How income tax for business owners works
- Gé Sletterink
- The basis
- 27 February 2026
- 5 min
- Managing and growing
- Finance
As an entrepreneur in the Netherlands, you will have to deal with income tax (IB). Simply put, this is a tax on all forms of income that you can have as a natural person (human being). In this article, you can read how income tax works for business owners, what deductions are available, and how to file your tax return.
What is income tax?
Income tax is a tax on your total income as a natural person. For entrepreneurs with an eenmanszaak (sole proprietorship), partners in a VOF (general partnership), partners in a maatschap (professional partnership), and managing partners in a CV (limited partnership), the result from your business counts as income. And so does the income they have personally.
At the end of each year, you file a tax return with the Netherlands Tax Administration. In this return, you indicate how much income you have personally earned. Your income may consist of:
- wages from employment
- profits from your business
- interest
- income from your own home (notional rental value)
- other income
These types of income are taxed in box 1 of the income tax return.
What is the box system?
In the Netherlands, income tax consists of three boxes. Each box taxes a different type of income:
- Box 1: Income from work and home, for example wages or profits from your own business.
- Box 2: Income from a substantial interest (dividend) if you own more than 5% of the shares in a BV.
- Box 3: Income from savings and investments.
Entrepreneurs with an eenmanszaak, VOF, maatschap, or CV pay income tax in box 1 on their business profits.
What is profit from business?
Profit from business is the amount remaining after you have deducted the purchase costs and all business expenses from your turnover.
Calculation example:
Profit = turnover - purchase costs - expenses
Turnover: €80,000
Purchases: €40,000
Expenses: €10,000
So the profit is €30,000
You have to pay tax on the profit, but you can first make use of a number of deductions.
Which costs are deductible?
You can deduct business expenses from your turnover. Examples of deductible expenses are:
- rental of workspace
- depreciation costs
- purchase of products and materials
- business telephone and internet costs
- business travel expenses (mileage or public transport)
- marketing and advertising
- business software and subscriptions
Please note: Expenses must be for business purposes and you must be able to prove them with receipts or invoices. Expenses that are partly private are subject to a deduction limit.
What deductions are available to entrepreneurs?
As an entrepreneur for income tax purposes, you can make use of schemes that reduce your taxable income. This means you pay less tax. These schemes are the entrepreneur's allowance and the SME profit exemption.
Entrepreneur's allowance
The entrepreneur's allowance consists of two parts:
- Self-employed person's allowance: in 2026, you can deduct 1,200 euros from your profit if you meet the hour criterion (working at least 1,225 hours per year in your business).
- Start-up allowance: An additional deduction of £2,123 for new entrepreneurs (maximum three times in the first five years that you are an entrepreneur and are also entitled to the self-employed person's allowance).
SME profit exemption
If the Netherlands Tax Administration considers the result from your business to be 'business profit', you are entitled to the SME profit exemption. You do not have to meet the hour criterion to qualify for this. The SME profit exemption is deducted from the profit after deduction of the entrepreneur's allowance. In 2026, the SME profit exemption will be 12.7%.
What are the income tax rates for 2026?
For entrepreneurs below the state pension age, the following rates apply in box 1 in 2026:
| Taxable income | Rate |
|---|---|
| up to 38,883 euros | 35.75% |
| from 38,883 to 78,426 euros | 37.56% |
| from 78,426 euros | 49.50% |
You pay this rate on your taxable income. This is your income after deduction of expenses and entrepreneur's allowance. Read more about the 2026 tax rates.
Tax return 2025
From 1 March 2026, you can file your income tax return for 2025. Are you working on this? Then use the article on Dutch tax rates in 2025.
How do you calculate income tax?
First, calculate your profit from business. Then calculate the income tax.
Use the turnover from the earlier example. The figures below apply to a business owner who spends more than 1,225 hours per year on the business and has been an entrepreneur for more than 5 years:
| Description | From gross to net | Fiscal calculation |
|---|---|---|
| Profit | 30,000 | 30,000 |
| Entrepreneur's allowance | -/- 1,200 | |
| 28,800 | ||
| SME profit exemption (12.7% of 28,800) | -/- 3,658 | |
| Taxable income | 25,142 | |
| Tax rate 35.7% | 8,988 | |
| General tax credit | -/- 3,115 | |
| Employment tax credit | -/- 5,381 | |
| Income tax payable | -/- 492 | 492 |
| Income-related health insurance contribution payable | -/- 1,219 | |
| Net income | 28,289 |
Depending on your personal situation and the amount of your taxable income, you may be eligible for tax credits. These reduce the amount of income tax you have to pay. In this example, the entrepreneur is eligible for the general tax credit and the employment tax credit.
In addition to income tax, as an entrepreneur you also pay an income-related contribution under the Healthcare Insurance Act (Zvw) on your taxable income. In 2026, this contribution will be 4.85%, which in this example amounts to €1,219.
Other sources of income
Do you have other income in addition to your business, such as wages from employment? If so, add this income to your taxable income before continuing your calculations. The payroll taxes or income tax previously withheld on this other income will be deducted from the income tax payable.
How do you file your income tax return?
As a business owner, you file your income tax return via the Mijn portal, or using filing software. You can also outsource your income tax file return to your bookkeeper, accountant, or tax adviser.
Important steps in the filing process:
- Collect all your income and expenses in the calendar year you file the return for.
- Calculate your profit.
- Use the tax deduction schemes you are entitled to, such as the entrepreneur's allowance and the SME profit exemption scheme.
- Fill in the return between 1 March and 1 May of the calendar year following the year you file for. Download the pre-filled tax return form: the Tax Administration has filled in the information they have of you. Check this pre-filled information and adjust if necessary. Fill in the rest of the tax return form.
Are you unable to file in time? You can request extra , this is called a filing extension. Do this before 1 May. If the extension is granted, you can file the tax return later. - Check the tax return before you send it. Download a copy for your files.
The Tax Administration will send you a tax assessment, that tells you how much you need to pay, or how much you will be refunded. Did you file your income tax return for the first time this year? Then you will probably receive a provisional tax assessment for the coming calendar year.
What is a provisional tax assessment?
If you receive a provisional tax assessment, you must pay a monthly amount in advance. That way, you do not have to pay the full amount of income tax all at once after receiving your tax assessment. The Tax Administration can impose a provisional assessment. You can also apply for a provisional assessment (Tax Administration website, in Dutch). Or apply for a (in Dutch), if the assessment no longer reflects your situation.
Do you need help?
Filing an income tax return can be difficult. If you need help, you can enlist the services of a bookkeeper, accountant, or tax adviser. You can also call 088 585 22 22 to discuss your income tax questions with a KVK business adviser.
