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Are you thinking about starting your own business?
2019-11-06 | By J.C. Suurmond & zn. Tax Consultants
Becoming self employed is very popular in the Netherlands, also for the non-Dutch. Some people take a leap of faith and start full-time. Others start slowly and see how it goes. For example, if they are (still) employed or have a working partner. In any case it is smart to know about tax related aspects beforehand. Here’s some basics you need to know:
Is there a difference between ZZP (self employed) and freelancer?
These terms are both often used for the same status. In both cases you work for several customers. If you have decided to become your own employer and have come up with a name the first administrative step to take is registering your new business at the Kamer van Koophandel or KvK (Dutch Chamber of Commerce). Strictly speaking a freelancer is a person who does some other jobs without having a registered business.
What legal form should you set up?
You will also have to choose a legal form for your business. Most entrepreneurs choose for setting up an eenmanszaak (sole proprietorship), which means you are a ZZP’er (zelfstandig zonder personeel – or independent with no personnel). This will also give you quite some tax advantages as you can read below.
These advantages become less if your business generates more income and becomes more permanent. In that case you might consider if a limited liability company (BV) may be an option. This would give new tax advantages, among which possibly the 30% ruling.
Make sure that you are not accidentally employed
It is important that there is no form of employment. If you work regularly for the same customer it may look like you are actually in an employment situation, which could lead to paying more taxes and social charges. In that case you can use a so called ‘model agreement’. This is not mandatory but can be wise to be able to proof that you are not employed. Three aspects indicating that you are employed are:
- Labour that you have to perform personally (you cannot replace yourself by someone else)
- Receiving wage
- Performing your work under the authority of your customer
If one of these conditions is not applicable in your situation there is no question of employment.
Which taxes should you pay?
If you have a sole proprietorship you will have to file a company income tax return, and a quarterly or monthly btw (VAT) return. You will also need to pay a percentage of your income as health insurance contribution Zvw).
What are your tax advantages as a sole proprietorship?
- Zelfstandigenaftrek (Self-employed deduction)
If you spend at least 1,225 hours a year on business related activities you are entitled to the self-employed tax deduction.
- Startersaftrek (Start-up deduction):
After starting your business under certain conditions you are entitled to the start-up deduction of € 2.123. Requirements are that you have not been an entrepreneur for at least one of the previous five years, and have not used the self-employed deduction more than twice in the previous five years.
- MKB-winstvrijstelling (Small business profit exemption):
After you have applied the self-employed deduction and small business profit exemption, 14% of the remaining profit is tax exempt and therefore deducted from the taxable income.
What if you have your own business alongside working at your regular job?
Of course this might be a safe start, but working as a zzp/ freelancer besides your regular job is not as tax beneficial as being a fulltime freelancer/zpp’er. You probably won’t meet the 1,225 hours criterion to be entitled to the self-employment deduction. Also to qualify for this deduction you must spend more hours working for your business then on your job as an employee.
What if you and your partner are working together in a business
If you are working along with your partner in the business there is another deductible item that can be claimed. This is the ‘Meewerkaftrek’ (Co-operating Partner Deduction). The following 3 conditions must be met:
- The partner working most is an entrepreneur;
- The partner working most meets the hours criterion;
- The fiscal partner working the least hours works 525 hours or more in the business or the other partner receives a compensation of less than €5,000.
No need to say that it is always important to record your own and your partner’s hours on business activities.
Do you have any questions about starting up a business and how to gain maximum tax benefit? Contact J.C. Suurmond & zn. Tax Consultants for assistance. We can inform you on business tax matters related as well as advising on your particular tax situation.