Sole proprietorship (eenmanszaak) setup and freelancer taxation in Netherlands

Self-employed individuals (zelfstandige zonder personeel or ZZP'er in Dutch) are entrepreneurs who own their own businesses and work for multiple clients. People who want to freelance typically choose either a single proprietorship or a limited liability company (besloten vennootschap or BV).

Registration with The Netherlands Chamber of Commerce is the initial step in forming a sole proprietorship (Kamer van Koophandel, or KVK).

Make an appointment with the Chamber of Commerce to finish your registration once you have completed the form. Online appointment scheduling is available via the KVK website.

At KVK, you will need the following items:

• The filled-out registration
• Your business details
• A legitimate identity document (ID, passport, or a copy of the residence permit)
• The charge of €50 may be paid using a debit or credit card.

Applying for VAT

You will be listed in the Commercial Register upon registration (Handelsregister). The KVK will submit your information to the Dutch Tax and Customs Administration, which will determine, based on your operations, if you are a VAT-entrepreneur. A freelancer or sole proprietor is typically a VAT entrepreneur, especially if you want to invoice customers abroad. Within two weeks, the Dutch Tax and Customs Administration should subsequently provide your VAT tax number and VAT identification number.

In the Netherlands, nearly all VAT-registered businesses are required to calculate and add VAT to service or product prices, regardless of their legal form. Once registered with the KVK, your business will acquire a number that must be included on all invoices and outgoing mail. Additionally, the VAT number should be included on invoices.

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Taxation

Profits earned by sole proprietors are subject to income tax. In the Netherlands, income is categorized into three boxes, each of which has its own tax rate.

Box 1: Income subject to taxation from work and home ownership

Box 2: taxable income from an investment in a big business

Box 3: taxable income from savings and investments

The earnings from the proprietorship is considered taxable income from job and property ownership, thus it belongs in Box 1.

Each year, you must file your tax return online by May 1st. Utilize tax return or accounting software or a tax intermediary through the website of the Dutch Tax and Customs Administration to file a tax return in the Netherlands.

Tax benefits for sole proprietors in Netherlands

If the Dutch Tax Administration recognizes you as a business owner and you meet a certain number of required working hours, you may be eligible for certain tax benefits. You can benefit from the private business ownership allowance (zelfstandigenaftrek) if you:

• Pay income taxes as a business owner
• Work for your own business for a minimum of 1,225 hours (800 hours in the case of a long-term occupational disability)
• Spend more than fifty percent of your time on your own business (This requirement applies if you have been an entrepreneur in the last five years)
• If you have achieved the age of eligibility for the state pension at the beginning of the year, the private business ownership allowance will be lowered by fifty percent.

Once these allowances are removed from your profit, you are eligible to an extra 14% tax reduction, under the SME profit exemption.

If there is no job relationship, the customer is not required to withhold payroll tax and social premiums.

Social security contributions and national insurance

As a self-employed (sole proprietor), you normally have to pay national insurance contributions (volksverzekeringen), and you'll be entitled to an old-age pension (AOW) once you reach the state pension age. The pension equals the minimum income, which you'll have to supplement yourself.

Note: This information is from official sources and should not be considered as a substitute for legal advice. Always check official websites or consult a lawyer or tax consultant before taking action.