What are start-up costs?
Start-up costs are costs you incur in the period before your registration with the Chamber of Commerce. You are then already preparing your business. These are only costs with a clear business purpose. These costs must be necessary to start your business. Think of advice, training or business resources. You include these costs in your accounts as soon as you start. Private expenses do not count.
Deduct up to 450 euros
Expenses up to €450 each are directly deductible as business expenses. These are expenses that you usually use for less than one year. You process the full amount at once in the starting year. This immediately reduces your taxable profit. You deduct the VAT separately as input tax if that is allowed.
From 450 euro depreciation
Costs of €450 or more are investments. You usually use these for several years in your business. You may not deduct these costs in one go. You spread the costs over the useful life. This is called depreciation. You take into account any residual value.
Deductible start-up costs for self-employed workers
Only expenses with a clear business character are deductible. The costs must be directly related to starting your business. They must be reasonable in amount and appropriate to your activities. You must be able to show what you incurred the costs for. That is why good administration is needed. You process these costs in your first financial year. They reduce your profit for the income tax return.
What is not deductible?
Expenses of a private nature are not deductible. For expenses of a mixed nature, deduct only the business portion.
Examples:
- Private clothing and personal care.
- Living expenses such as groceries and housing costs.
- A driving licence or other private training.
- Expenses with no direct connection to your business.
Need receipt or invoice?
You should be able to back up every start-up cost with evidence. Therefore, keep all receipts and invoices. The proof must show the date, amount and description. Without proof, you cannot deduct the costs. You keep these records for at least seven years.
VAT on start-up costs and reclaim
You often pay VAT on start-up costs. You can usually reclaim this VAT as soon as you become a VAT entrepreneur. You do this via your first VAT return. The costs must be entirely business-related. You process the VAT as input tax. In your profit calculation, you then include the costs excluding VAT. If you cannot reclaim VAT, you include the costs including VAT.
Preload
Preload is the VAT you pay on business expenses. You deduct this from the VAT you have to pay yourself. As a result, you pay less VAT on balance. If you cannot deduct VAT, the VAT remains part of your expenses. You process this correctly in your accounts.
Until when can you deduct start-up costs?
You may deduct expenses incurred in the years before you started. The expenses must be demonstrably intended for your business. You must be able to show that you were already preparing at that time. The further back the costs go, the stricter the assessment. Good substantiation is therefore necessary.
Start-up costs example
This example shows how expenses incurred before you start your business are treated for tax purposes after you start. It highlights the difference between direct deduction and depreciation.
Examples:
- You take a €300 business course before starting your business. You can fully deduct these costs in the first year as start-up costs, as they are directly related to your business.
- Before starting, you buy a €1,200 laptop that you use for several years. This is an investment. You do not deduct the cost in one go, but write it off over its useful life, even if the laptop was purchased before you started.
- You can reclaim the VAT on both purchases as input tax after registration, provided you are a VAT entrepreneur.
Hours as start-up costs
In the start-up phase, you often spend a lot of time on your business. You may not include these hours as expenses in euros. However, they are important for tax regulations. You should therefore keep good records of these hours. Even hours before the official start count. A clear record of hours is necessary.
Hours criterion
You must devote a minimum of 1225 hours per year to your business to comply with the hours criterion. This applies for the full calendar year. Hours from the start-up phase also count. The number of hours is not adjusted in case of a late start. Without proper registration, tax benefits expire.
Deductions
If you meet the hour criterion, you are entitled to entrepreneurial deductions. This deduction reduces your taxable profit. It concerns fixed deductions. If you fail to meet the hours criterion, these benefits will expire.
Process start-up costs in your accounts
You account for start-up costs in your first financial year. You book them as expenses or investments. You do this on or around your start-up date. Use clear descriptions in your accounts. Keep all supporting documents carefully. This way your accounts are correct and you can make use of the tax advantage.
