Benefits for starting entrepreneurs
When you’re just starting out as an entrepreneur, you will probably have a lot on your mind. Setting up a business and finding customers or clients takes a lot of time and energy. And in addition, you also have to deal with all kinds of financial matters! Fortunately, there are a number of tax benefits you might be entitled to in the first years of your entrepreneurship.
Declaring start-up costs
It’s possible to include business costs you’ve made before the actual start of your company in your administration afterwards. These are the so-called start-up costs. This includes all the expenses you’ve made to start your business and includes costs for marketing, advice and your registration with the Dutch Chamber of Commerce (KvK). If you’ve bought equipment such as a laptop or an expensive camera as a private individual with the intention of using it for business purposes later, you’re allowed to put it in your company’s accounts. You’re selling it to your company so to say. Of course, the most important condition for stating these costs is that you still have all the receipts and invoices.
Using tax relief for new companies
As a starting entrepreneur, you’re entitled to a tax relief for new companies three times in the first five years of your business. The tax relief for new companies complements the private business ownership allowance for which the criterion is working at least 1225 hours per year for your company. This extra deductible item on your tax return reduces your profit, meaning you have to pay less tax. You can’t choose the years for which you want to use the tax relief for new companies yourself. When applying for the private business ownership allowance for any particular year, while also being entitled to a tax relief for new companies, you must make use of it. Are you also in paid employment, in addition to running your own business? Should the application of the tax relief for new companies result in a negative profit and cause a loss, this will automatically reduce your income. This can mean that you’ll get part of the income tax back that’s been withheld during the year.
All business expenses over €450 are considered an investment. As a general rule, all business investments must be depreciated over the course of, at least, five years. This means that each year you can declare a maximum of 20% of the purchase price as expenses. However, investments made in the years that you’re entitled to the tax relief for new companies, OR the year before that, you’re allowed to choose how and when you depreciate business assets. This method can significantly reduce your profit in the first years, resulting in paying less income tax.
Small businesses scheme (KOR)
Even though this exemption is not exclusively for new business owners, it can provide you with some administrative advantages. When registering for KOR, you get a VAT exemption and you no longer have to file VAT returns. If you’re still in the start-up phase with little turnover, it might be interesting to see if this regulation is suitable for your company. If you have any questions about this, you can always contact your accountant!