Making use of the Small Businesses Scheme (KOR)

All Dutch legal entities can make use of the Small Businesses Scheme (Kleineondernemersregeling, KOR), provided their turnover does not exceed €20,000. If you use this scheme, you are exempt from paying and declaring VAT.  For other taxes, such as income tax, you must continue to file a tax return and pay it on time.

Turnover-dependent

The KOR is a turnover-related VAT exemption. In 2020, it replaced the old KOR scheme. You are eligible for this exemption if your turnover (excluding VAT) is no higher than €20,000 per calendar year.

All deliveries and services that are normally taxed with VAT, count towards this amount. You also need to include your VAT-exempt turnover from:

  • the supply and rental of immovable property,
  • financial services, and
  • insurance services.

Turnover from other VAT-exempt services does not count towards the turnover limit. This includes, for instance, medical services, sports services, and services provided by writers and journalists.

Voluntary scheme

Any entrepreneur can choose to apply this exemption scheme, regardless of legal form. This includes associations and foundations. If you choose to use the Small Businesses Scheme, you do so for a minimum of 3 years, or until you exceed a turnover of €20,000. Under the scheme, you do not charge VAT on your goods and services. Nor may you reclaim any VAT on expenses (input tax). You can keep your accounts simple and you do not have to file a VAT return.

You also do not have to send an invoice, but you are allowed to do so. No VAT percentage or VAT amount can be stated. Instead, the invoice should include the sentence 'factuur vrijgesteld van OB o.g.v. artikel 25 Wet OB' (invoice exempt from VAT under Article 25 of the Turnover Tax Act). If you make use of the KOR you do not need to meet the standard invoice requirements.

Exceeding the €20,000 limit

Have you made more than €20,000 turnover in a calendar year? Then you must calculate VAT from the first delivery with which you exceed the €20,000 limit. From that moment, you must again keep the normal VAT records and file VAT returns. The turnover before exceeding the limit remains free of VAT. However, in the 3 years that follow, you can no longer make use of the KOR scheme.

Is the KOR Small Businesses Scheme beneficial for you?

Do you meet the conditions for this scheme? Then it could give you some advantages. You do not have to keep VAT records or file VAT returns. The list below will help you decide whether the Small Businesses Scheme might be interesting for you:

  • Are your customers mainly private individuals and organisations that cannot offset VAT? If your selling price remains the same as it was before you made use of the Small Businesses Scheme, your margin will be higher. In this case, the new scheme will be interesting for you.
  • Do you have many business customers? If you make use of the tax credit under this new scheme, you cannot reclaim the VAT on purchases and business expenses. Your 'purchase price' will therefore be higher. To maintain the same margin, you then need to increase your selling price without VAT. This may make your product less interesting to business customers.
  • Have you deducted VAT on investments as withholding tax over the past 5 years? If so, you will be faced with a VAT adjustment if the deducted VAT divided by 5 years is more than €500. You must then refund that amount of VAT. For investments in property, the calculation period is 10 years.
  • Do you rent out your property subject to VAT? If so, you are not eligible for the Small Businesses Scheme.
  • Do you have foreign customers or transactions for which you reverse-charge VAT? Then you must still file a VAT return. Read more about this on the website of the Tax and Customs Administration (Dutch).

Still in doubt? Ask your (tax) advisor for advice.

Applying the Small Businesses Scheme (KOR)

Are you already running a business and would you like to apply the Small Businesses Scheme?

Then you need to take action. You can participate in the scheme from the start of each new tax period (usually a quarter). Make sure the Tax and Customs Administration receives your application no later than 4 weeks before the starting date.

Are you starting a business soon and would you like to make use of the KOR?

You can only apply for the scheme if you are an entrepreneur and have received a VAT identification number from the Tax and Customs Administration. The first possibility to participate in the new Small Businesses Scheme is at the start of next quarter. Apply to the Tax and Customs Administration no later than 4 weeks before your desired starting date. You must submit your VAT return for the quarters in which you do not yet participate in the Small Businesses Scheme.

You can apply the Small Businesses Scheme after you get a written confirmation of participation from the Tax and Customs Administration. You must continue to file a VAT return for the quarters during which you were not yet participating in the scheme.

Turnover less than €1,800 and no KVK registration

Do you have an annual turnover of no more than €1,800 and are you unable to register with the Netherlands Chamber of Commerce KVK? You can still use the KOR. In this case, you do not register as an entrepreneur for VAT and you do not have to report to the Tax and Customs Administration. You then make use of the voluntary registration threshold. You are not bound by the KOR’s minimum application period of 3 years.

You can always decide later to register as an entrepreneur for VAT with the Tax and Customs Administration. In any event, you must do so if your annual turnover exceeds €1,800. Check if you must register with KVK.

Sole proprietorship, solar panels and the KOR

Do you have a sole proprietorship and are you considering buying solar panels for your home? Or do you have solar panels for your home and are you considering starting a sole proprietorship? Your choice of whether or not to use the KOR applies to all your activities. You cannot choose to use the KOR for the solar panels alone.

Learn more about the KOR Small Businesses Scheme can be found on the website of the Tax and Customs Administration (in Dutch).

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