Taxation (enterprises, companies)
After registering with the Chamber of Commerce, you will receive a VAT number (tax identification number) from the tax authority, which will be necessary for handling various tax and administrative matters in the future.
When registering with the Chamber of Commerce, you have the option to fill out a “linked” form, which allows for simultaneous registration with both the Chamber of Commerce and the Tax Authority. If the chosen legal form of the company is defined as a legal entity, you will need notarial assistance for registration.
It is important to register with the tax authority as soon as possible because you will also need your tax number for reclaiming Value Added Tax (VAT).
Be prepared for more frequent inspections by the tax authority for newly established businesses. You can even schedule an appointment for an inspection request yourself.
Entrepreneurial tax categories for sole proprietorships and companies
Value Added Tax (VAT) Every business is required to charge Value Added Tax to its customers. However, there are exceptions, and certain services can be performed tax-free (such as education, healthcare services, and art). Some products and services are subject to a reduced VAT rate of 9% instead of the general 21% (e.g., basic foodstuffs). If you trade internationally within the EU, and both parties involved in the transaction have valid international VAT numbers, the applicable VAT/Value Added Tax rate is 0%. The construction industry often applies the reverse charge mechanism for VAT.
The Value Added Tax charged to your customers must be refunded to the tax authority, but the VAT paid to your suppliers can be claimed back. The exact amount of VAT to be charged to your customers and claimed back from the tax authority can be specified. If you do not charge VAT to your customers, you are not entitled to a refund. The Value Added Tax must be declared and paid monthly or quarterly, depending on the legal form of your company and your revenue.
Activities exempt from Value Added Tax (VAT)
In certain exceptional cases, your business is not obliged to pay Value Added Tax. These activities include:
Taxation of small businesses
If you only have to pay a very low amount of Value Added Tax, you can apply a special scheme for small businesses (Kleineondernemersregeling). If this scheme applies to your business, you can significantly reduce or even eliminate the payment of Value Added Tax.
You are required to keep accurate records of your Value Added Tax and any applicable benefits. If you are exempt from paying Value Added Tax, you must declare it in your income tax return.
The tax authority determines whether you can be considered an entrepreneur for tax purposes based on the following criteria:
If you meet these conditions, the tax authority will consider you an entrepreneur. This entitles you to various tax credits and benefits. To claim these tax benefits, you must meet a specific hour criterion, which determines how much time you must spend running your business as a minimum. Currently, the specified minimum is 1,225 hours per year (approximately 50 weeks, 24.5 hours per week). Another criterion is that at least 50% of your working time must be spent on your company. In case of pregnancy or childbirth, the tax authority calculates the time spent on maternity leave or with your child based on the average hours of the previous year.
If you, as an entrepreneur, employ employees, you must pay employer’s contributions to the tax authorities on their behalf. These contributions consist of income tax, compulsory social security contributions, and other insurance contributions payable to the individuals concerned.