Being the boss of your own business is great fun, of course. Earning money, paying yourself a nice salary and also saving and investing. But don't forget the tax authorities, who also want a piece of the pie. Think, for example, of the ZZP (or VAT) turnover tax.
What is VAT?
When we talk about sales tax, we actually mean VAT. And that is the tax (usually 21%) that you put on your services or products. You then remit this tax back to the Inland Revenue. So it is actually money that the customer pays, which is not actually your money at all.
What is really nice is that you can also reclaim the VAT you paid on business expenses as an entrepreneur. So that way, you can get back that 21% VAT you paid on the business laptop.
What are the VAT rates in the Netherlands?
In the Netherlands, we have 3 types of VAT rates.
- 21% (standard): This fee sits on most things like paid consultancy, clothing, or, for example, the cost of creating a website.
- 9% (low rate): This applies to food, books and hairdressers.
- 0% (zero rate): For exports or international services, you pay 0% VAT.
There are also professions that do not have to deduct and remit VAT. We'll tell you more about that later!
When do you pay that sales tax (VAT)?
When you sell products or services that have VAT on them, you are obliged to pay sales tax. If you are going nice, you do so every three months. That is then the standard VAT declaration. Do you have less to declare? Then you can also file your sales tax return once a year. But do you have a lot of action in the tent? Then the tax authorities want to know more and might even see you every month.
Exception
As we mentioned earlier, some professions do not have to charge VAT on their products or services. Sounds good perhaps, but forget that they cannot then reclaim VAT either. This applies to:
- Healthcare (think dentists or physiotherapists).
- Education (entrepreneurs providing tutoring or training).
- Financial services (mortgage brokers or insurers).
By the way, do you have a low turnover? Then maybe you can take advantage of the small entrepreneur scheme (KOR). With this scheme, you don't have to give up any at all.
How do you file your sales tax return?
You might be thinking: headache. But filing VAT returns is really not difficult if you are a bit organised. Follow these steps and you'll be fine.
- Keep your records well
Keep track of everything you do in business. Write down what you have sold and spent. Be keen on how much VAT you have received from customers and how much VAT you have paid on business expenses. If necessary, create a jar where you keep all your VAT separate. - Log in to the Tax Office
Go to the online business portal of the Tax Office. or use an accounting program (preferably ours). Enter how much VAT you received and how much VAT you paid. The system will calculate the difference for you. - Pay or receive
Did you receive more VAT than you paid? Then you pay the difference to the tax authorities. Did you actually incur more expenses? Then you will receive VAT back. - Save all receipts
Make sure you keep all your receipts and invoices neatly. The tax authorities can be tricky and check your records for up to seven years. So better make sure you can show all your receipts.
How much sales tax (VAT) do you have to pay as a self-employed person?
How much VAT you have to pay as a business owner depends on what you have sold have spent. In jargon:
- You charge VAT on everything you sell.
- You deduct the VAT you paid on your business expenses.
An example:
- You earned €5,000 in one quarter and charged 21% VAT on it (€1,050).
- You incurred €1,000 in business expenses, of which €210 was VAT.
- What you pay in VAT is €1,050 - €210. So that's €840
Calculating sales tax (VAT)
Want to calculate VAT quickly? It's not hard to do! Here's a quick way to do it.
- Calculating VAT on your sales: Take the total amount of your what you sold and divide it by 1.21 (if the VAT rate is, of course, 21%).
E.g. €121 including VAT: €121 ÷ 1.21 = €100 excluding VAT. The VAT you pay is then €21. - Calculating VAT on costs incurred: Do the same for what you spent. But then deduct this amount from the VAT on your sales.
The pro-tip: Use an accounting programme. Such a programme calculates everything for you. Preferably use our programme!
Need help with sales tax returns?
Are VAT and other tax issues giving you a headache? No problem, we are here for you. We at Van Passe B.V. can help you keep everything running smoothly. And that means:
- Your VAT return is always correct (so never an angry tax official).
- You don't miss opportunities to reclaim VAT (get those pennies back nicely).
- You can nicely focus on your business (and thus make even more money).
