The tax liability for starting entrepreneurs

As a starting business manager you have various tax obligations to fulfill. For example, you are expected to file various declarations that you cannot avoid. But what do these declarations actually entail and on what dates must they be submitted? And what is expected of you as a new entrepreneur? In fact, as a starting entrepreneur you will have to deal with 2 types of taxes: income tax and sales tax. Read here some practical tips about your company's tax obligations, which every company will have to deal with.

The meaning of a sales tax

Sales tax actually refers to the VAT return. The abbreviation VAT is synonymous with Value Added Tax on services or products of any company. To make a long story short. As a company, you will have to pay VAT to the Dutch state for every sale. Every three months – also called a quarter in accounting circles – you will have to file a so-called VAT return. You can also get money back instead of having to pay. This is possible if you have used certain services or products for business purposes. With mainly starting entrepreneurs, it often happens that you purchase and need products for your company. In some cases you pay more VAT than you collect. You can then reclaim the VAT amount from the tax authorities via the quarterly VAT return.

The annual income tax

In addition to sales tax, every entrepreneur has to deal with so-called income tax. You will have to file a tax return for this statutory tax once a year. In an arithmetic overview that extends over the period of a financial year, the tax authorities calculate the amount that you must pay to the Dutch tax authorities. The amount of income tax depends on various factors and is calculated according to the earnings of that year and the various deductions. As a starting entrepreneur, in addition to the self-employed person's deduction, you also have the starter's deduction. The deduction ensures that you pay less income taxes. For larger companies, in addition to sales tax and income tax, you will also have to take corporate tax into account. These regulations do not apply to freelancers, general partnerships and sole proprietorships.

The starting entrepreneur and the starter's deduction

The starter's deduction was created to make things a little easier for starting entrepreneurs and to encourage them. This deduction is valid for a period of 3 years after the start-up of a business. For clarity. Not every new entrepreneur is entitled to this benefit. For example, you must meet certain conditions to qualify for this. You must also be entitled to a self-employed deduction. If this is not the case, you are not eligible. As a self-employed person you must meet the hour standard. In addition, you may not have been an entrepreneur for 5 years. You may also not have benefited from the self-employed deduction twice in the previous 5 years.

Pay less taxes thanks to the self-employed deduction

As a starting entrepreneur, you are offered the opportunity (3 years after starting your business) to claim the self-employed person's deduction, which means you pay less income taxes. The size of the income deduction depends on the income of that financial year. Please note that not everyone is eligible for a self-employed deduction. For example, you must be registered with the Chamber of Commerce as a self-employed entrepreneur and you must meet certain requirements regarding the hours criterion. For example, you must be able to prove in black and white that you have spent a minimum of 1225 working hours on your company on an annual basis. Moreover, your job must be your main professional activity. Suppose you are still employed and worked more hours than in your own company. Then you are not eligible for this self-employed deduction.