Difference between turnover tax and income tax for sole traders

The difference at a glance

Tax liability as a self-employed person

The Tax and Customs Administration assesses your entrepreneurship for VAT and for income tax separately. Even without entrepreneurship status for income tax, your income may be taxable, for example as result from other activities. Specific conditions apply to exemptions and deductions.

What is VAT?

You charge sales tax, or VAT, on top of your selling price to customers. You pay this VAT to the tax authorities. What you pay yourself in VAT on business expenses, you can usually reclaim. In this way, VAT works as a kind of pass-through mechanism: you collect it for the government.

VAT rates

The standard rate is 21%. For certain products and services, the rate is 9% or 0%. Some services are exempt, such as certain healthcare and education services. The conditions apply on a per-activity basis; a sector label does not automatically mean that all turnover is exempt. Nor is foreign trade automatically subject to 0%. See the VAT rates and exemptions from the Tax and Customs Administration.

VAT return

You usually file a quarterly VAT return. You report the VAT due and deduct any recoverable input VAT . Under the invoice accounting system, the invoice date usually determines the filing period, not the date your customer pays. Different rules apply under the cash accounting scheme.

KOR scheme

With a maximum of €20,000 in relevant annual turnover, you can, under the conditions, opt for the small entrepreneur scheme (KOR). You then do not calculate VAT and do not deduct VAT on expenses. Usually you do not file a VAT return, but there are exceptions, for example with certain foreign transactions. The KOR does not provide exemption from income tax.

What is income tax?

The income tax is charged on your business profit. If you operate as a sole trader or through a general partnership (vof), that profit falls under Box 1 of your personal income tax return. The Dutch Tax and Customs Administration assesses whether you qualify as an entrepreneur using factors such as independence, business risk and turnover.

Entrepreneur for income tax purposes

The Dutch tax authorities look at, among other things, independence, profit expectations, entrepreneurial risk and clients. All circumstances are assessed together. A Chamber of Commerce registration or a few ticked characteristics do not automatically grant entrepreneur status. Use the Entrepreneur check as a tool.

Pricing

For anyone who has not yet reached state pension age, the following rates apply in Box 1 in 2026: 35,75% up to and including €38,883; 37,56% on the portion above that up to and including €78,426; 49.5% on the excess. This relates to your taxable Box 1 income, not your turnover or just your business profit. For example, wages earned alongside your business and personal allowances are also taken into account. Tax credits are then applied.

Deductions

Each deduction has its own conditions. In 2026, for example, these include:

• Self-employment deduction: €1,200, including entrepreneurship and complying with the hours criterion.
• Start-up deduction: an additional €2,123, depending on your history as an entrepreneur and the deductions you claimed in the preceding five years. It does not automatically apply in your first three calendar years.
• SME profit exemption: 12.7% of the profit after the entrepreneur’s allowance, without the hours criterion.

For those who had already reached the state pension age on 1 January, half of the self-employed person's deduction and start-up deduction apply. Read more about deductible expenses for the self-employed.

Calculating tax as a self-employed person

How much you have to pay depends on your figures. But broadly speaking, it works like this:

VAT

You calculate the VAT due according to the applicable scheme and only deduct deductible VAT on expenses. Therefore, under the invoice-based scheme, a received payment does not automatically determine the return period.

Income Tax

Determine your annual taxable business profit, including any adjustments and investment deductions. Then apply the entrepreneur’s deduction and SME profit exemption if you qualify. Include any other income and personal deductions. Calculate the tax and tax credits, and deduct any provisional assessments and withholding taxes already paid.

The Zvw is a separate contribution. In 2026, the personal contribution will amount to 4.85% of the applicable contribution income, with a maximum contribution income of €79,409. If, for example, you receive a salary in addition to your business income, you must assess your income situation jointly. Source: percentages contribution Zvw.

Example: VAT remittance is different from profit

Hypothetical quarter with all activities subject to the 21% rate and deductible purchases: your turnover is €10,000 excluding €2,100 VAT. Your business expenses are €4,000 excluding €840 VAT. The VAT payable is €2,100 − €840 = €1.260. The quarterly profit before tax deduction is €10,000 − €4,000 = €6.000. Your income tax is then determined over the whole year, along with your other income, deductions and credits.

How much tax do you pay as a zzp?

Create an annual forecast of income, costs, deductions, tax credits and Zvw. Deduct any provisional assessments already paid and distribute the expected remainder across the remaining months. Update that forecast if your figures change. A fixed reserve percentage provides no certainty.

Keep VAT separate. For an amount including 21% VAT, calculate the VAT portion using 21/121; for 9%, use 9/109. For the full calculation, see the explanation on income tax for the self-employed.

Would you like help with both tax returns? See which bookkeeping services, VAT returns and income tax work are included in our accounting package.

Frequently Asked Questions