Starting a business and being self-employed may be a challenge. Next to your acquisition and/or marketing work to win over new clients, you also have to keep a proper business administration which may turn out to be a struggle afterwards. Either way, you do not want to be surprised by losing possible tax benefits.
Freelancers, sole traders or other self-employed entrepreneurs can profit from significant allowances. We make sure that you claim the self-employed deduction (in Dutch: “zelfstandigenaftrek”) and the starters deduction (“startersaftrek”) - to the extent that you are naturally eligible. These facilities are substantial, since they can amount to over 9,000 euros per calendar year.
In 2020, the self-employed deduction amounts to EUR 7,030. However if your profits are lower, you cannot benefit directly in total, but can carry forward the remainder for 9 nine years. Now, when are you eligible for the self-employed deduction? Principally there are two requirements:
- you need to qualify as an entrepreneur (note: in the view of the Dutch tax authorities, “DTA”); and
- you need to pass the business hours spent-test.
Both a bit further explained below.
Ad 1. In the view of the DTA, not every profit making person automatically qualifies as an entrepreneur. For example, you may perform some activities occasionally or only for close family or friends (it may be considered a hobby instead). Alternatively, when lacking independence you may be re-qualified as an employee for tax purposes. In fact, there are many specific criteria (such as bearing an economic risk) to consider if you are a true entrepreneur. For now, most important is that you check the boxes for having a continuous organization of capital as well as labour aiming for profits via economic participation. Reach out to us if you have doubts about your business activities.
Ad 2. You have to spend more than 1225 hours to your business. It is important to understand that this is a very strict requirement and applies per calendar year, as such also in case you start or stop during the year you still have to spend 1225 hours. Indirect hours such as acquisition, schooling, administration etc. do qualify as well. If you have recently started it is important that you dedicate more than 50% of your time to your business (e.g. next to an employment). At all times the DTA can request you to proof that you have spent these hours (prepare a time sheet!).
For starters, the self-employment deduction will be increased with another EUR 2,123 (in 2020), but only if you check all the boxes again.
Starters are entrepreneurs who in the last 5 calendar years (1) did not claim the self-employed deduction for more than 2 times; and (2) who were not an entrepreneur in at least 1 or more of these tax years.
How to apply for the deductions?
We will claim it for you when we file your income tax return. Nevertheless it goes without saying that our advisors are available in case you need any guidance when filling in your questionnaire.