Do not miss these income tax return tips

Do you have a sole proprietorship, general partnership (VOF), professional partnership (maatschap), or limited partnership (cv)? Then you have to deal with income tax. You can file your income tax return for the previous year between 1 March and 1 May. You can also request an extension until 1 September – but your request must be made before 1 May.

The Dutch Tax and Customs Administration automatically fills in your personal details. You complete the business details of the declaration yourself. Use applicable deductions and schemes to pay less income tax. The amounts mentioned apply to (the return for) the year 2021. Do you have a private limited company (bv)? Then view the available tax allowances.

Consider the impact of corona

Besides the tax tips below, several points for attention apply to your tax return for 2021. Has anything changed in your personal situation? Check the pre-completed declaration carefully and update it where necessary. Corona may also have caused a drop in turnover or loss. Consider:

• Some support schemes in 2021, such as NOW and Tozo, are taxed. This can affect the amount you have to pay in tax and fees. Other schemes such as TVL are tax-free but must be stated as exempt profit components.
• If you filed before 1 April, you will hear before 1 July if you will receive a refund or have to pay. Was your income negative in 2021? In that case, the Tax and Customs Administration will offset this with your income from the previous 3 years and you may get a refund. Initially by looking at your income 3 years ago, so 2018. And if there is more loss than profit in 2018, then with 2019 and possibly 2020.
• Averaging (middeling) may save you money. If you earned less in 2021 than in 2019 and 2020, you can calculate the average income over those 3 years. If the tax for the average income is lower than in the individual years and the difference is greater than €545, you can get a tax refund.
• The hours criterion was temporarily relaxed in 2021. If you work as a self-employed professional in your company for at least 1,225 hours per year, you will receive the private business ownership allowance (zelfstandigenaftrek) and tax relief for new companies (startersaftrek). This was not always possible due to the corona crisis. For the period between 1 January and 1 July 2021, the Tax Administration allows you to count 24 hours a week, even if you did not work those hours.
• Have you postponed paying mortgage interest? In that case, the deductible interest amount may be lower. The interest deduction depends on the conditions of your mortgage lender. You cannot deduct unpaid interest.

1. Entrepreneur allowance and SME profit exemption

The Tax and Customs Administration has added the online tool 'OndernemersCheck' (in Dutch) to the online tax return. This allows you to check in advance if you have to file a tax return as an entrepreneur, if you have to fill in the profit part, and if you are entitled to an entrepreneur's allowance and other deductions.

The entrepreneur allowance is an amount that you deduct from your profit and can consist of different parts. You are eligible if you are an entrepreneur according to the criteria of the income tax. You must also meet the hours criterion, whereby you spend at least 1,225 hours on your company. The private business ownership allowance is an annual deduction of a fixed amount. The tax relief for new companies is an extra deduction in 3 of the first 5 years of the company. WBSO is the R&D tax credit scheme. It is a deduction for innovative research work. The discontinuation relief is a deduction of a fixed amount if you end your business.

Due to the SME profit exemption, you can deduct 14% from the profit after the entrepreneur allowance. The hours criterion does not apply to the SME profit exemption. You must be an entrepreneur according to the income tax criteria.

2. Investment deduction and depreciation

When investing in business assets, you can deduct an amount from the profit via the small projects investment credit (kleinschaligheidsinvesteringsaftrek, KIA, in Dutch). The scheme applies if you invest a minimum of €2,400 in a financial year and a minimum of €450 per business asset. You can also write off business assets. Then you divide the costs of business assets over the number of years that you use them. A special arrangement applies to starting businesses. Under certain conditions (in Dutch), you determine the rate and amount of debiting yourself.

3. Business balance

The balance of your business bank account belongs on the balance sheet of your company. This concerns money that is needed as working capital or for an investment (in Dutch). It does not count for your income in box 3. In 2021, private assets above €50,000 per person are taxed. In 2022 this will be €50,650. You have to transfer permanent excess liquid assets from business to private.

4. Cost Deduction for mixed costs

Only the amount above the threshold of €4,700 is deductible from the costs for business gifts, study trips, conferences, and also business lunches or drinks. You may also choose to deduct 80% (in corporation tax 73.5%) of the mixed costs incurred by you. Then the threshold does not apply. Read more about the deduction of expenses (in Dutch).

5. Allowance check

An allowance (toeslag) is a contribution towards the costs that you have in your situation. There are allowances for the rental costs of your home, healthcare allowance, child budget, and childcare. The amount of your allowance is based on your income. Equity also counts for the first 3 allowances. If you can make use of the entrepreneur allowance, your assessment income will be lower. You will then be eligible for an allowance earlier. More information and a test calculation can be found on toeslagen.nl (in Dutch).

Help with taxes

Do you need support with your taxes? Find a tax expert (in Dutch), an accountant through the Royal Netherlands Institute of Chartered Accountants (NBA, in Dutch); SRA (in Dutch), or a tax advisor (in Dutch). They can help you with your taxes and allowances.