Tax deductions and tax schemes

What are tax deductions?

If you make use of tax deductions in your income tax return, you end up paying less tax. There are different types of deductions.

You can deduct certain business expenses from your turnover. Such as for work clothes, business telephone costs, and repair costs. Some costs can be deducted in one go. Others need to be spread over several years. Then you deduct part of the costs each year. This is called amortisation.

There are also tax allowances. You deduct these from profits. Such as the entrepreneur allowance, small projects investment credit (KIA) and energy investment allowance (EIA). It depends on your situation whether you can make use of these.

Entrepreneur allowance

The entrepreneur allowance (ondernemersaftrek) is an amount that you deduct from your profit. Then you pay less tax. The allowance consists of several parts:

• Private business ownership allowance

  Do you meet the conditions for the private business ownership allowance (zelfstandigenaftrek)? In that case, you may deduct an amount from your profit in your income tax return. The private business ownership allowance is an important deduction for entrepreneurs.

• Deduction for research and development work (WBSO)

  Do you spend time and money on research and development yourself? Then you may be able to reduce costs with the WBSO. You will then receive the tax deduction for research and development work via your income tax return. Do you have staff? Then WBSO reimburses part of the wage costs and expenses through the employee education and training tax rebate (Afdrachtvermindering speur- en ontwikkelingswerk) in the payroll taxes.

• Co-working partner tax relief

  Does your tax partner (in Dutch) work 525 hours per year or more in your company? And do you pay them less than €5,000 or nothing at all? In that case, you may be able to make use of the co-working partner tax relief (meewerkaftrek). Your profit will then be lower so that you pay less tax.

• Discontinuation relief and tax-free annuity

  Are you closing your business? And does that give you an advantage (discontinuation profit or stakingswinst)? In that case, you may be eligible for a discontinuation relief (stakingsaftrek). You then pay less tax on your discontinuation profit. Sometimes you can use part of the discontinuation profit to pay annuity premiums. You will then receive a tax-free annuity (stakingslijfrenteaftrek).

SME profit exemption

The SME profit exemption is a tax deduction to reduce your taxable profit. As a result, you pay less tax. If your company suffers a loss, the SME profit exemption reduces your tax loss. In that case, the SME profit exemption can have a negative impact on your company.

Small projects investment credit (KIA)

Do you invest in business assets such as a computer or office furniture? Then you may be eligible for the small projects investment credit (KIA). The amount you may deduct depends on the amount invested in the financial year. View the KIA table with percentages (in Dutch) on the Belastingdienst website.

Tax schemes for starters

There are various tax schemes for starting entrepreneurs:

• Tax relief for new companies

  The tax relief for new companies (startersaftrek) is an increase in the private business ownership allowance (zelfstandigenaftrek). Are you a starting entrepreneur and do you meet the conditions? Then you may deduct an additional amount from your profit in your income tax return. There is also a tax relief for new companies in case of occupational disability (in Dutch).

• Random depreciation for starting entrepreneurs

  As a starter, you can determine how and when you depreciate business assets. You use the random depreciation (in Dutch: willekeurige afschrijving). This way, you can keep taxes low in your first business years. Conditions apply.

Investment deductions for sustainable business

Are you buying business equipment or techniques that are environmentally friendly? For example, insulation, heat pumps, or techniques that are more energy-efficient. Then you may be able to use these deductions.

• Energy Investment Allowance (EIA)

  Do you invest in energy-saving techniques or business assets? You may be able to use the Energy Investment Allowance (Energie-investeringsaftrek, EIA).

• Environmental Investment schemes MIA and Vamil

  Do you invest in environmentally friendly assets? Then you may be eligible for an environmental investment allowance (Milieu-investeringsaftrek, MIA) or the Random depreciation of environmental investments scheme (Willekeurige afschrijving voor milieu-investeringen, VAMIL).

Combining investment deductions

Are you making an investment that is good for the environment and want to combine deductions? You can combine the KIA with the EIA or the MIA/Vamil. But you cannot use EIA and MIA for the same asset at the same time.

Fiscal reserves

Fiscal reserves (in Dutch) are amounts that you set aside. You reserve them for a later moment. You may deduct these from your profit. This way, you postpone paying tax on those amounts until a later date. There are 2 main tax reserves:

• Reinvestment reserve

  If you sell a business asset, you may add the book profit to a reinvestment reserve (in Dutch). You use the reserved profit to buy a new asset.

• Equalisation reserve

  With the equalisation reserve (in Dutch) you set aside amounts for expected high costs in the coming years. This concerns, for example, major maintenance of your business premises.