The 30% Ruling and VAT Regulations for Your Business
Start Your Own Business with the 30% Ruling
Many expats obtained the 30% ruling when they were working for an employer, but what many expats do not know is that they can have the 30% ruling if they have their own Dutch B.V. or company. For example, a dentist or a doctor currently working for an employer can have their own B.V. together with the 30% ruling. It does not matter if the company is foreign or a Dutch B.V. Important is that the company is a legal entity paying taxes in the Netherlands.
Please be aware of the following requirements if you would like to implement the 30% ruling for your own B.V. as a self-employed entrepreneur or freelancer:
- During your current employment the 30% ruling has already been granted in the Netherlands;
- Within three months after ending your current employment you have to sign a contract with your own B.V.;
- A Dutch B.V. must be set up before signing the contract.
- The Dutch B.V. has to pay a taxable income of at least € 35,770 excluding the 30% ruling, or € 51,100 including the 30% ruling;
- A new request of the 30% ruling must be filed at the Dutch tax authorities;
We recommend obtaining a special form issued by the Dutch tax authorities called “VAR” (“Verklaring Arbeidsrelatie”) annually.
Self-employed entrepreneurs and freelancers must pay extra attention in order to not be considered a paid employee of their client at the end of the year by the Dutch tax authorities. If this happens, you are not an independent entrepreneur anymore. Also, your client will be confronted with extra premiums, payroll tax, and fees. In order to avoid this and to ensure that you have the self-employed/freelance status, you can apply for a VAR-declaration at the Dutch tax authorities. The following will be determined, among others:
- Is there any authority between you and the client (is the work done in the office of the client, what kind of email address do you use?)
- Does the client give instructions to you?
- How many clients do you have, only one big client or more?
If it turns out you had only one big client for the majority of time and the Dutch tax authorities issued you a VAR-declaration, they might challenge it. As a result, the client will be confronted with all the (tax) consequences.
Value Added Tax (VAT)
In the Netherlands and Europe it is compulsory for a business to charge VAT (in Dutch: BTW) to its clients on the invoice. The VAT an entrepreneur is charging a client can be offset against the VAT a supplier is charging him. At the end, the rest is paid to the Dutch tax authorities. You cannot reclaim any VAT if you do not charge VAT on your invoices (basic rule).
When the Dutch tax authorities issue the tax forms to you, you always receive a VAT number (unless you are working as a VAT exempted professional such as medical, journalist, author). Most entrepreneurs must file the VAT tax return on quarterly basis. However, in case of high turnover it can be changed to monthly. On the other hand, if the turnover is very low, on request the VAT tax return can be changed to annually.
The first VAT-return must always be filed on paper. You can only reclaim paid VAT on goods or services used for your activities as an entrepreneur. After the first VAT return, the Dutch tax authorities will send a VAT-assessment with the amount which has been declared by you. Make sure the VAT-returns are filed on time. Otherwise, penalties will be issued. Also, when you have to pay VAT, pay it on time. The Dutch tax authorities will issue penalties very quickly.
The VAT rate in the Netherlands is 21% (standard rate) or a reduced rate of 6% and 0% (for supply in the EU intra-Community supplies and export) in October 2013. For e-commerce, special rules apply.
If you invoice clients, certain invoice requirements must be met. The invoice must contain the date of issue, invoice number, full name and address of you and the client, description of the provided goods or services, VAT rate, total amount, and chamber of commerce number. In EU situations, the EU-VAT number of you and the client abroad must be stated.
Kleine Ondernemersregeling (VAT)
A self-employed entrepreneur or freelancer who does not have large sums of VAT in their administration can apply for a special tax facility called Kleine Ondernemersregeling (small-sized entrepreneurs’ regulation). In that case you will have to pay less VAT, or none at all. This regelation is only applicable for non-limited companies (Eenmanszaak / CV / VOF). Furthermore, the VAT has to be returned after reclaiming input VAT, is less than € 1,883 a year.
In order to apply for this special tax facility, you need to file a request to the Dutch tax authorities.