Starting a business after retirement

Increasingly often, people continue to work after having reached the state pension age. This can be as an employee but also as an entrepreneur. Are you nearing retirement, and do you have plans to start your own business? Read here what you need to know.

Your old age pension (AOW) and retirement

When you reach your state pension age, you can claim AOW benefit. This is true whether you were employed, self-employed, or on benefits. The AOW benefit is a fixed (gross) amount.

Were you employed? In that case, it is highly likely that you have built up a supplementary pension. 

You can earn unlimited additional income if you have reached your state pension age and receive AOW or a supplementary pension. Income tax rates are lower (in Dutch) if you receive AOW.

Are you planning on early retirement? You pay the normal income tax rates up to your retirement age. You will also still have to pay the AOW premium (in Dutch) on additional earnings up to your retirement age. After your retirement age, this is no longer necessary. You can only apply a payroll tax credit with one employer or benefits agency.

Tax matters and additional earnings

If you start as a self-employed professional without staff (zzp’er) or a freelancer, your business structure is likely to be a sole proprietorship (eenmanszaak). This means you must pay income tax on your business profits. The Netherlands Tax Administration (Belastingdienst) considers these profits as extra income on top of your AOW and pension. You must declare this income when you file your income tax return at the end of the year. The Tax Administration calls this income from other activities (inkomsten uit overig werk, in Dutch). Your extra earnings can put you in a higher tax bracket. This means you will have to pay more tax.

When you reach retirement age, the income tax rate decreases. You no longer pay the AOW premium. The tax credits also change. Do you receive rent or healthcare allowance? Your additional income may mean you receive less or no allowance. 

Tax deductions for entrepreneurs

Do you do more than an occasional job? Then the Tax Administration may see you as an entrepreneur.  

Do you spend at least 1,225 hours on your business? Then you can make use of the private business ownership allowance (zelfstandigenaftrek). You may only deduct half the amounts after your retirement age. 

VAT and the small businesses scheme (KOR)

You will also have to deal with VAT. You calculate what you have charged your customers in VAT per quarter. You deduct the VAT that you have paid yourself on costs or purchases. You file a declaration on this balance. 

Is your turnover lower than €20,000? Then the small businesses scheme (KOR), an exemption from VAT, can be beneficial.

Not an entrepreneur, but working

Are you just doing another assignment for your former employer? Or are you doing a project for a single client? Then you are not an entrepreneur. This means that you do not have to register with the Netherlands Chamber of Commerce KVK.

If your employment is not extended for that one assignment, your employer or client can hire you through a temporary employment agency. Another possibility is using the opting-in scheme(in Dutch). This arrangement means it appears as if you are employed and your client deducts payroll tax and premiums from your salary and transfers it to the Tax Administration. 

If your client is not willing to withhold taxes, then using the data portal Payments to third parties (uitbetaalde bedragen aan derden, UBD, in Dutch) is another option. Your client then registers their payment to you with the Tax Administration, but you are not considered a salaried employee, nor an entrepreneur. At the end of the year, you file a tax return for this income yourself.

Tip! In some situations, it is hard to tell the difference between an entrepreneur and an employee. So, check with the Tax Administration to see if the schemes described above apply to you.