Our first tip is to keep track of your hours. That is important because the Dutch tax authorities use this to check whether they see you as an entrepreneur for income tax. You must invest at least 700 hours in your business. And if you want to be eligible for most of the deductions, you should invest 1,125 hours at a minimum. Please note: do not only keep track of your labor hours but all hours you invest in your business (e.g., travel time, the time you spend on your administration)
So, after you have checked whether you meet the hour criterion, you should know that you are eligible for certain deductables. The next tip is to take a good look at the deductible items for entrepreneurs. Here, we will sum up the most popular ones.
- The most commonly known deduction: the entrepreneurs deduction (ondernemersaftrek). This is an amount entrepreneurs can deduct from their revenue. This deduction is a sum of the self-employed deduction, start-up deduction, deduction for research and development activities, co-operating partner deduction, and liquidation deduction.
- To be eligible for the next deduction, you do not have to invest 1,125 hours, but you only need to meet the 700-hour criterion: the Small Business Profit Exemption (MKB-winstaftrekvrijstelling). After you reduced your revenue with the entrepreneurs deduction, you may deduct another 14% (2021) from your profit.
- It is reasonable that you need to invest in your business. Business expenses of more than € 450 are investments. To compensate for these costs, you can make use of the investment deduction.
In addition, it is understandable that, sometimes, you have to make business costs. Business costs are all expenses made concerning your own business. Do you need to pay rent? Do you have to travel by public transport? Have you incurred costs for furnishing your office? These are all business costs which you may deduct from your profit: as a result, paying less tax! Our final tip, therefore, is to keep track of all business expenses.
On 6th October, The TaxSavers will host a webinar on tax-related information for freelancers/self-employed professionals. Find more information about the event here!