Becoming self employed is increasingly popular in the Netherlands – in fact nearly all the 191,000 new companies registered with the Chamber of Trade last year were one-man operated firms. If you are thinking of taking the plunge, what key issues should you think about?
1 Can you set up a company as a non-Dutch national?
Yes, nationality as such is not relevant for registering a business, particularly if you are already living in the Netherlands.
However if you are not living in the Netherlands you will need to meet substantial conditions. You will need to prove what ties your business has with the Netherlands. If you want to set up a sole proprietorship you will at least need a Dutch business address and Dutch fiscal number and, if you are setting up a limited company (BV) you will need a local director.
2 Do you need a business plan and if so, what should it include
You don’t need a business plan to set up your business but it is wise to have one as part of your business set up and to know where you are heading. If you need external financing, you will need to produce one. A business plan should include the following 10 points:
- What will your company’s goal be? Why are you setting up this company?
- What is your customers situation at the moment? What problems do they encounter? How are they solving this?
- What would be your company’s added value? How do you help your customers in their current situation?
- How relevant is your company?
- What does your market look like?
- Who are the competitors in your business area and why is your company better?
- What will your company’s product or service be?
- What is the purpose of this product or service and how will it be produced?
- What type of company will it be?
- What is your financial plan and when will you reach the break even point
3 What sort of company should I set up?
The most common form of self employment is to set up as an eenmanszaak (sole proprietorship), which means you are a ZZP’er (zelfstandig zonder personeel – or independent with no personnel)
You have to declare any income from freelance work or self-employment to the tax office, but as an eenmanszaak, you can benefit from a number of tax breaks.
Self-employed deduction (Zelfstandigenaftrek)
You are entitled to the self-employed deduction if you can show you are an independent entrepreneur and spend at least 1,225 hours a year on business related activities. The self-employed tax deduction is €7.280.
Start-up deduction (Startersaftrek)
Once you have started your business, you may be entitled to the start-up deduction of € 2.123. To qualify you must be entitled to the self-employed deduction, 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.
Note: It is possible that the self-employed deduction and the start-up deduction add up to more than your company’s profit. This will result in a loss, which is deductible against other tax years in which you made a profit.
Small business profit exemption (MKB-winstvrijstelling)
After applying the above deductions, 14% of the remaining profit is tax exempt and therefore deducted from the taxable income.
If your income as a ZZP’er grows and becomes more permanent, the tax advantages become proportionally less substantial. In that case a limited liability company (BV) may be an option for you.
As a BV is a separate entity, it has limited liability and in principle you should not be liable for claims on the BV (unless you as director are held responsible for mismanagement of the companies finances). And, very importantly, the BV structure might offer the possibility to (continue to) make use of the 30% ruling. Contact an expert such as Suurmond Tax Consultants to find out more about setting up a BV.
4 What about company taxes?
For a sole proprietorship you will have to file an income tax return with company accounts, and a quarterly or monthly btw (value added tax) return.
As a self-employed person, you will also have to pay a percentage of your income towards health insurance. Employers currently pick up part of the health insurance bill for their staff, and if you technically employ yourself, you have to do the same thing. In 2019 the fee is 5.7% on taxable profit of up to € 55,927 – or a maximum of €3,187.
5 Can I be a freelancer alongside working at my regular job?
Yes, but you may not be able to use the complete tax facilities. Apart from the hours criterion of 1,225 hours you must also spend more hours working for your business then on your job as an employee.
You will also have to pay additional health insurance contributions based on your self-employed income.
6 Would I be eligible for advanced tax agreement?
No. Only large enterprises such as multinationals can make agreements with the tax office about their potential tax liabilities. But a good tax advisor will make sure you make the most of the tax breaks open to you.
If you would like to find out more about the tax implications of freelancing, please contact Suurmond Tax Consultants www.suurmond-taxconsultants.com .
Our experts have been helping expats from all over the world make use of existing tax regulations in the Netherlands to reduce their tax liability for more than 30 years. We offer a free tax scan, to check whether you are making the most of the opportunities on offer. Feel free to email firstname.lastname@example.org
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