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  • Writer's pictureJenifer Benton

Year end tips 2023 for self-employed and IB entrepreneurs

Updated: Dec 4, 2023

The tax world never stands still, and as a ZZP'er it is often difficult to keep up to date with everything. Therefore, we have briefly summarized the main points of all the changes and relevant issues that may be of interest to your personal situation in order to end the year optimally fiscally and get 2024 off to a good start. Do not hesitate to contact us if you have any questions, we are happy to look at your personal situation together and, thanks to our expertise, can support you to optimize your current situation fiscally.

Important: Any information found in this article is based on the information that was available on the day of it's release. Unfortunately we cannot predict the future yet, and due the flexible nature of the legislation, certain numbers and rules may be different in the future.


Comprehensive list of tips for self-employed people

Income tax tips for entrepreneurs


1. Are you or are you not a business owner for income tax purposes

If you have started your business this year, check whether or not you are considered an entrepreneur for income tax purposes. In doing so, the Internal Revenue Service pays attention to, for example:

  • Self-employment: Do you determine how you do your work? Do you set your own prices? Do you use your own materials, tools or equipment?

  • Entrepreneurial risk: Do you risk your clients not paying your bills?

  • Continuity: Do you have enough resources to run the business? Are you making a profit? If, no, is there a realistic profit expectation over a number of years?

  • Size of your business: Do you work for a variety of clients? How much time do you spend on them? What is the average annual turnover?

  • Advertising: Do you advertise your business (for example, through a website, print materials or social media)?

If you are classified as an entrepreneur by the Internal Revenue Service, then you can take advantage of certain entrepreneurial deductions/facilities that ultimately allow you to pay less income tax. In particular, consider the mkb exemption and the self-employment deduction.

 

2. MKB profit exemption when qualifying as an entrepreneur

If you meet qualification as an entrepreneur, then the MKB exemption is applied. The exemption is 14% of the profit in 2023. In accordance with the adopted amendment to the 2024 Tax Plan, this percentage will go to 13.31% as of 2024. Be prepared that the benefit of the SME profit exemption deduction is limited. Indeed, the maximum deduction rate is 36.93% in 2023 (36.97% in 2024 as per the Tax Plan). That maximum rate was still 40% in 2022.

 

3. Think about your administration in the start-up phase

Costs incurred with the intention of establishing a business can later be included as a deduction in your income tax return. So keep good records of these expenses and keep all relevant documents. Keeping track of the number of hours spent is also recommended, since in order to apply, for example, the self-employment deduction, it must be shown that more than 1,225 hours per calendar year were spent on the enterprise. As soon as you have the idea of starting a business, also start keeping track of all start-up expenses and hours worked.

 

4. Business in dire straits? Offset the loss

Your business may also be loss-making (in the start-up phase). This can result in a loss from work and home (in box 1). This loss is offset against positive income from work and home from the three preceding years and against positive income from work and home from the nine following years. The order of offset is fixed: first the three previous years and then the nine following years (the oldest year first).

Also note:

To the extent that the losses cannot be set off in the aforementioned years, the right to loss relief is lost. This is because it is not possible to set off these losses against income from substantial interest (box 2) and savings and investments (box 3).

Tip

Prevent your losses from being lost and see if the result can be increased by, for example, deferring expenses and charges or releasing provisions earlier.

 

5. Pay attention to income from assets made available

If this year you have made your assets, for example a property or a loan, available to your tax partner or your tax partner's minor children, you should consider how to account for this for tax purposes. If your tax partner or your or your tax partner's minor children have earned a profit from your business or from other work, you must declare the proceeds (less the deductible costs) in box 1 as income from property made available. The 12% exemption is deducted from these proceeds.

Also note:

You are required to keep records of the assets you have made available. You must also prepare a balance sheet and an income statement.

 

6. Check your provisional tax assessment

Check whether your business income is still in accordance with the provisional income tax assessment. The provisional assessment is an estimate based on the most recent data available to the Tax Office. If the information in the provisional assessment is not correct, for example due to changes in your financial situation, you can adjust the provisional assessment at any time during the year. Is the information in your provisional assessment correct? Then you must pay the assessment. If you pay before the first payment date, you will receive a payment discount. The percentage of the payment discount went up from 2% to 3% on July 1, 2023, and will go to 4% on January 1, 2024. However, according to the proposal on Budget Day 2023, the payment discount for income tax will be abolished on January 1, 2024; lump sum payments will remain possible anyway, but without the discount.

Also note:

You cannot object to your provisional assessment. If you change your provisional assessment, you may receive a discrepancy decision for changes that you have submitted but that the Tax Office does not accept. You can object to this decision.

 

7. Keep a record of your hours

If you are an entrepreneur for income tax purposes, you may be eligible for certain types of entrepreneur deduction (self-employment deduction, co-employment deduction). For this, however, you must meet the hours requirement. You meet the hours requirement if you spend at least 1,225 hours on your business(es) in 2023. Even if you have not been an entrepreneur all year, you must still spend at least 1,225 hours on your business(es).

Also note:

All hours you spend on your enterprise count toward the hours requirement, as long as you can plausibly demonstrate those hours you spent on your enterprise. You can do so, for example, using your diary, quotations, time sheets and invoices.

 

8. Apply the self-employed deduction

If you meet the hours requirement as an entrepreneur then you can apply the self-employment deduction of €5,030 in 2023 (€3,750 in 2024 according to the Tax Plan). The benefit is calculated at a rate of 36.93% (in 2023). The self-employed deduction does not exceed the amount of profits before entrepreneurial deductions. This limitation does not apply if you are a starter and qualify for the starter deduction.

Is your profit too low to completely consume the self-employment deduction? Then you can offset the amount of unrealized self-employment deduction over the next nine years.

 

9. Pay attention to the startup deduction

As a starting entrepreneur, in addition to the self-employed deduction (of €5,030 in 2023), you can also claim the starter deduction of €2,123. There are conditions attached to this. You have not been an entrepreneur for income tax purposes every year for the past five years and you have used the self-employed deduction a maximum of twice in the past five years.

 

10. Take advantage of deduction for research and development work

If you perform work for research and development purposes, you may be eligible for a tax ruling that allows you to reduce your research and development (R&D) costs. Check whether you are eligible for this tax scheme.

 

11. Claim the small business investment deduction

Consider whether it is desirable to invest now or wait with investments until after January 1, 2024. The time of investment is the time when you enter into the obligations to purchase or improve the asset. This is because you can qualify for small-scale investment deduction for your investment if you have invested in business assets. The amount you may deduct from profits depends on the total amount you have invested per business. To qualify for the small-scale investment deduction (KIA) in 2023, you must invest an amount between €2,601 and €353,973 in business assets for your company.

 

12. Consider environmentally friendly investments

If you want to invest or have invested in environmentally friendly business assets, you can check whether you qualify for the Environmental Investment Allowance (EIA) and the Arbitrary Depreciation of Environmental Investments (VAMIL). By applying the MIA, you can deduct up to 45% of the investment amount from profits. VAMIL allows you to depreciate an investment at any time. The random depreciation is limited to 75% of the investment amount. By depreciating faster, you reduce your taxable profit and pay less tax in that year. This offers you a liquidity advantage, unless it puts you in a loss situation.

Also note:

Consult the Environmental List which lists all business assets eligible for MIA and/or VAMIL.

 

13. Consider energy-saving investments

Check whether you want to invest or have invested in energy-saving business assets or renewable energy. You may then be eligible for the energy investment deduction (EIA). The EIA allows you to deduct 45.5% (2023) of the investment amount from your profit. You must invest a minimum of € 2,500 per asset. As of 2024, the percentage EIA will be structurally reduced to 40% in accordance with the Tax Plan 2024.

Also note:

Make a notification to RVO.nl within three months after the investment. You will receive a confirmation of receipt which you must keep with your accounts. After that, you indicate the energy investment deduction in your tax return.

 

14. Beware of the disinvestment allowance

If you have sold or donated business assets for which you applied investment deductions in previous years, you may have to repay part of that deduction, in the form of a disinvestment addition. Check in your administration whether you have sold or donated business assets within five years after the beginning of the calendar year in which you made the investment. The value of those assets must collectively exceed € 2,600.

Also note:

If you stop your business or part of it, the disinvestment addition also applies to the business assets that you dispose of or transfer to your private assets within the disinvestment period.

 

15. Put your profits into reinvestment reserve

If you are going to sell your assets or have sold them this year, add your book profit on assets to the reinvestment reserve. This will prevent you from owing tax on that book profit immediately. A condition is that on the balance sheet date you intend to reinvest in another asset.

Also note:

Even if you lose an asset, or if it is damaged and you receive compensation for it, you can include the difference between this compensation and the book value of the asset in the reinvestment reserve.

 

16. Prevent release of reinvestment reserve

You were able to delay taxation at some point by establishing a reinvestment reserve. However, the reinvestment reserve must be added back to profits at the time you no longer intend to reinvest. Also, if three years have passed since the fiscal year in which you formed the reserve, and you have not yet made a reinvestment, tax will still be levied on the book profit. Check your records to see if you can avoid the release of the reinvestment reserve by writing it off against the reinvestments made.

 

17. Establish a provision

Do you want to delay earnings? Then check whether you can still make a provision. For this it is already sufficient that the future expenses have their origin in facts and circumstances that occurred before the balance sheet date, and that a reasonable degree of certainty exists that the expenses will be incurred in the future. Furthermore, the future expenses must also be attributable to the period prior to the balance sheet date.

Also note:

You can make a provision for, for example, a reorganization, maintenance, remediation costs, product warranty or staff anniversary expenses.

 

18. Form an equalization reserve

Find out if you have costs and expenses from business operations in this fiscal year that won't result in a spike in expenses until the future. For example, consider specific maintenance costs on your premises, such as painting. In fact, you can then add a portion of the costs charged against profits to the equalization reserve. This also reduces your profit for this year.

Also note:

The amount you are allowed to reserve depends on the expectation about the amount of future costs and the time when you incur the costs. Thus, you must make a reasonable estimate. If it later turns out that the estimate was too high then you must include the excess in profit. The annual addition does not always have to be the same. It may change, for example, if costs increase or the time period changes.

 

19. Depreciate on your assets

If you have purchased new business assets such as buildings, machinery, cars, inventory and other durable items that you use for business, you cannot deduct all the costs in the year of purchase (unless the asset is worth no more than €450). Instead, you must depreciate on them. To depreciate an asset, you must determine the amount you may depreciate each year. This depends on the purchase cost, the residual value and the probable useful life. According to the tax authorities, you can use the straight-line method. You then depreciate each year a fixed percentage of the difference between the purchase cost and the residual value. The formula for this calculation of depreciation is: depreciation per year = (purchase cost - residual value) : estimated useful life.

Also note:

The depreciation per year is a maximum of 20% on the acquisition cost of the asset. For goodwill, the maximum percentage is 10%. In addition, depreciation on business premises differs from depreciation on other business assets. Therefore, chart your depreciation.

 

VAT tips

20. Check your eligibility for the small business ruling

You can make use of the small business allowance (KOR) if you have not made more than €20,000 in sales this year. If you meet all the conditions, you no longer have to charge VAT to your customers. You also no longer have to file a VAT return. However, you can no longer reclaim VAT on your costs and investments.

 

21. Consider the billing requirements

Check that the invoices meet the requirements for VAT. The invoice must contain the following information:

  • your full name and that of your buyer;

  • your full address and that of your customer;

  • your VAT identification number;

  • your Chamber of Commerce number, if any;

  • an invoice number;

  • what goods and number of goods supplied;

  • what services and quantity;

  • the date the goods or services were delivered, or the date of an advance payment;

  • the amount you charge, excluding VAT;

  • the VAT rate applicable to the goods or service provided.

Also note:

Additional conditions apply to international supplies or services within the EU.

 

22. Reclaim VAT on uncollectible claims.

If you have sent the invoice then you must pay the VAT stated on that invoice on a timely basis on your tax return. If your customer does not pay the invoice or pays only part of it, your claim may be (partially) uncollectible. In that case you have paid VAT unduly. You can reclaim this VAT as soon as it is certain that your claim is non-recoverable. In any case, the claim is considered uncollectible one year after the due date of the invoice.

 

23. Don't forget your VAT correction

Check whether you have over- or under-reported VAT this year or in the past five years. You are obliged to report this. If so, amend your return using the 'Suppletie Omzetbelasting' form.

Also note:

If it turns out that by correcting your return you receive or have to pay € 1,000 or less in refunds, you may include this in the next return.

 

Tips for all taxpayers


24. Do you have a tax partner or not?

Find out if you are considered by the IRS to be a tax partner this year. Tax partnership means you can file tax returns together and share certain income and deductions. Unmarried cohabitants who are both registered in the Municipal Personal Records Database (GBA) at the same residential address are tax partners for income tax purposes if one or more of the following conditions are met:

  • They have signed a notarized cohabitation contract.

  • They have a child together.

  • One of the partners has a child and the other has acknowledged the child.

  • They are registered as partners for a pension plan.

  • Both partners own the home that is their primary residence.

  • A minor child is also registered at the same residential address and no business rental agreement can be presented between the cohabitants.

  • They were already tax partners last calendar year.

 

25. Do you qualify for personal deductions?

Should you have additional expenses, you can deduct them from your income tax if they are classified as personal deductions. These include partner alimony paid, expenses for specific care costs, costs for temporary stay at home of severely disabled persons and gifts.

Personal deductions are deducted from income in Box 1. Any remainder is deductible from income in box 3 (rate 32% in 2023) and then from income in box 2 (rate 26.9% in 2023). Further, keep in mind that the personal deduction is only deductible at a maximum rate of 36.93% in 2023.

 

26. Don't forget about taxes on your assets

Check how high your assets are this year. Is your capital not higher than your tax-free capital? Then you have no benefit from savings and investments and do not have to pay taxes in Box 3. The levy-free capital is € 57,000 per person (in 2023). So for you and your tax partner together € 114,000. Is your capital higher? Then only the part above it counts for the calculation of the tax in box 3. The following return percentages apply for 2023:

bank and savings deposits and cash: 0.36% (provisional);

investments/other assets: 6.17% (fixed);

debts: 2.57% (provisional).

On the calculated return, you pay 32% income tax in Box 3. An amendment to the Tax Plan raises this rate to 36% in 2024.

 

27. Consider making a donation

You can still make an exempt gift of €2,418 per person this year. As a parent, you can donate a higher exempt amount to your child of €6,035.

Attention to the following

Partners, such as parents or grandparents, are considered one donor.

 

28. Consider gifting for private home.

You can still make use of the increased exemption for the gift for a private home this year under conditions. The one-time increased exemption will be €28,947 in 2023 (the "jubelton bonus" was scrapped in 2022). In accordance with the Tax Plan, the gift exemption for owner-occupied housing will be scrapped altogether as of 2024.

The gift must be given to the recipient between the ages of 18 and 40, or partner of the recipient between the ages of 18 and 40. Also, they both have not previously used an increased exemption for a gift from this donor.

Please note:

although the gift exemption for private homes has already been discontinued as of January 1, 2023, you are still able to supplement a gift from 2022 tax-free up to a maximum of € 106,671 this year (before the end of 2023!) under the transitional rules. This means the supplement must be paid by bank transfer before 01-01-2024 and that money must have been spent by the recipient on their own home before January 1, 2025.

 

29. Purchase expensive purchases this year

If you plan to make an expensive purchase soon, it may pay off for tax purposes to make and pay for it no later than Dec. 31, 2023. By doing so, you will lower your assets and thus reduce the Box 3 tax.

 

30. Consider green investing

You can also reduce your Box 3 assets by investing green. Green investments are subject to an exemption in Box 3 of up to €65,072 for 2023. If you have a fiscal partner, then the exemption for you and your partner together is even double (€ 130,144). By amendment to the Tax Plan, this exemption will be scaled back to €30,000 per person effective January 1, 2025.

 

31. Bundle your healthcare costs

You can deduct your healthcare costs in income tax at a rate of 36.93%. A threshold does apply, which means that only healthcare expenses above this threshold are deductible. Have you already incurred expenses but come in below the threshold? Then consider, for example, making the planned purchase of a prosthesis or orthotics this year so that you can cross the threshold.

 

Year end tips for entrepreneurs summarized

As you can read in this article, in these year-end tips for entrepreneurs, self-employed and sole proprietors, there are several ways to optimize your personal tax situation. Fortunately, you are not alone, we are ready to assist you with all your questions. Together we will gladly look at your personal situation and what the possibilities are so that you do not have to pay more than necessary.

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