Small businesses scheme (KOR)
The term will most likely ring a bell with most starting entrepreneurs: The small businesses scheme (or KOR). Since 1 January 2020, the small businesses scheme has changed. Before, it was implemented as a VAT reduction, but today it’s a VAT exemption. The KOR only applies to turnover tax and doesn’t influence, for example, the income tax return.
What does KOR entail?
As mentioned, KOR is a VAT exemption. This means that you don’t charge VAT on the income from your company and you no longer need to file VAT returns. Please note: this also means that you can no longer reclaim VAT on your expenses. KOR is a voluntary scheme for which you can register with the tax authorities. You can start participating in KOR every quarter. As soon as you’re registered for KOR, you participate in it for at least 3 years, or until you no longer meet the conditions. You can’t just simply unregister during this period.
To register for KOR, you must meet the following conditions:
- You’re an entrepreneur for VAT. This means you’re self-employed. The KOR applies to every legal form of business.
- Your company is located in the Netherlands or you have a permanent establishment here.
- Your turnover is never higher than € 20,000 per calendar year.
Does your turnover exceed € 20,000 during the year? Then you’re obliged to immediately start charging VAT on your income. You must also unsubscribe from KOR. For the next 3 years, you won’t be able to register for the scheme. Turnover that’s normally not taxed, such as exempt income or income with the VAT deferred, doesn’t count towards this turnover limit.
When is registering for KOR beneficial for your business? And when not?
Participating in KOR has its advantages and disadvantages. It can save you a lot of time administration-wise and you don’t have to be bothered with VAT returns.
- Are your customers mainly private individuals or customers who cannot reclaim VAT themselves? Then participating in KOR can be interesting. You can keep your prices or tariffs as they were, but you no longer pay VAT over them. This will increase your margin.
- Are your customers mainly businesses or professionals? Because you can no longer reclaim VAT on purchases and business costs, your purchase price will be higher and so will your margin. In this case, KOR is probably not favourable.
- If your business requires you to make a lot of investments or purchase a lot of materials, it’s also not beneficial to register for KOR because you can no longer reclaim your VAT.
Registering for KOR or not?
Ask your bookkeeper if it’s possible and a good idea to register for the KOR. This is different for every situation.