VAT and Income Tax for Freelancers

Are you a newly-registered freelancer feeling overwhelmed by Dutch tax paperwork? Did you receive a blue envelope from the tax office for your ZZP business and unsure how to navigate it? Or did you miscalculate your profits last season and want to ensure you’re on top of things this time? Here is a practical guide that will help you navigate taxes as a freelancer in The Netherlands.

Starting as a Freelancer in the Netherlands

Are you an expat planning to start as a freelancer or self-employed entrepreneur in the Netherlands? Here’s a quick overview of the essential steps to get you on the right track.

What is ZZP’er/freelancer/sole proprietorship?

In the Netherlands, you’ll come across terms like freelancer, zzp’er (self-employed without staff), and sole proprietorship (eenmanszaak). A zzp’er or freelancer works without an employment contract, and you’re responsible for handling your own taxes. A sole proprietorship is a legal form of business you can choose when registering with the Chamber of Commerce (KvK).

If your work is occasional or more of a hobby where you only cover expenses, you might not need to register with the KvK. For most freelancers, though, registration is necessary.

How to Get Started

• Register with the KvK
  If you’re offering services or selling products with the goal of making a profit, you’ll need to register with the KvK. You’ll receive a KvK number and a VAT number (BTW-nummer) to start invoicing clients.
• Get Help Early
  If you’re not confident in handling taxes or bookkeeping, it’s wise to consult a tax advisor or accountant at the beginning to avoid mistakes.
• Keep Track of Your Finances
  You must maintain proper records for at least seven years. Many freelancers choose bookkeeping software for efficiency or hire bookkeeper services.

VAT

As a freelancer in the Netherlands, you'll need to handle two main types of taxes: VAT (Value-Added Tax) and income tax. In this section, we’ll focus on VAT, which requires a separate return from income tax.

What Is VAT?

VAT is a tax applied to most goods and services. While individuals can’t do much about VAT, as a business, you need to charge VAT on your services or products.

VAT Rates in the Netherlands

There are three main VAT rates:

• 21% for most services and goods
• 9% for specific goods (e.g., food, books)
• 0% for exempt services (e.g., medical, educational)

The VAT rate you apply depends on what you sell and where your clients are located, whether within or outside the Netherlands.

How Does VAT Work for Freelancers?

When you invoice your clients, you usually add VAT (output VAT), which you later pay to the tax office. You can also claim back the VAT you’ve paid on business expenses (input VAT). Every quarter, you file a VAT return, reporting the difference between your output and input VAT.

Filing VAT Returns

You file VAT returns quarterly, with deadlines at the end of the month after each quarter:

• Q1: April 30th
• Q2: July 31st
• Q3: October 31st
• Q4: January 31st

If you reverse-charge VAT (common with EU companies), you may also need to file an ICP return.

Filing Income Tax as a Freelancer

In addition to quarterly VAT returns, freelancers in the Netherlands must also file an annual income tax return. Unlike employees, you are responsible for paying your own taxes, as no employer withholds taxes from your income.

Income Tax Brackets

For 2024, the income tax rates are:

• 36.97% for income up to €75,624
• 49.50% for income over €75,624

In addition to income tax, you’ll pay a healthcare insurance contribution (ZVW) of 5.32%, up to a maximum income of €71,628.

Tax Credits

The Dutch tax system offers two key rebates:

• General levy rebate: A tax credit that reduces your taxable income. In 2024, the maximum rebate is €3,374, but it decreases for incomes above €24,814.
• Labor levy rebate: If you earn income from self-employment or other work, you may qualify for this rebate, with a maximum of €5,532. However, it decreases from an income of €39,957 and phases out completely at €124,935.

Tax Benefits for Entrepreneurs

If you're considered an entrepreneur for tax purposes, you can benefit from several deductions:

• Self-employment deduction: Available if you work at least 1,225 hours annually in your business. The 2024 deduction is €3,750.
• Starters' deduction: An additional €2,123 deduction for new entrepreneurs, available for three years.
• SME profit exemption: 13.3% of your profits are exempt from taxes, after applying other deductions.
• Small-scale investment deduction: If you invest more than €2,800 annually, you can deduct up to 28% of the investment.

To sum up, starting as a freelancer in the Netherlands involves important steps, especially when it comes to taxes. You’ll need to understand how VAT works, manage quarterly VAT returns, and file your annual income tax return. As an expat, this Dutch system can seem complicated, but with the right support, you can manage it effectively and take advantage of tax benefits available to entrepreneurs.

At TaxSavers we are always available to help freelancers handle their taxes and finances in the Netherlands. Whether you are just starting or looking for ongoing advice, our team is here to guide you through the process and help you stay compliant.

Learn More on Our Webinar

If you'd like more detailed information on managing taxes as a freelancer, join our upcoming webinar on October 23. We’ll explain key tax rules, give practical tips, and answer any questions you might have. It’s a great way to get expert advice and start your freelancing journey with more confidence and professional guidance! Sign up today.