From January 1, 2020, a new small business scheme (KOR, kleineondernemersregeling) is in effect in the Netherlands: the exemption from turnover tax (omzetbelasting). This scheme can be beneficial in certain situations. If your revenue is less than 20,000 euros per year, you can choose to enroll in the new scheme. So, it’s a choice; you can also decide not to enroll. If you opt for the new scheme, there’s no need to file a VAT return or remit any VAT. It’s important to weigh the pros and cons before making a decision. Understanding the specifics can help you maximize your benefits.
If you choose to enroll, you won’t charge VAT anymore, and you shouldn’t put VAT on your invoices: the amount excluding VAT becomes the amount including VAT. You don’t even have to send invoices for the VAT, though you can if you wish. The downside is that you can no longer deduct VAT on costs as input tax. In certain cases, you might need to adjust and remit VAT you previously deducted on investments (real estate and certain movable properties) if it exceeds 500 euros.
Legal entities, such as a bv (besloten vennootschap or private limited company), can also avail of the new scheme.
Who benefits from the new scheme?
The new scheme is not beneficial for everyone. To determine if it’s advantageous for you, you must meet all of the following criteria:
– you have a turnover of less than 20,000 euros including VAT;
– at the end of the day, you would have to remit VAT;
– you mainly supply to individual consumers or to businesses exempt from VAT.
Who doesn’t benefit from the new scheme?
If you fall under one or more of the following criteria, the new scheme is not beneficial for you:
– you have a turnover exceeding 20,000 euros including VAT;
– at the end of the day, you would receive a VAT refund, like entrepreneurs who have turnover with 9% VAT but primarily have expenses with 21% VAT;
– you mainly supply to other businesses; due to the new scheme, the amount excluding VAT that you currently invoice would become the new total amount, and you can’t reclaim the VAT on your expenses: your costs would then increase.
Which revenues count towards the 20,000 euros?
– Exempted revenue doesn’t count (except for the sale and rental of real estate and financial services).
– For sales of goods where VAT is paid on the profit margin (reisbureauregeling and margeregeling for used goods), only the profit margin is considered as revenue for the application of the new KOR.
– Cross-border revenue where the place of delivery or the service location isn’t the Netherlands doesn’t count in determining if you stay below the revenue threshold.
No administrative obligations?
When you participate in the new scheme, you don’t have to send invoices and you also don’t have to do VAT returns anymore. Administrative obligations and declarations for intra-Community deliveries and services (ICP-aangifte) also cease. However, there’s an obligation to declare and maintain records for VAT on purchased goods and services. Think of VAT on purchased goods and services that are shifted to you (like from Google, Facebook, or Adobe). If you don’t want this, ensure you don’t receive invoices with the shifted VAT. You do this by retracting your VAT number from, for example, Google or Facebook. They will then send you an invoice with VAT (like Irish VAT). Your costs will then increase, and you can include them in the income tax return.
For purchases, there’s an obligation to keep records. The lapse of administrative obligations is quite relative. To file an income tax return, maintaining proper records is essential.
What if your revenue turns out to be more than 20,000 euros?
If you’ve registered for the new scheme and later find out that your revenue exceeds the 20,000 euro threshold, from that point onwards, you have to charge VAT again and also return to filing VAT.
Regret signing up for kleine ondernemersregeling?
Earlier in this article, several situations were mentioned where the scheme isn’t beneficial. If you’ve signed up and find out the new scheme isn’t beneficial for you, you can cancel the exemption after three years. However, be cautious: after canceling, you can only re-register after another three years. So, calculate carefully what’s best for you.
Save time and money
For small business owners, there are various tax schemes and benefits to consider, including the kleine ondernemersregeling (KOR). Fully understanding and correctly applying these schemes can be time-consuming and complicated. Taksgemak can assist you with your tax returns for entrepreneurs and VAT returns. Taksgemak takes advantage of deductions like zelfstandigenaftrek, startersaftrek, mkb-winstvrijstelling, and various investment schemes. The mortgage interest deduction and the correct declaration of a foreign property are also in our trusted hands. A proper tax return is not just a requirement; it also provides clarity and financial overview.
About the author: Farshad Bashir combines his passion for entrepreneurship with tax advice at Taksgemak to assist businesses and individuals with the complex world of tax regulations. He simplifies the complicated and ensures his clients stay on track. Before diving into the consulting world, he was a member of the Dutch Parliament. This combination of political experience and tax knowledge makes him an excellent partner for anyone.
