Learn about how taxes work for self-employed entrepreneurs in the Netherlands, from VAT to deductions.
If you’re planning to run your own business in the Netherlands, you’ll first need to get your head around how the tax system works, including how your employees are paid, which deductions you can make on your tax return, and how any business premises you rent is taxed and insured.
In this guide, the expert expat tax adviser Finsens explains all you need to know as a business owner in the Netherlands.
Finsens is a specialist financial consultancy with over 25 years of providing financial advice on tax, asset management, mortgages and financial planning to professional expats working in the Netherlands.
Taxes for self-employed people in the Netherlands
If you’re self-employed, a freelancer or a business owner, you’ll need to be on the Trade Register to get a BTW (VAT) number, which your company will require to pay tax.
You should notify the Tax Administration as soon as your company starts doing business in the Netherlands. If you’re starting a one-man business, a professional partnership, a limited partnership or a general partnership, you can register for the Tax Administration and Trade Register at the same time.
Both registrations take place at the Chamber of Commerce, and the registration form for foreign companies is available on the website of the Belastingdienst (Tax and Customs Administration in English). In order to start your business and work in the Netherlands, you will have to submit the form personally.
Value added tax (VAT) in the Netherlands
Value added tax (VAT) will be one of your main outgoings as a business in the Netherlands. The Trade Register will provide you with a VAT (BTW in Dutch) number, which you’ll need to use when informing the Tax Office of your company’s income throughout the year.
VAT is paid either on a monthly or on a quarterly basis, depending on the type of business you have and your turnover.
It is compulsory for businesses to charge VAT when invoicing their clients, though there are some exceptions. If you teach educational courses or provide educational training, you may be VAT exempt for these. Services provided by journalists, composers and authors are also VAT exempt, as are medical services and products.
According to Rijksoverheid (in Dutch), VAT is charged at 9% or 21%, depending on the type of product or service. The rate may be 0% if you trade internationally outside of the EU.
The VAT you charge and which is paid by your client must be returned to the Tax Administration, but VAT charged to suppliers can be offset against your return.
If you do not charge VAT, you cannot offset it, so you should check with the Tax Administration if you are unsure whether you need to charge VAT.
Small-sized entrepreneurs regulation
For entrepreneurs who do not have to return large sums of VAT, the regulation for small-sized entrepreneurs (Kleineondernemersregeling in Dutch) applies. If this regulation is applicable to your situation, you will pay less VAT or none at all.
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 €1,883, and;
- the business you run is a one-man business, a professional partnership, a general partnership or a limited partnership.
Even if you’re not eligible for VAT, you must meet the administrative requirements, such as maintaining invoicing records. If these rules 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 criteria, 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 at 24.5 hours per week. For persons unfit to do other work, the number of hours required is 800.
If you have run a business once before in the last five years, you will have to work for more than 50% of your working hours in your own business. Exceptions are made if you’re pregnant. 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.
Filing US taxes from the Netherlands
Despite the fact that every US citizen and Green Card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so.
Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from the Netherlands, contact Taxes for Expats and see our Guide to taxes for American expats.
Dutch income tax system and opting-in
Employer and employees (or freelancers) can agree that the employer will submit income tax on behalf of: this is known as opting-in. 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 that this system does not make a freelancer an employee in the common, practiced sense. For example, the employer will not deduct any employed persons’ insurance scheme contribution. If you’re planning on opting in, you’ll need to inform Tax Administration beforehand.
Dutch corporation tax
If you have a private company with limited liability (besloten venoostschaap met beperkte aansprakelijkheid in Dutch; commonly shortened to 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.
Payroll tax in the Netherlands
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.
Your enterprise is legally obliged to keep administrative records and hang onto these for at least seven years. You also need to keep records of invoices sent and 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);
- the goods delivered or service provided;
- prices exclusive of VAT;
- the VAT amounts split into VAT rates.
All residents in the Netherlands need to pay a premium of around €1,300 per year for basic health insurance, but you’ll also need to pay an income-related contribution, too.
As an entrepreneur, you can receive a care allowance from the government if your income is below a certain level.
You can find out more in our guide on the Dutch health insurance system.
Tax-deductibility of business premises costs
If you’re renting a business premises, the costs you pay are tax-deductible. If you work from home, however, things can get more complicated and you’ll only be able to deduct costs if the following applies:
- your office space is in an independent part of the house;
- at least 70% of your income is earned there (if you also have an office elsewhere);
- at least 30% of your income is earned there (if you don’t have an office elsewhere).
If you meet the above criteria, a maximum of 4% of the value of the office space and a pro-rata part of the costs of it are tax deductible.
Dutch associations for entrepreneurs
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 provides information on such organisations and associations in your area.
Expat centers have been specially designed for expats and internationals living and working in the Netherlands to provide expats with a wealth of practical information in English during their stay or process of immigration.
- Answers for business: 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’.
- The Dutch Chambers of Commerce (KvK) provides information on starting a business, legal forms, registration in the trade register, international trade etc.
The Dutch Chambers of Commerce can provide you with further details regarding your specific position, either at the start of your business or while running it.