The Dutch hours criterion for self-employed professionals

For Dutch entrepreneurs, the number 1,225 has almost magical properties. If you spend at least 1,225 hours per year on business activities, you can claim tax allowances, like tax relief for new companies and the entrepreneurs' allowance. You could benefit by thousands of euros per year. But how many hours do you have to work each week to get to 1,225 hours? Find out about the most important aspects of the hours criterium.

Our advisors get questions daily about the Dutch hours criterion for self-employed professionals (in Dutch).

1. What is the hours criterion good for?

Does the Tax Administration consider you an entrepreneur? You are entitled to a tax benefit called entrepreneurs' allowance. You qualify for this allowance if you can prove you have spent a minimum of 1,225 hours on your business in a calendar year. If you work 8 hours a day, you will reach this number by spending 3 days or 24 hours a week on working in your business. This minimum of 1,225 hours is called the hours criterion (in Dutch).

The following tax benefits apply over 2023:

• Private business ownership allowance
  A fixed deduction from your profit. In 2023, this allowance amounted to €5,030.
• Tax relief for new companies
  Businesses eligible for this allowance may deduct a fixed amount from their profit 3 times within the first 5 years of having started the business. The tax relief for 2023 is €2,123. 
• Working partner's abatement
  If your fiscal partner also works in your business, you may be eligible for working partner's abatement. This allows you to deduct a percentage from your profit, depending on the number of hours worked by your partner. Your tax partner is the person with whom you file your tax return. 
• R&D tax credit (WBSO)
  If your business conducts research and design projects, you may be eligible for the R&D tax credit. This allows you to deduct part of the costs for your R&D from your profit.

For specific tax questions, go to the Goede start met de Belastingdienst website. The chat function also accepts English questions. 

2. What is the period over which the hours are calculated?

The hours criterion counts the number of hours spent on your business during a calendar year, so from 1 January through 31 December. The date on which you started your business makes no difference. Did you start on 1 July? To benefit from the tax schemes, you need to spend 1,225 hours on your business. That includes hours spent preparing the start of your business. For instance: a conference you attended, a training, drawing up your business plan, or building your website.

3. What if I do not work 1,225 hours on my business?

Do you spend less than 1,225 hours on your business in a calendar year? Then you cannot make use of entrepreneur deductions listed above. You also do not have to file an income tax return as an entrepreneur. You report the income from your business as 'income from other work'. This is your turnover minus the business expenses you have incurred. You pay income tax on this.

4. Which hours count towards the hours criterion?

You can count all the hours spent on your business. That includes indirect activities, such as keeping records, managing your website, and customer acquisition. And of course you count the direct hours, hours you spend working on an assignment or for a client. Did you give birth to a child? You may count the 16 weeks' maternity leave you have taken towards the hours criterion. Use the number of hours per week you would normally have worked. 

5. How do I record my hours?

If the Tax Administration asks for proof that you meet the hours criterion, you need to be able to show it. You may do so in your own way. For example, use an Excel file, an app, or accounting software. Saving emails and planners helps you provide supporting evidence for your hours records. The Tax Administration can check for up to 7 years in the past. 

6. What does the Tax Administration mean by 'plausible'?

To profit from tax benefit schemes, you must spend a plausible number of hours on your company in relation to your turnover. In other words, you need to be able to prove that you have spent enough hours on your business. You do so by keeping hours records. If you are just starting out, you will have a larger amount of indirect hours. The Tax Administration will accept this at first, but your business has to have a proportionate amount of turnover after a while.

7. What is the reduced hours criterion for work disability?

A reduced hours criterion applies to entrepreneurs who receive a benefit for work disability. If you receive a Wajong, WIA, WAO, or Ziektewet benefit, the hours criterion is usually 800 hours (in Dutch). Before you start a business, always discuss your plans with the benefits agency, so you know what the effects on your benefit will be.

8. How does the Tax Administration check my hours records?

You file a yearly income tax return. In it, you state your turnover and the number of hours spent on your business. The Tax Administration performs spot checks. If they pick your tax return, they will check if or not you have spent 1,225 hours or more on your business. In some cases, they will request evidence, such as emails, your appointment agenda, or bank statements. You may receive a visit from a tax inspector.

9. Does the 1,225 hours criterion also apply to a vof, maatschap, or bv?

If your legal structure is a vof (general partnership) or a maatschap (professional partnership), you can profit form the private business ownership allowance, the tax relief for new companies, and other types of tax relief. Every partner has to spend 1,225 hours on the business, and file their own income tax return. It can happen that one partner does meet the hours criterion while another partner does not. A bv (private limited company) cannot make use of the private business ownership allowance or the tax relief for new companies.

10. Does the hours criterion apply to part-time entrepreneurs as well?

There is no reduced hours criterion for part-time entrepreneurs. So, meeting the hours criterion can be quite a challenge if you are a part-time entrepreneur. And if you have been in business for over 5 years, you also need to spend more hours per calendar year working in your business than you do on other activities, such as working in employment.