No difference between a self-employed professional without staff and a freelancer
There is no difference. In both cases you work for various clients, without an employment contract. You carry out your work as an independent entrepreneur. In the Netherlands, self-employed professionals and freelancers are not legal structures.
Freedom is at the top of the list of benefits that come with being a freelancer. But self-employment has more advantages. And disadvantages, too.
- You are your own boss and decide for yourself how and when you carry out assignments.
- Your hourly rate is often higher than when you work as an employee.
- If you meet the hours criterion of 1225 hours, you pay less taxes.
- You choose your clients yourself, which allows your work to be varied.
- You are not insured against illness or incapacity for work, you have to arrange this yourself.
- You do not build up a pension.
- You are your own boss and therefore liable for any damage and failure to comply with agreements.
- You must maintain your business records yourself or outsource it to a bookkeeper or accountant.
- You do not receive a net amount: you still have to pay tax over your profit.
Are you going to work as a self-employed professional? These 7 steps will help you start your own business.
1. Your preparation
With a business plan you write your plans down on paper. This increases your chance of success. You investigate whether your plans are feasible. Does your own company generate enough money to cover your costs? Do you need investors or do you start from an unemployment benefit? Take these aspects into account when making your business plan.
Start your business in a location that suits you. From a market to a multi-company building or in a pop-up store. There are various possibilities.
Most freelancers start from home. Do you want that too? Always check with your municipality what is allowed and what the options are.
Are you unsure whether you should register with the Netherlands Chamber of Commerce KVK? View the criteria that make up a company here.
2. DBA Act and determination of employment
The Dutch Tax and Customs Administration determines whether you are self-employed based on a number of criteria. In addition, they also check whether you are an entrepreneur for income tax purposes (in Dutch). It is important to find out, because it has consequences for the way in which you complete the income tax return and whether you are allowed to make use of any deductions. You can get clarity about this by completing the OndernemersCheck (entrepreneur check, in Dutch) of the Dutch Tax and Customs Administration.
If you are going to carry out an assignment for a client as a freelancer, you need to know about the employment relationship between you and your client. Are you self-employed or are you in paid employment? This would be arranged through the DBA Act, but the enforcement of this law has been suspended until October 1, 2021. Are you not sure if you are an employee? Avoid false self-employment and use a model agreement from the Dutch Tax and Customs Administration. This way, you know for sure that there is no paid employment. Many clients find the current rules to hiring freelancers unclear. To remove this ambiguity, they can consult the pilot Web module Assessment of the Employment Relationship (WBA). By completing this online questionnaire, your client will receive an answer in advance to their question whether or not the work they want to outsource is considered to be paid employment. Please note: the outcome of this web module is an indication and not a legal decision.
3. Determine your hourly rate
Determining the right hourly rate is difficult. An hourly rate that is too high holds off customers. An hourly rate that is too low is not only an undervaluation of your qualities. It may also generate too little income.
First of all, calculate the minimum monthly amount you need to live on and to pay your financial obligations. Add to this your holiday allowance, income tax, the income-related health insurance contribution, and unforeseen costs. Then calculate your business costs, such as office rent, equipment, business insurance, etc. These are your necessary income and taxes plus business costs. Divide this amount by the number of billable hours. And there you have your minimum hourly rate, the rate you need to avoid making a loss. Your experience and skills are also worth something and therefore also play a role in determining your hourly rate. You can compare your hourly rate with that of your competitors.
Hourly rate calculation tool
Use the KVK hourly rate calculation tool and calculate your hourly rate based on a desired net income. Please note that this tool is only available in Dutch.
4. Mitigating your risks
As a freelancer, you are responsible for your own risks. Which means taking out relevant insurances. But also building up your pension. We have listed the most important risks for you:
Or look here for an overview of important insurances.
5. Choose your legal form
Self-employed professionals must register with KVK. There you must indicate with which legal business structure you will start your business. Most freelancers start with a sole proprietorship. And in some cases they start with a private limited company (bv). In addition to tax consequences, your choice of legal structure also has consequences for your liability. Find out which legal structure suits you with the Tool for choosing a legal structure on Business.gov.nl.
6. Register your company with KVK
So, you want to become self-employed? Are you ready to start your own business? Have you come up with a good company name? Then you can make an appointment with KVK and register your company. You do this by completing the registration form digitally. You can then make an appointment online at a KVK office. During your appointment, a KVK employee will check your proof of identity and check whether you meet the registration conditions. As soon as your registration has been completed, you will receive your KVK number. KVK then passes on your business details to the Dutch Tax and Customs Administration. Registering a sole proprietorship costs a one-off fee.
Think carefully about your business description. The company description indicates which core activities you actually do as a self-employed professional. Based on your company description, the KVK employee determines a suitable SBI code together with you. This code is used by government agencies, industry associations, pension funds, banks, and insurance companies. If you are going to engage in other business activities, please report this to KVK. We will then change the SBI code or add an activity and a new code. As a freelancer it is possible to offer multiple activities (in Dutch) within your company (sole proprietorship).
Not sure whether you should register your company? First check whether your plans meet the criteria for a company.
Registration Tax Administration
After your registration, KVK will pass on your details to the Dutch Tax and Customs Administration. They will send your VAT ID and VAT number by post within 2 weeks.
7. Set up your administration
Bookkeeping and administration are not among the most favourite activities of many self-employed professionals. But proper business records are required by law. For example, your invoices and quotations must meet various requirements.
Your business records give insight into how your company is doing. You can outsource your administration or do it yourself. Basic knowledge of keeping business and financial records is important. There are handy apps and accounting programs available. Ask a bookkeeper about this or ask your network.
As an entrepreneur you have to deal with taxes. What is the difference between sales tax and income tax and which tax deductions can you apply as a starting entrepreneur? We help you on your way with a calculation example (in Dutch) so that you can estimate how much money you need to reserve.
Small businesses scheme (KOR)
Do you expect your turnover to remain below €20,000? Then the small businesses scheme (KOR) from the Tax Administration can be useful. You have to register separately for this with the Tax Administration. If you apply the KOR, you do not charge VAT on your deliveries. Also, you may not deduct any VAT on costs (input tax). You are allowed to keep a limited VAT administration and you do not have to submit a VAT return.
Self-employed and paid employment
You can combine working as an employee and working as a freelancer. We call this part-time entrepreneurship. Part-time entrepreneurship has consequences for your income tax and any deductions and allowances. We recommend that you let your employer know that you will be working as a self-employed professional as well. In any case, always check your employment contract about ancillary activities.
The General Data Protection Regulation (GDPR) is the privacy law that applies to all entrepreneurs, including self-employed professionals, since May 2018. Everyone who works with personal data must comply with the GDPR. You must be able to demonstrate what you use data from (potential) customers for and how long you keep it. For example, the processing of customer data for drawing up an invoice already falls under the GDPR. These 10 questions will help you determine what actions you need to take to comply with the law. This way you become GDPR-proof and avoid any fines.
Last updates on 19 November 2021