Taxation and other acts

Starting a Business

Published: 21 August 2009 Modified: 03 November 2011

Each year you must declare your business income and other income to the tax authorities. When you run your own business, your business profit will be your main source of income.

You will have to state in your tax return how this profit has been built up and will then have to pay tax on it. Certain expenses can be deducted from your income, which reduces the amount of tax due. Because tax laws change constantly, the best way to find out everything you need to know is by getting advice from experts. The Belastingdienst (Tax Office) of The Hague for example, has a Startersdesk where you can get free advice on the tax rules for people who start their own business. The Bedrijvenbalie in The Hague can also give you information on tax rules concerning starting your own business.

Also available is a booklet published by PricewaterhouseCoopers to inform foreign nationals and their employers on tax and social security issues in the Netherlands.

Depending on your type of business you will have to comply with the Winkeltijdenwet (Shop Hours Act) 1996, the Warenwet (the Food and Drugs Act) and the Wet Misleidende Reclame (Misleading Advertisements Act).

Tax Affairs

As a self-employed entrepreneur you are responsible for your own tax affairs. It is important to know which taxes you will be required to pay and what options for deductions and exemptions may apply to your company.

The Chamber of Commerce can help you with advice on tax matters, and even with filling out the tax application forms.

Taxation

Contacting Inland Revenue

You should notify Inland Revenue as soon as you know your plans to start a business. The relevant form Opgaaf Gegevens startende onderneming (Statement of Information for starting up a business) is available from the Belastingdienst, or Inland Revenue office. It is to your advantage to provide this information at an early stage: new companies which have made investments in their business often receive money back following their first Value Added Tax return (VAT, or BTW as it's called in Dutch) as more VAT is paid than is actually charged in the beginning. Start-up businesses are regularly visited by an inspector from the Inland Revenue office to ensure business administration meets the required standards. You can also make an appointment yourself for an ‘introductory visit’.

What kinds of taxes do you have to deal with? Businesses have to deal with four kinds of taxes:

Value Added Tax (VAT, or BTW) — it is almost always compulsory for businesses to charge clients VAT/BTW.

Income Tax — if the Inland Revenue office considers you an entrepreneur, you can benefit from a number of tax allowances and will then pay less income tax.

Wages and Salary Tax — if you employ staff, you will be liable to pay wage tax.

Corporation Tax — if you have a private company with limited liability, you will be liable to pay corporation tax.

Tax allowances and exemptions — you can take advantage of tax allowances and exemptions in respect of two taxes.

1. Value Added Tax

For businesses which have to pay very little VAT, the Kleine ondernemersregeling (small businesses provision) applies. This means you pay less VAT or no VAT if certain conditions are met, including:

You would normally be liable to pay a maximum annual amount of €1,883.

You have an Eenmanszaak (sole proprietor), Vennootschap Onder Firma: VOF (partnership) or Commanditaire Vennootschap: CV (limited partnership).

You meet the administrative requirements with regard to VAT, such as the issuing and filing of invoices

2. Income Tax.

For businesses required to pay income tax, allowances may apply if certain conditions are met.

Self-employed persons allowance

Conditions are as follows:

you run the business on your own account,
you are between the age of 18 and 65 on January 1, 2009,
there is no provision to prevent double taxation on profits (for example, if you have paid tax on a proportion of the profit in another country)
you work a minimum of 1,225 hours in your business during the year; the hours you put in before the business was actually up and running can also be included, so keep a record. You have to spend 50% of your working hours on your business.

Start-up business allowance

For the year 2009 the following conditions apply:

in this year you are entitled to the self-employed persons allowance
between 2004 and 2008 inclusive you used the self-employed persons allowance on no more than two occasions.

Furthermore, any period in which you did not run a business between these dates was no longer than one year. The allowance is €2,190.

Housing allowance

If your business is based in your home, the housing costs can be deducted under certain conditions. For more information, please contact the Tax Office.

Investment allowance

You often have to make investments before starting a business, in particular for capital assets. If you have invested a minimum of €2,200 and a maximum of €240,000 in particular sorts of capital assets during 2009, you will be entitled to an investment allowance. The amount involved depends on the level of investment.

Special tax allowance for the self-employed

You can set aside amounts for later; this is a special tax allowance. As long as you continue in business, you are not liable to pay tax on these amounts.

Random depreciation provision

Sometimes as a new business you can depart from the normal method of depreciation. You can then decide for yourself how much you deduct per year.

However, there are two conditions:

you are a sole proprietor, partnership (VOF) or other partnership
you are entitled to the start-up business allowance and self-employed persons allowance

Tax Affairs: Value Added Tax (VAT, or BTW)

Businesses are nearly always liable to charge VAT to their clients. The rate is 6% or 19% depending on the type of product or service. The VAT which you receive from your client must be paid to the Inland Revenue office. The VAT which you have paid out yourself to suppliers can be offset against this. Value added tax is paid either monthly or quarterly, depending on the type of business you have and the level of turnover.

Tax Affairs: Income Tax

Entrepreneurs who pay turnover tax are not always liable to pay income tax. When deciding if an entrepreneur has to pay income tax, the Inland Revenue office will look at the following:

extent of the work performed
level of turnover and profit
time spent in the business
presentation to the market
number of clients
presence of debtors’ risk

If the entrepreneur is liable to pay income tax, he can take advantage of a number of tax allowances. If you are an employer, you have to make wage deductions and pay these to the Inland Revenue office. Declaration and payment is usually done on a quarterly basis.