damages caused by, for example, fire, lightning or explosions. Damage to windows is not covered by a building insurance; you will have to take out separate glass insurance.
Not only the insurance company, but banks as well may pose certain conditions before granting you a loan for investing in your business. If you have a bank loan to finance the business premises or machinery, equipment, etc., the bank often stipulates that you take out buildings insurance.
You need transport insurance if you are responsible for the transportation of the goods until they arrive at their destination. If your business transports the goods itself, insurance should also be taken out to cover the risks during transportation.
Not all debtors will pay the invoices you send them; they may be involved in bankruptcy proceedings, or suspension of payments has been granted. A debtor could also dispute an invoice and refuse to pay. Credit insurance will pay the invoiced amount, but the insurance company will probably check your accounts receivable portfolio before insuring you. The insurance company will not accept invoices sent to clients with bad creditworthiness.
General Terms and Conditions
Applying General Terms and Conditions (GTC) to all the contracts with your clients or customers makes clear to them what terms and conditions you apply for services, payments, purchase or sales orders, etc. GTC may help to avoid awkward discussions or conflicts, because each party’s rights and obligations are defined. Please note that especially larger companies and organisations usually apply their own GTC and may, therefore, be unwilling to accept yours.
The following terms and conditions are usually included in the GTC:
- offer – without obligation or not, term for acceptance;
- transportation – responsibility for transportation costs, insurance and import duties;
- delivery term – definition of circumstances beyond a party’s control;
- retention of title – when will the other party become the goods’ owner (e.g. after payment);
- guarantee – if a guarantee is provided, terms and conditions;
- dispute resolution – competent court or arbitration;
- liability – limitation of liability, total amount of damages to be paid.
Under Dutch law GTC may not be unreasonably onerous – ie. you may not impose terms and conditions that would not be fair on the other party, and vice versa. Applying GTC will only be valid if the other party is aware before signing the contract. If both parties apply GTC, you will need to decide whose conditions apply.
Long-distance sales and purchases
There are associations for specific branches and special interest groups for young entrepreneurs, female entrepreneurs or entrepreneurs with a non-Dutch background. The Chambers of Commerce gladly provides information on such organisations and associations in your area.
Expat centers have been especially designed for expats and internationals living and working in the Netherlands to provide expats with a wealth of English-language municipal and practical information during their stay.
Do check the local zoning plan for your office location, in which the municipality determines the designated use of premises or locations. The designated use of most houses – including terraced houses and semi-detached houses – is ‘residential’. Strictly speaking, you cannot start a business at that address.
In practice, setting up an enterprise at a residential designated address is permitted provided that:
- the type of business you run can be classified as an office;
- your clients do not visit the house;
- you do not cause any nuisance to your neighbours;
- only a small part of the house is used for business activities.
A shop, a hairdresser’s salon, beauty parlour or a mechanic’s workshop are not very likely to be seen as businesses which can be run at your home address.
Tax-deductibility of accommodation costs
The costs incurred for renting business premises are fully tax-deductable. If your enterprise is at your home address, tax-deductibility of the costs is not always possible. The Tax Administration only allows you to deduct costs if:
- the office space is an independent part of the house, for example, with its own entrance;
- at least 70 percent of your income must be earned in the home office space if you also have office space somewhere else;
- without a working space elsewhere, at least 30 percent of your income must be earned in the home office.
If you meet these conditions, a maximum of 4 percent of the value of the office space and a pro-rata part of the costs of the office space are tax-deductable. The Tax Administration will inform you on the tax-deductibility of accommodation costs in your situation.
Renting or buying business premises only makes sense if you are a full-time entrepreneur. Running a business at your home address will be a lot less expensive than renting business premises, but do realise that a business run from your home may look less professional to your clients than run from business premises.
It will be efficient to have a business telephone number attached to your trade name, next to a private (family) telephone number. Another way of smoothing the clients’ way to contact you is to engage a bureau providing secretarial services. Secretarial tasks – answering your phone, taking messages or putting calls through – can then be taken over in your absence. For business meetings and appointments you might consider to temporarily rent space at a business unit or park, instead of receiving at your home address.
Renting business premises
Depending on the type of business premises you rent, your rights and obligations may differ. Renting a shop, you have more protection if the owner wants to terminate the contract than when renting an office. Renting an office space in a large office building where temporary offices can be rented would likely be treated differently.
Premises for retail and catering business
Retail businesses (eg. shops) and catering businesses (eg. cafés and restaurants) do not have the same functions as offices. Retail and catering business are accessible to the public, whereas offices can usually only be visited upon invitation. The rules that apply for these business premises are different as well. The law concerning premises for retail and catering business provides the entrepreneurs with a right to security of tenure, ie. protection against termination of the contract by the lessor.
Publicly accessible locations where goods or services are delivered directly to the public are referred to as business premises (middenstandsbedrijfsruimte). Examples are shops, cafés, restaurants, traditional enterprises such as greengrocers, butchers and bakers, garages, dry-cleaners and collection and delivery services.
The rental law that applies to renting business premises stipulates that the entrepreneur who rents the premises will be entitled to security of tenure for an initial period of five plus five years, or a initial period between five and 10 years. If you should not wish to take on long-term obligations, you could opt for a short-term contract with a maximum of two years.
The lessor can only terminate a rental contract when he has good reasons to do so, and termination can only take place if the statutory notice period and other statutory rules are observed.
Other business premises
Premises used by entrepreneurs to run a business which cannot be classified as retail and catering businesses, ‘bedrijfsruimte’ (as described above), are referred to as other business premises, ‘overige bedrijfsruimte’. For instance: factories, offices, banks, travel agencies, bicycle lock-ups, car rental firms, workshops not freely accessible to the public, casinos, law firm offices, advisor bureaus, doctor surgeries, funeral undertakers, sports centres, gyms and garage boxes as well.
If you rent premises like these, the contract does not have to comply with any statutory rules on the term of the lease. Lessor and lessee are free to enter into any form of contract they like. The rent to be paid cannot be changed during the term of the contract, not even by requesting the court to permit this, but parties can include a clause on interim rent review. If lessor and lessee have not agreed otherwise, the lease is supposed to be for an indefinite period of time.
Termination of the contract must take place by giving notice. If a notice period has not contractually been agreed on, the notice period will be the same as the payment term for the rent. So, if the rent is paid on a monthly basis, the notice period will be one month. If the rent is paid twice a year, the notice period is six months, unless parties have agreed on another notice terms.
When the lessor has given notice of termination, the lessee does not have to vacate the premises immediately but is given two months to request the court to extend the vacation period (period after which he has to leave). The court can extend this to maximum one year. After the first request for suspending the vacation period, the court can grant another two extensions, to maximum one year each. If a lessee fails to meet his contractual obligations, eg. if he does not pay the rent, the court may not grant any extensions.
Renting office space in a large office building
An alternative to renting office premises or working from home is to rent office space in an office building with office units for small enterprises. The advantages are the relatively low rent and flexible conditions. The notice term is usually short, which enables an expeditious exit if you do not need the space anymore.
Some office buildings, such as The Hub Amsterdam – also referred to as ‘incubators’ – stimulate innovative business and support starters setting up their businesses there.
- Answers for business: the starting point of the Dutch government for entrepreneurs. See at a glance which rules, permits, taxes and subsidies apply when you do business in the Netherlands.
- Dutch Immigration authorities: The IND (Immigratie- en Naturalisatiedienst) has the governmental task to carry out the immigration policy.
- Dutch Ministry of Foreign Affairs (BuZa): The official website of the Dutch Ministry of Foreign Affairs offers specific information for newcomers in the section ‘coming to the Netherlands'. It also offers a selection of expat websites.
- The Dutch Chambers of Commerce provide information on starting a business, legal forms, registration in the trade register, international trade etc. We have accumulated knowledge, contacts and partnerships, which makes it the essential reference point for every firm doing or seeking to do business.
A brief outline of all taxes in the Netherlands can be found by clicking the following links: www.minfin.nl or www.belastingdienst.nl
The Ministry of Social Affairs and Employment has made available brochures in different languages with information on working in the Netherlands, the minimum wage, and rights and obligations of employees from EU countries.
Apart from general information, the Dutch Chambers of Commerce will be glad to provide you with further details regarding your specific position, either at the start of your business or while running it.
If you are located and/or interested in the Region Amsterdam:
Do call 020-5314684 or send an email to email@example.com for a consultation with one of our specialists of the Bedrijfsvoorlichting department.
Dutch Chambers of Commerce / Expatica
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Updated 2012, 2015.
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