Registering Your Business and Income Tax Regulations
Legal Forms for Starting a Business
If you pass for all the IND-requirements, you have to decide what type of legal form you would like to set-up and what kind of business structure you would like to operate under. There are two possibilities: non-limited liability and limited liability.
- Non-limited liability company:
- Eenmanszaak (Sole proprietorship)
- Commanditaire vennootschap (Limited partnership)
- Vennootschap onder firma – VOF (General partnership)
- Limited liability company:
- B.V. (private limited liability company)
- N.V. (public limited liability company)
- Cooperatie (Cooperative)
- Stichting/Vereniging (foundation)
Setting up a non-limited liability company is easier and cheaper (for example in terms of maintenance). However, the personal assets of you and your family will be on the line if you go bankrupt or are sued. You don’t have this risk is with a limited liability company.
The most commonly used entities are the Eenmanszaak and the ‘B.V.’. These days, many people work as a self-employed entrepreneur or freelancer in their field. These people are also called ‘ZZP’ers’ (zelfstandige zonder personeel'or self-employed without staff). They mostly use an Eenmanszaak
Existing Foreign Companies
Existing foreign companies wishing to establish their business in the Netherlands can they do this with the existing foreign legal entity in the country without the need to convert it into a Dutch legal entity, called a branch office (permanent establishment). A branch can be a sales office or a production company, but also a representative office. It does not have a legal form, but is a part of the foreign enterprise.
Registration with the Chamber of Commerce and Tax Authorities
If you have decided what kind of business you would like to start, it must be registered at the Kamer van Koophandel. Registration can anywhere from one week before you start your business.
Limited liability companies (B.V., N.V.) are more complex to start then non-limited liability companies (Eenmanszaak, VOF), since you form a corporation together with a Dutch notary. Consulting a Dutch tax expert is recommended if you would to set up a limited business.
After the registration of a business, the Dutch tax authorities (Belastingdienst) are automatically informed by the Dutch chamber of commerce. They will then issue, for example, a VAT-number which can be used for tax deductions applicable to your company.
Income Tax and Its Regulations
Non-Limited Liability Company
If you have a non-limited liability company as a self-employed entrepreneur or freelancer, you have to declare your income as ‘business profits’. In that case, you can also apply for certain entrepreneur facilities such as investment allowance, tax-deferred retirement reserve, and entrepreneur allowance (tax credits). Some entrepreneur allowances are:
- Self-employed persons allowance (Zelfstandigenaftrek)
- Starter allowance (Startersaftrek)
- R&D allowance (S&O Aftrek)
- Co-working partner relief (Meewerkaftrek)
In order to qualify for these allowances, you have to meet the ‘hour criterion’, meaning you have to be active for at least 1.225 hours a year. This includes direct working hours, but also hours spent on travelling, market research, and administration. In your first year, it is smart to keep an administration of your hours spent. For example, you must work in your company 50 weeks of 24,5 hours a week. For certain cases they make an exemption, such as pregnancy.
Limited Liability Company
If you have a limited liability company, you are an employee of your own company. The B.V. has to pay corporate-dividend tax and wage tax to the Dutch tax authorities for you as an employee. The entrepreneur allowance described above cannot be applied for by a limited liability company.
For both non-limited and limited companies, expenses can be claimed as business expenses. For example costs for travel, marketing, communication, legal, accountancy, equipment, or services from a third party can be deducted as business expenses.
Dinner, gifts and study trips or conference attendance costs are only partially deductible. Not deductible are clothes, fines, personal devices, personal computers, and general literature.
If you need a car for your business, you have two options. Use your own private car for the business or put a car on the balance of the company. With the first option, you can claim the business kilometer against € 0,19 per kilometer. The second option makes it possible to deduct all the expenses (fuel, insurance, taxes). However, at the end of the year you must add the car to your personal income because of the personal use. As a result, you will have higher income. Which option is the best depends on the personal situation.
Based on the administration the income/corporate tax return must be filed. This must be done before April 1 of every year. As an entrepreneur you will receive an invitation from the Dutch tax authorities. Most tax advice companies have an extension arrangement with the Dutch tax authorities. In that case the tax return can be filed one year later. Be aware that if you file the tax return too late penalties will be issued.