Setting up an administration as an entrepreneur, a sole trader (in Dutch: “eenmanszaak”) or as part of a personal partnership (“vennootschap onder firma” or “vof”) is obligatory in the Netherlands. It goes without saying that one should wish to set up a proper administration, in line with the Dutch Tax Authorities’ (“DTA”) standards.
By law, every entrepreneur is required to keep a copy of its books. A well set up administration provides not only for a clear overview of the business, it also provides for insights in income and expenses of the business.
There are more stringent rules in case of a legal entity, such as a limited liability company established under Dutch or foreign law (in Dutch: a besloten vennnootschap). Nonetheless, for entrepreneurs who are personally liable such as a sole proprietor (also “ZZP-ers”) there are no specific requirements to the administration, as long as the information is complete, accurate and easily accessible for third parties such as the DTA. Basically, the administration is form free.
Before and after the tax return
For smaller entrepreneurs the administration seem to be a logical sum of the income and expenses. It is important to keep in mind that the overview of your administration will also function as the basis for periodical tax returns, such as the VAT or the yearly income tax return. It is also the basis for deductions and tax refund claims.
Once your tax return was sent to the DTA, your administration has not become redundant. The complete administration - including underlying proof - should be kept for future audit and control purposes. For example, should a discussion regarding your (or even your client or provider’s) tax position come up, you are required to provide for proof (e.g. of any deductions claimed in previous years).
For 7 years, the administration must remain available and accessible. Store the administration securely and make a backup (offline or online).
Proof your transactions
Keep proof of all transactions, mutations, expenses and invoices by date and detail. It is permitted to keep the proof electronically (e.g. scan, e-mail, photocopy, PDF et cet). As each business is different, there is no template with respect to which proof to keep. Bear in mind that your administration must make logical sense and structure. So, exceptions are recommended to further substantiate (think of correspondence regarding credit invoices, or discounts, returns et cet.). Keep at least (not limited):
- Contracts with clients, rent, cars etc.;
- Overviews and summaries;
- Travel cost sheets (kilometres);
- Assets and debts;
- Inventory statements;
- Bank accounts.
The above must provide for a conclusive, airtight and balanced (financial) administration. Blue Umbrella assists to set up such administration, as long as your input is comprehensive to our advisors and what goes without saying: is a 100% complete.
All transactions together result in a balance and profit & loss sheet. The profit & loss sheet will be the total of all income and expenses, categorized and including explanatory notes to the extent necessary. Note that if you have personnel you will need to administrate more (reach out to us if you have any questions).
If the administration is there but is not a 100% complete, or if the following tax filing cannot be done (properly or timely), the DTA may impose penalties and tax interest in your name. The penalties will be higher in case of recidivism or (proven) bad will. If no tax filing was done at all, the DTA may estimate the taxes due. It goes without saying that such estimation is almost never on the lower side. A proper administration provides saves you money and provides for opportunities.
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