Year-End Tips 2024: 11 Tips for the self-employed entrepreneurs

​

1. Keep on overview regarding time spent on your business!

The hours spent on your business, the so called hour criterion, is crucial for accessing many tax benefits for self-employed entrepreneurs, such as the self-employed deduction, starter deduction, deduction for research and development, and collaborative deduction for a partner. You must be able to provide information that you spent at least 1,225 hours on your business during a calendar year. If you are no longer a starting entrepreneur and alongside your business you also perform other activities (within or without an employment contract), you must also spent more than half of the available working time to your business.

2. Enforcement of false self-employment

On January 1, 2016, the Deregulation Assessment of Employment Relationships Act (Wet DBA) was introduced. Due to the uncertainty surrounding the Wet DBA, its enforcement has been suspended over the past few years, but that is about to change. From January 1, 2025, the Tax Authorities will resume enforcement against false self-employment. They can impose corrections, additional tax assessments, and fines retroactively to January 1, 2025, if it turns out that the self-employed person (freelancer) meets the criteria of an employment relationship. A one-year transition period will apply, during which employers and workers will not be subject to fines if they can prove they are taking steps to fix false self-employment. However, administrative penalties may still be imposed.

False self-employment occurs when a self-employed person (freelancer) is, in practice, based on facts and circumstances exactly employed by the client.

Note! The model agreement based on the criterion of free replacement from the Tax Authorities is revoked as of January 1, 2024. Check if you are still using such model agreements and, if so, consult your advisor.

3. Small-Scale Investment Allowance (KIA)

Have you invested enough in assets in 2024 to qualify for the small-scale investment allowance (see the table below)? If not, there may still be some tax benefits to be gained! To qualify for this investment scheme, an investment must be at least € 450 excluding VAT. Also, you are able to  depreciate the invested amount annually.

Note! Did you make an investment in a business asset in 2020 and claimed the small-scale investment deduction at that time? If you sell an investment within a five-year period, you must take into account a disinvestment addition. Consider postponing the selling this asset until 2025.

4. Invest in energy-efficient business assets in 2024

Do you have plans to invest in a business asset listed on the energy list of the Dutch enterprise agency (RVO), soon? Assess whether this asset is also included on the Energy List for 2025. If not, it may be beneficial for tax purposes to invest in 2024. This means that, for example, you need to sign an engagement letter or order confirmation this year. However, you must ensure that the energy investment is reported to the RVO on-time to claim the energy investment deduction and the environmental investment deduction.

5. Buy a delivery van without BPM-tax

Until the end of 2024, you can still benefit from the BPM-tax exemption when purchasing a new delivery van for business usage (the van must be used for at least 10% of the time for business activities). This exemption will expire in 2025. As of 2025 delivery vans will be subject to the same tax treatment as passenger cars. Investing in 2024 can save you thousands of euros. If you buy a CO2-free delivery van in 2025, you will still not have to pay BPM-tax.

6. Provision

If you want to defer profits, consider whether you can create a provision. It is sufficient for this purpose that future expenditures have their origin in facts and circumstances that occurred before the balance sheet date, and that there is a reasonable degree of certainty that the expenditures will be made in the future. Furthermore, future expenditures must also be attributable to the period preceding the balance sheet date. Possible provisions are for example, restructuring, maintenance, remediation costs, providing guarantees on products, or anniversary expenses for employees.

Tip! In 2025, the Small and Medium-sized Enterprises (SME) profit tax exemption will be reduced from 13.31% to 12.7%. From a tax perspective it may be beneficial to – if possible – bring future profits forward to 2024 or defer costs until 2025.

7. Last VAT Return of the Fiscal Year 2024

When preparing the final VAT return for the year 2024, please consider the following points:

Adjustments related to private usage

• Correction of VAT for private use of a car (both for you as an entrepreneur as well as your employees).
• Correction of VAT for private use, for example, gas, water, electricity, and heating.
• Correction of VAT for personal usage of goods belonging to the business for purposes other than businesslike (including private use, such as assets used for both business and personal purposes).
• Correction of VAT for services provided by you as an entrepreneur for purposes other than business (including private usage).
• Correction within the framework of the company canteen scheme.
• Other corrections on the deduction of prepaid taxes on distributions to employees (providing opportunities for sporting or recreation, private transportation, and housing), as well as for business gifts and similar items.

Pro-rata-related adjustments

• Entrepreneurs who do not exclusively provide VAT-taxed services must calculate the pro-rate deduction percentage for the past year. This may result in an adjustment (upwards or downwards) of the previously deducted VAT on general costs.
• If the pro-rate deduction percentage falls below 90% (or 70% for, among others, travel agencies), you must assess the implications for possible ‘optional taxed rental’ in rental contracts.
• Revision of prepaid tax on movable and immovable investment goods.

In some cases, under conditions, it has been approved that corrections can be made at the end of the calendar year (if the calendar year is not the same as the fiscal year).

Deadline for reclaiming foreign VAT:

Are you economically active in multiple EU countries? Dutch entrepreneurs who have tax deduction entitlement can reclaim VAT paid in other EU countries through an electronic request with the Tax Authorities. Note that separate login details are required for this, and the application process may take several weeks. The request must be submitted no later than September 30th of the year following the year for which you are reclaiming VAT. Received requests after this date may not be taken into account by the other EU country.

8. Does a debtor not pay your invoices? Request for VAT refund in a timely manner

If a debtor does not pay your invoice, you may, under certain circumstances, request for a refund of the VAT you have already paid to the Tax Authorities.

Please note! If you make arrangements with your debtor regarding the payment of your invoice(s), your claim may be converted into a loan. In that case, you cannot submit a refund request to the Tax Authorities. Before proposing a payment scheme, make sure to carefully assess whether your debtor will ultimately fulfill its obligations or not. Ultimately, one year after the claim became due and payable, it is assumed that the debtor will not pay your invoice, and you must request the VAT refund.

You must submit the refund request in a timely manner. This means within one month after it becomes clear that your customer will not pay your invoice.

9. Retention obligations

Cleaning up and destroying old administrative records can certainly result in cost savings, but keep in mind the legal retention period of at least seven years for your administrative data. Regarding real estate and the rights subject to it, you must keep the VAT administration for ten years.

For VAT, there is a special retention obligation in certain cases (for ten years). Permanent documents (deeds, pension and annuity policies, etc.) should not be discarded.

Tip! If you store the data from sales receipts digitally and are able to make it available for the Tax Authorities, it is no longer necessary to keep paper receipts, cash register rolls, and similar information. This also applies to invoices, provided that no information is lost during scanning.

10. Information provision on amounts paid to third parties

Starting from January 1, 2022, employers are required to provide information to the Tax Authorities about paid amounts without wage tax withholding to third parties. If you make such payments to a private person, you must inform the Tax Authorities about several details, including name, address details, place of residence, date of birth, Citizen Service Number (BSN), and the amounts paid, including expense allowances, in a calendar year. The provision of information obligations does not apply to payments to employees, artists, professional athletes, or volunteers, among others. The provision of information obligations also does not apply to individuals who have issued an invoice, provided that the invoice complies with the requirements of the Dutch VAT law. For 2023 and subsequent years, you can provide the information during the year itself, but no later than January of the following year.

Tip! Start as soon as possible with identifying which individuals you will need to gather and provide information for and check if you have all the required information, such as a BSN number.

11. Opt for a businesslike compensation for your co-operating partner

If your partner works in your company, it is businesslike to grant the partner a remuneration. For a civil law employment relationship with your partner, there must be an employer-employee relationship based on an employment. In such an employment relationship, you can take advantage of facilities in wage taxes. Do you opt to grant your partner a fair value employment renumeration for his or her work? In that case you can deduct this remuneration as labor costs from your profit. However, it is required that the remuneration exceeds the amount of € 5,000 and is actually paid out.

You can apply the collaborative deduction for a partner in your Dutch income tax return if, you were regarded as an entrepreneur with profit from business activities, you met the hour requirement, and your partner worked at least 525 hours in your business in a calendar year without receiving any compensation that you can deduct from your profit. The deduction is a percentage of the profit, ranging from 1.25% to a maximum of 4%, depending on the number of hours your partner worked. Unlike the employment relationship and the employment remuneration of € 5,000 or more, your partner is not liable for tax on the collaborative deduction for a partner you took into account in your tax return.

The choice between an employment relationship, a reasonable employment remuneration, or the working partner deduction depends on the actual situation.

Disclaimer

While utmost reliability and care have been aimed for in the compilation of the Year-End Tips 2024, this version has been put together based on knowledge up to November 11, 2024. We have assumed that the Senate will approve the Tax Plan 2024 and the adopted amendments. Our organization cannot be held liable for any inaccuracies and their consequences.

More Year-End Tips 2024

For Directors/Major Shareholders (DGAs)
For the Self-Employed Entrepreneurs
For Private Individuals