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If you run a small business in the Netherlands, you may be eligible for the Small Businesses Scheme (kleineondernemersregeling, KOR). If so you will pay less turnover tax (VAT) to the Dutch Tax and Customs Administration (Belastingdienst). In some cases, you may not have to pay any VAT at all and you may even be exempt from the administrative obligations of the VAT system altogether.
When do you qualify?
- Your business has a permanent establishment in the Netherlands and must be registered with the Dutch Chamber of Commerce (KvK).
- You run a one-man business or your company is a joint venture involving natural persons, such as a partnership (maatschap) or a general partnership (vennootschap onder firma).
- After deduction of input tax (voorbelasting), you pay less VAT than the annual threshold of € 1.883.
- You keep your tax administration up-to-date in accordance with Dutch Tax and Customs Administration obligations, unless you are eligible for administrative exemption (see below).
Which businesses do not qualify?
Some business do not qualify for the Small Businesses Scheme (KOR). This applies to legal entities, such as private limited companies (bv), foundations and associations. Your business also does not qualify if one partner in a professional partnership is a legal entity.
How to calculate your tax deduction?
You can check how much VAT you can deduct (in Dutch).
How to apply?
You must apply the definitive VAT deduction (in Dutch) to either your last return of the year or your first return of the following year. However, you are also allowed to apply the deduction provisionally in your monthly or quarterly VAT returns.
If the annual amount of VAT due is expected to remain below € 1.345, you can submit an application for exemption from the administrative obligations of the VAT system (in Dutch) stating this in writing to your local Dutch Tax and Customs Administration office. This application must contain a credible reason for exemption based on your tax returns from previous years.
Administrative exemption from the VAT system (in Dutch) means you no longer have to:
- Send invoices. If you do send invoices you are not allowed to add VAT. Should you do so you will lose your exemption.
- Fill in VAT returns.
- Keep your purchase invoices for longer than 7 years, or 9 years in the case of immovable property from time of use.
Modernisation of small business scheme
Under the new budget, the small businesses scheme (KOR) will be modernised as of 1 January 2020. Entrepreneurs with a turnover under € 20,000 will be exempt from paying VAT. This means they will no longer charge their customers VAT. In addition, they will no longer be required to fill in a VAT return, nor will they be able to deduct VAT paid by them from their monthly or quarterly VAT returns. They will also be exempt from keeping VAT records.
The compensation was announced on Prinsjesdag (Budget Day) 2018. It is, of course, subject to the measure passing through the Upper and Lower Houses of Parliament, as is the date of introduction.