The Smallholders' Allowance (KOR) is a scheme for entrepreneurs with a low annual turnover. If you use this scheme, you no longer have to charge VAT to your customers. You also no longer have to file a VAT return. And that saves you time and administrative hassle. But it can also save you a lot of money. Yet this scheme is not always advantageous for everyone. In this article, we explain how it works and what you, as an entrepreneur, should pay attention to.
What is the small business scheme?
The KOR is intended for entrepreneurs and self-employed people who have an annual turnover of up to €20,000. If you participate in the KOR, you are exempt from the VAT obligation. And that means you:
- no need to charge VAT to your customers
- no longer need to fill in a VAT return
- but unfortunately also cannot deduct VAT from your expenses or investments
This scheme is voluntary, but applies for a minimum of three years. During these three years, you have to stay under €20,000 turnover annually. Only then will you stay in the scheme.
Terms
You can participate in the KOR if you meet these conditions:
- Your turnover remains below €20,000 per calendar year
- Your company is based in the Netherlands
- You have a VAT identification number (i.e. you are a VAT entrepreneur)
- You supply goods or services where VAT normally applies
But note: if you are part of a vof or partnership, the turnover limit applies to the entire partnership. So not for you personally.
Consequences of participating in the KOR
Participation in the KOR has a few practical implications:
- You may not include VAT on your invoices
- You no longer have to file a VAT return (unless you have to declare VAT for foreign sales)
- You cannot deduct VAT on business expenses or investments
- As an entrepreneur, you are obliged to keep up your choice of KOR for at least 3 years (unless you go above the limit).
Advantages of the KOR
The KOR can be very attractive to small business owners because:
- you no longer have to file a VAT return
- you get less paperwork out of it
- you can invoice more easily, without VAT
- customers pay no VAT with you, which is especially useful if you have many consumers
Especially entrepreneurs and self-employed people who have few business expenses or investments can benefit substantially from this. It makes doing business a lot easier and clearer.
Disadvantages of the KOR
Unfortunately, the KOR is not advantageous for everyone. For example, in the following cases:
- You cannot recover VAT on business purchases or investments
- This can be especially detrimental if you have large expenses or if your business is growing
- You are locked into the scheme for a minimum of 3 years (unless you exceed the turnover limit)
- Nor can you benefit from other VAT schemes, such as the reverse charge scheme or intra-community supplies (goods sold between countries)
So think carefully about your situation and your plans for the future. That way, you won't face any surprises.
Small business scheme applications
Do you want to use the KOR as an entrepreneur? Then make sure you register with the tax authorities at least four weeks before the start of a new quarter. Read here how to do that.
And if your application is approved, you will receive a confirmation. You can then start on the first day of the new quarter. So you can benefit from the scheme without any worries.
Stop KOR
You can stop using the KOR at two points in time:
- You exceed the turnover limit of €20,000 per year.
In that case, you must report it to the tax authorities immediately. You will then lose your VAT exemption immediately. And from then on, you have to charge VAT again and file VAT returns. - You want to stop yourself (at your own request).
Of course you can, but you are normally stuck with your choice for at least 3 years. So do you want to quit earlier? Then you need to be able to give a good reason.
View the official explanation from the Inland Revenue on opting out of the KOR.
Small business scheme in the EU (EU KOR)
Since 1 January 2025, there has also been a European version of the KOR: the EU KOR. This scheme allows you to get VAT exemption in other EU countries where you operate your business.
To make use of the EU KOR, you have to register with the Tax Administration. They will then forward your details to other EU member states. This is especially useful for entrepreneurs who regularly sell in other EU countries. Think of webshops or service providers with international customers.
Do you occasionally sell something across the border? If so, different rules apply. You also sometimes still have to file a one-off VAT return, either in the Netherlands or abroad.
Conclusion
The small business scheme is especially attractive for entrepreneurs with low costs and simple administration. The scheme not only saves you time, but also the hassle of VAT. Still, you should really bear in mind that you cannot deduct VAT on investments. So it is important to check carefully whether the scheme suits your business.
