Selling products in an online shop requires more than simply building a website. A fundamental requirement for starting an online shop in the Netherlands is paying VAT and income taxes. As an entrepreneur, it’s important to get well acquainted with the tax system in order to avoid fees and penalties.
Most entrepreneurs are legally obligated to register at the Chamber of Commerce (KvK) and apply for a VAT number when operating an ecommerce business in the Netherlands. It ensures that your business complies with the tax requirements necessary to send out invoices and benefit from government allowances. Here is a breakdown of your basic tax obligations as an online shop owner in the Netherlands.
In the Netherlands, the Tax and Customs Administration (Belastingdienst) will likely consider you an entrepreneur if you own an online store. This status has some implications when it comes to filing your income tax return. As opposed to working for a company where your employer withholds your income tax from your salary. Being self-employed makes it your responsibility to calculate and pay your income tax yourself.
The tax authorities define an entrepreneur as someone who provides products or services for payment to make a profit. Your business must meet the following criteria that qualify you as an entrepreneur:
- Independence: you are solely responsible for arranging work and setting prices
- Business risk: you are liable for any debt or losses incurred by the online shop
- Continuity: you invest time and money into acquiring clients
- Business size: you serve multiple clients and generate turnover
In order to determine if you meet the aforementioned requirements for filing your income tax as an entrepreneur, you can check here.
For tax purposes, it’s important to verify your status as an entrepreneur. The tax authorities grant special exemptions and allowances to support self-employed individuals in the Netherlands. Here is a list of the tax benefits you can claim as an entrepreneur:
- Entrepreneur deduction: consists of different allowances on your profit up
- SME profit exemption: reduces your taxable profits up to 14%
- Private business owner allowance: deduct a fixed amount from annual gross profits
- Small projects investment credit: deduct business asset investments from profits
Check each allowance to make sure you meet the hour criterion to qualify. The Dutch tax authorities allow you to deduct up to 46% in total.
The time period for submitting your annual tax return is from March 1st to April 30th. The deadline for filing an extension is May 1st. Any tax returns filed after the deadline could be subject to a fine.
Not an entrepreneur?
Have you determined you don’t qualify as an entrepreneur? Then your income falls under the category of “earnings from other activities.” When the tax authorities do not regard you as self-employed, then you are “enjoying results.” Note that under this status you are still allowed to deduct business expenses from your income. However, you cannot benefit from any income tax deductions and allowances for entrepreneurs. Keep in mind that you might still be considered an entrepreneur for VAT purposes.
Value Added Tax (VAT)
Conducting business in the Netherlands requires paying VAT to the government. The value added tax must be paid regardless of the legal structure of your online shop. In order to qualify as an entrepreneur for VAT purposes, your online shop must:
- Participate in the normal economic traffic
- Provide products or services
- Charge more than symbolic fees (make a profit)
When you start your online shop, the Chamber of Commerce will forward your registration to the tax authorities who will determine your status as an entrepreneur. In turn, they will issue your online shop a VAT number which you must attach to your invoices. According to the Dutch Civil Code (Burgerlijk Wetboek), your online shop must clearly display your company’s Chamber of Commerce number and VAT identification number.
How to pay VAT?
The payment scheme for VAT is reverse changed. It means your customers will pay you VAT on top of the purchase price and you will be responsible for paying it to the tax authorities. A VAT return should be filed each quarter regardless of whether or not you conducted business in that period. It can be filed digital through the tax authority website. Tax rates are three-tiered: 0%, 9%, and 21%. Presumably you will have to charge the highest rate which applies to most products sold in online shops. Check which rate applies to your products here.
Under the Small Business Scheme (KOR), your online shop may qualify for a VAT exemption. If you are registered as a sole proprietor at the Chamber of Commerce, and your annual turnover is less than €20,000 then you can apply to opt out of paying VAT. When your online shop business is exempt from VAT, then you do NOT have to:
- Charge customer VAT
- Pay VAT
- File a VAT return
- Keep VAT records
- Claim VAT on your costs and investments
You can participate in KOR for a period of 3 years or until your turnover exceeds €20,000 in a calendar year. Apply for the small business scheme here.
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