The small entrepreneurs VAT exemption (Kleineondernemersregeling) is a Dutch tax scheme designed to help small businesses reduce their administrative burden and offer services without charging VAT. This exemption applies to eligible businesses with an annual turnover of no more than €20,000 per calendar year. Below, Taxsight explains the key benefits and potential drawbacks of this scheme.
VAT rates in the Netherlands
In the Netherlands, VAT is applied at different rates depending on the type of service or product. The standard VAT rate is 21%, while certain essential goods and services, such as food and medicines, are taxed at 9%. There are also VAT-exempt services, such as medical treatments and therapy, which do not require VAT registration or payment. Businesses that qualify for the small entrepreneurs VAT exemption can operate without charging VAT, provided they remain within the turnover limit.
How to apply for the VAT exemption
Small businesses, including sole proprietorships and limited companies (B.V.), can apply for the VAT exemption through the Dutch tax authorities (Belastingdienst). Once approved, the company no longer charges VAT on its services or products. This also means that the business does not have to submit VAT returns, simplifying its tax obligations. When the exemption is granted, the company’s VAT number is withdrawn, and from the next quarter, it must operate without charging or reclaiming VAT.
Benefits of the small entrepreneurs VAT exemption
- No VAT on sales: Businesses do not have to charge VAT, making their services more affordable for consumers.
- Reduced administrative work: There is no need to file VAT returns, easing the compliance burden.
- Cost savings for clients: Individuals cannot reclaim VAT, so this exemption makes services more accessible to private customers.
Duration and limitations
The VAT exemption remains valid for at least three years, as long as the company’s turnover stays under €20,000 per year. If the turnover exceeds this amount at any point, the business must immediately start charging VAT again. Once a company opts for the exemption, it cannot reapply for a VAT number within this three-year period unless it surpasses the turnover threshold.
Potential drawbacks of the VAT exemption
A potential downside of the exemption is that businesses cannot reclaim VAT on expenses. This can be a disadvantage for those who plan to make significant investments, as they will not be able to offset VAT costs. Entrepreneurs should carefully consider whether the exemption is beneficial for their specific situation.
Need expert advice?
For questions about VAT exemptions or other financial matters, Taxsight provides expert advice. Contact them at +31 (20) 261 3221 or email info@taxsight.nl for assistance.
