Investing in your business? This might be profitable at the end of the year.
The end of the year is the moment to check if it’s wise to make an extra investment. There are several tax rules that might make it profitable to invest before the year is over.
Small business scheme (Kleineondernemersregeling, KOR)
This is the last year you can profit from KOR in its current form (from 1 January 2020 there will be new rules!), which means investing can be appealing if your VAT (btw) is just above the limit of €1.883. Suppose you owe €1.883 in VAT for 2019 and you buy a nice camera for €1.000 (excl. VAT/btw). Because the VAT is €210 (21%) you would declare this €210 as input tax in your VAT declaration and you’d pay €1.673 (€1.883 – €210) in VAT. But because of this investment you can apply for the Small business scheme (KOR) and the €210 is multiplied by 2,5 which means you only owe: €1.148. An extra VAT benefit of €525!
Small scale investment allowance (Kleinschaligheidsinvesteringsaftrek, KIA)
When you invest for over €2.300 in one year, you can use an extra deduction: the KIA. The deduction is 28% of the investment amount. Suppose you invested €2.000 this year, then it’s worth the trouble to buy that iPad of € 500 that you needed anyway. This way your investments will be over €2.300 which gives you an extra deduction of €700 (28% of €2.500)! (beware: from 2020 you will need an investment amount of € 2400 to use the KIA)
Environmental investment allowance (Milieu-investeringsaftrek, MIA)
For electric (cargo)bikes there’s another deduction other than the KIA: the MIA (Environmental Investment Allowance). With this allowance the government encourages you to ride a bike instead of driving a polluting car. This deduction can add up to 36% of your investment. To use the MIA your investment needs to be €3.000 at least and it has to be listed in the Environment list. You also need to apply for it through RVO.nl
Sounds good! Let’s shop?
Of course it’s great to ‘reward’ yourself with a new camera, iPad or an electric cargo bike. But from an entrepreneurs perspective it might not be the best decision if you already made these investments last year. It’s important to know as well that you don’t have a lot of extra deductions when you make a profit of around €25.000. Because if you have a profit around that number and you qualify for private business ownership allowance, you don’t have to pay income tax (you do have to pay for the health care law, in dutch: Zorgverzekeringswet, ZVW). So the extra deduction has no use then.
Only make an investment if you can really use it and if you have a good profit. This way you can fully make use of the deductions.