Don’t wait until the tax office starts to investigate you. If you are thinking of setting up a business on your own in the Netherlands, you need to consider some questions from the start.
Blue Umbrella helps thousands of internationals with their tax affairs and its experts see the same issues repeatedly. But, says a company expert, being properly prepared can avoid headaches later.
The number one piece of advice is to really focus on your business idea, make a plan and consider the right kind of structure for your market and time commitment.
“How big do you want to be? Will you be hiring employees? These are the questions to ask so you can choose which kind of legal structure you need: a small business/freelancing) or a limited liability company,” says the Blue Umbrella expert. “Just on an A4, plan your market, clients, the product to sell, expected revenue, expenses. Plan how to approach the market and set your goals.”
Freelancer or limited company?
Since the government crackdown on “fake” self-employed people, you need to think about whether you will genuinely be freelancing if you want to start off as a sole trader or ZZP-er (a freelancer without employees). The biggest question is whether you will have enough clients, although this can be over time, rather than all at once.
“We all start with one client, so don’t worry about that,” says the Blue Umbrella expert. “You can have one client for a year and a half, but search for another and actively seek to broaden your client base so that you then have another client, and then a third – that’s okay. You can have one client for a long period, but they have to change at a certain point.”
It’s worth reading carefully how the government assesses your genuine independence and how integrated you are into the client’s business.
Starting as a ZZP-er is straightforward: you just need to register at your local Chamber of Commerce or Kamer van Koophandel. Consider at the start whether to take out disability insurance (which might become mandatory) or join a collective insurance model like a broodfonds.
Limited company
If your business expands rapidly or you need to hire people, you can always switch to a limited company structure (BV) or start with this. “You can always do this later – there is nothing to be lost really in terms of tax exemptions,” says the Blue Umbrella expert. “But don’t go for a limited liability company because of the expat ruling, the 30% ruling.”
Certain foreign employees with specialist skills can have 30% of their salary paid tax-free (27% from 2027), under certain conditions, and employing yourself through a BV can allow you to take advantage of this ruling. But, warns Blue Umbrella, it might not be in your interests.
“As a director, you have to pay yourself a minimum of €58,000 a year, and even if you have no revenue in the company and the profit is zero, you still pay taxes over your salary,” he says. “If you’ve brought in a lot of staff, this can’t be offset from the director’s salary.”
By contrast, if you were a freelancer, working full time in your company, you would have an entrepreneur’s tax deduction, the SME profit exemption and the starter’s tax deduction. “And they all add up to around 20% to 25%, so that is almost similar to the 30% ruling, which stops after five years,” he says. “So don’t fall into the 30% ruling trap.”
Employees
If your company grows and you need some help, you should think carefully about employees. If you become a formal employer, you will need to be aware of the Dutch employment rules including your obligation to pay towards up to two years of sick pay for problems including burn-out. Internationally, this is unusual.
“When you want to hire people, if they are self-employed, then they send you an invoice,” says the Blue Umbrella expert. “That’s easiest. But when they become an employee, there are risks involved: if they are on holiday or sick, as long as the contract is running, you have to pay salaries. Even if there is no revenue in the company.”
If you are considering employing someone, then you may want a BV structure to limit your personal liability and if necessary, the BV can be dissolved if the business is not going well. “Then, if there’s no money in the BV, it’s a sad story but the company will file for bankruptcy and you will not go personally bankrupt,” says the expert.
Other issues to consider for your business are your VAT obligations and the location of your clients (because that will determine where VAT is due). Check whether you need a licence and the municipal rules for your premises – you may find they don’t allow 10 bakeries in the same street. Also consider whether you will need business insurance. “We like to insure everything in the Netherlands,” says the Blue Umbrella expert.
And remember the great advantage (and disadvantage) of being your own boss – you are unlikely to sack yourself!
Find out more about Blue Umbrella’s services for businesses and meet other entrepreneurs at a seminar in Amsterdam at the Beurs van Berlage at 18.45 on Thursday 25 June.
