Freelancers in the Netherlands pay taxes like everybody else. But the Dutch tax system can be a bit overwhelming at times, especially if you’re not from the Netherlands. There are just so many different taxes and rules! This blog is a brief overview and explanation of the taxes you (most likely) need to pay as a freelancer or self-employed professional in the Netherlands.
If you are going to work as a freelancer or self-employed professional, you need to register at the Chamber of Commerce (KvK). You will then be automatically registered with the tax authorities (De Belastingdienst). The Belastingdienst will determine if you are an entrepreneur (ondernemer) for the purposes of turnover tax and income tax depending on your legal entity. You could be susceptible to VAT but not to income tax. Most freelancers are registered as a ZZP’er (zelfstandige onderneming zonder personeel), meaning they’ll have to pay both taxes.
Let’s start with a small explanation of VAT (BTW in Dutch).
Turnover tax (VAT)
Most freelancers need to charge and pay VAT, value-added tax, on the services or goods they purchase and sell. There are three VAT rates in the Netherlands: 0%, 9%, and 21%. The VAT rate you need to charge depends on the goods and services you offer. 21% VAT is the general tariff.
9% VAT rate is for example for the following goods and services:
- appearances in musical performances, operas, operettas, and at music festivals
- dance performances
- performances by disc jockeys or video jockeys at, for example, dance parties
- performances by a master of ceremony or a vocalist at dance events
- performances in revues, musicals, and cabaret shows
Services with a 0% VAT rate include among others teaching within art education. Goods with a 0% VAT rate are, for example, goods you supply to an entrepreneur in another country within the European Union.
Besides a 0% VAT rate, specific services and goods can also be exempt from VAT. For example, within art education. If you teach people under 21 the following services are exempt from VAT:
- teaching music education such as singing lessons, instrument lessons
- dance education such as jazz dance, children’s dance, street dance, classical dance, modern dance, show and musical dance (aerobics is taxed)
- drama education such as drama and theater lessons
- visual arts such as drawing, crafts, textile, and audiovisual design
21% applies to all other products and services.
As a freelancer or self-employed, you need to charge VAT over the services and/ or goods you deliver. The percentage and amount of VAT you charge need to be stated in invoices that are sent to clients. The VAT charged needs to be paid off to the Belastingdienst.
Freelancers who buy goods or services for their business will pay VAT to the seller. This will also be visible on the bills and/ or invoices you receive. The VAT you paid to other companies deducts the amount of VAT you need to pay off to the Belastingdienst.
The VAT you paid and received needs to be declared to the Belastingdienst every month or quarter, depending on your preference. Most entrepreneurs do this every quarter. You will fill in the amount of VAT you received, and the amount of VAT you paid for business expenses. The difference needs to be either paid or will be paid back. VAT declarations are time-consuming, and mistakes can be made easily. Small mistakes or being too late with your declaration can result in a fine. It is highly recommended to keep on track with your administration with, for example, bookkeeping software. This will eliminate the chance of mistakes or being too late. Advanced bookkeeping software offers services such as uploading your bills and invoices by taking a photo, and your VAT declaration can be submitted to the Belastingdienst automatically through an official integration.
Another important tax is the income tax.
You are most likely an entrepreneur for the purpose of income tax, if:
- Your activities are conducted in an economic setting
- You can expect to make a profit
- You work independently and at your own risk
Income taxes are divided into three categories, so-called boxes. It is possible that you need to pay tax in all three boxes, but it is also possible that you need to pay tax in only one box. It depends on the type(s) of income you have. Each box has its own rate.
The three boxes are as follows:
Box 1: income tax for work and homeownership
- Salary, tips, business profit
- Benefit, pension, annuities, and maintenance payments
- Income from abroad
- Income earned as a freelancer, childminder, artist, or professional athlete.
The tax percentage in box 1 is until a taxable income of €69.399, 37,07%. Above €69.399, you need to pay 49,50% tax.
Income taxes in box 1 are paid over your taxable income. Your income can be reduced with different deductions, for example, deductions, especially for starters or small businesses. Since these deductions are lowering your income and therefore the amount of tax you need to pay, it is highly recommended to have a close look at all possible deductions. This can be complex, but you can outsource your income taxes and get advice from professional bookkeepers.
Let’s say, your taxable income is €75.000 in 2022.
For the first €69.399, you need to pay 37,07%. That will be €25.726.
For the €5601 that is left, you need to pay 49,50%. That will be €2772.
The total amount of tax due is €28.498.
This is a lot of money, but you can spread the payment of the income taxes over the year. This will be explained later in this blog.
Note: these percentages change every year (slightly) and differ for people who are already retired or are going to retire in that particular year.
Box 2: financial interest in a company
If you have a substantial interest of at least 5% directly or indirectly in another business (or together with your tax partner), you need to pay tax in box 2.
In 2022, the tax percentage for box 2 is 26,90%.
Box 3: savings and investments
If you have savings over €50.000 (or €100.000 together with your tax partner), you need to pay tax in box 3. In 2022, the percentage is 31%. So, if you have €55.000 in savings & investments, you need to pay 31% over €5.000.
Besides income taxes, there is also a national insurance premium (premie volksverzekeringen). Freelancers need to pay this through their income tax declaration, and it will be calculated with a percentage of their taxable income. The percentage you must pay depends on, for example, your age and changes every year slightly.
You can request a provisional assessment for your income taxes, this will be sent in December or January for the new year. The provisional assessment consists of the estimated income taxes and national insurance premium you need to pay that year. You will then pay a part of your income taxes and national insurance premium every month, and therefore you don’t have to pay everything at once at the end of the year.
Keep in mind that this assessment can be changed during the year, for example, because of the purchase of a house. You must declare this at the Belastingdienst yourself. At the end of the year, the final assessment still needs to be done, this will consist of the outstanding amount of taxes you need to pay. If the definitive assessment differs from the provisional assessment, you need to pay either more taxes or you will receive too much-paid taxes back.
This blog is made in collaboration with Tellow, a bookkeeping tool for freelancers and self-employed. You can create invoices, quotes, VAT and income tax returns, and more all in one easy app. The app and website are available in English. If you still have some questions, Tellow also has an English-speaking customer service team and bookkeepers. Make sure you check it out here.