Tax Filing
In the Netherlands, the task of filing taxes as a self-employed individual is a legal obligation demanding a good understanding of Dutch tax laws. Self-employed professionals in the Netherlands must fulfil specific tax obligations, including income tax calculations, VAT returns, and the strategic use of tax deductions.
In this article, you’ll learn about taxes as regards self-employment in the Netherlands. You’ll also learn some tips that will help you stay out of tax trouble so you can focus on growing your business. It can also happen that you get a tax refund from the tax office, so pay attention as we discuss all of this in detail.
Types of Taxes
There are two types of taxes that small business owners are obliged to do in the Netherlands and failure to make your tax return will result in a fine from the tax office and you want to avoid this at all costs.
1. Value-Added Tax (VAT)
On your sales invoice, you charge 21% VAT to your customers in which customers pay this money to you and you are to remit it to the tax office. Sometimes it can be 9% and other times it could be 0% VAT.
You make VAT returns on a quarterly basis, the month following the end of each quarter.
Add all the VAT you charged to the sales invoice and remove the VAT paid on any purchases made (e.g VAT paid on office equipment). The balance is what you would then remit to the tax office.
So you want to ensure to set aside the VAT amount each time a customer pays you so that you have the money to pay to the tax office when it is time for VAT returns.
How do you make your VAT returns?
- You can file your VAT returns directly from the website of the tax office (belastingdienst.nl). Using your digit code you can file your taxes.
- You can also file your VAT returns directly from your bookkeeping software. Most of the bookkeeping software in the Netherlands is designed to be able to handle your VAT returns directly from the system. I’ve been using e-boekhouden for a few years now and recommend it for my clients.
- Thirdly, you can seek the advice or help of a bookkeeper to help in filing your VAT returns.
Note that you must file your VAT returns even if you have made no sales during the quarter.
And of course, you can always visit the website of kvk.nl for more information regarding taxes as a small business owner.
Click here to simplify your bookkeeping with e-boekhouden
2. Income Tax Returns
The income tax returns are done once a year and usually between the 1st of March and the 30th of April. This return is for your business activity from January to December of the previous year.
The income tax is levied on the profit from your business minus all deductions and tax reliefs that might be applicable to you. The balance is what is taxed during the income tax returns.
Income tax returns is made via the website of the tax office . After you have filled out all your information, the tax office decides how much you pay in taxes or if you’re gonna get a refund from the tax office.
As an employee, your employer deducts taxes from your salary on a monthly basis. But as a business owner, you have to make provision yourself for income tax.
This means that you have to estimate your income tax on a monthly basis and put that money aside so that at the end of the year you have sufficient funds to pay your tax obligations. This way, you stay out of trouble with the tax office because you’re able to pay your taxes when due.
Small Business Scheme (KOR)
The small business scheme is a scheme that the government introduced to help very small businesses. So if your business turnover is less than 20,000 in a calendar year, you can apply for the small business scheme. The scheme means that you do not have to do the quarterly VAT returns, but you have to apply for this and get a reply from the tax office before you can start implementing the small business scheme in your business.
The moment you get approved for the small business scheme, you will no longer be required to charge VAT on your invoices. You will also not be able to deduct VAT from the expenses or purchases you make for your business.
The small business scheme once approved, will last for a minimum of three years. The moment your business exceeds 20,000 in a calendar year, you must start making your returns again to the tax office.
Conclusion
In summary, self-employed individuals in the Netherlands must prioritize tax compliance. This article has discussed the intricacies of income tax, VAT, and offered valuable suggestions to prevent potential tax troubles. Remember, meeting your tax obligations is essential for the financial health of your self-employed business.