Sole proprietorship
A sole proprietorship is a transparent entity, which means that it is linked to the private owner. The owner is liable for the company’s obligations and taxes. The owner is, after deduction of all costs, taxed for the profit of the company. The taxes are due via the personal income tax return.
Tax credits sole proprietorship
As a sole proprietor, you are entitled to the general small companies discount of 13.31% of your gross profit. That means that only 86,69 % of your profit is taxed. In 2024, the deduction is limited. The benefit is calculated at a rate of 36.97%.
The self-employed tax deduction of 3.750 euros (for 2024) may also be claimed. The self-employed tax deduction has been reduced in recent years and will ultimately amount to only 900 in 2027.
On top of the mentioned amount you can also claim an amount of € 2.123 for the first three years.
The most important requirement you must adhere to so you can claim the self-employed tax deduction is that you have spent at least 1.225 hours on your business activities in the calendar year. This includes direct working hours but also hours you spend on travelling, market research, administration etc.
With a sole proprietorship, the full profit is always taxed in the same year, which could result in higher taxes than if you were to have a B.V. However, the setup of the sole proprietorship only requires a registration at the chamber of commerce (KvK).
The limited liability company (B.V.) in combination with the 30% tax ruling
You also have the option to freelance through your own incorporated B.V. and pay yourself a salary. This option may allow you to apply for the 30% ruling tax application if you fulfil the general criteria. The liability and taxability by operating via a B.V. are different from operating as a sole proprietor.
Obligations B.V.
The B.V. is treated as a separate entity and has to meet additional requirements, such as filing monthly payroll tax returns, quarterly VAT returns, an annual corporate income tax return and filing the annuals at the chamber of commerce.
Salary obligations of a B.V.
A shareholder of a B.V. who owns 5% or more of the shares is obliged to receive a salary if they perform work for the company. The B.V. is obliged to withhold wage tax on the salary. The obliged salary needs to be determined on the basis of the usual wage rules. This means that the salary needs to be determined on the basis of performed work by the shareholder and has to be at least € 56.000 (2024) gross on annual basis. An exception may apply if the B.V. does not generate sufficient income or the performed work is very limited.
30% Ruling
The minimum required salary to benefit fully from the 30% ruling is around € 66.000. However, the minimum salary to be eligible for the 30% tax ruling application is 46.107 euros (2024). The wage tax rates are the same as the tax rates for the sole proprietorship. However, the effective tax rate may be lower if you are an employee of the B.V. under the 30% ruling application. This is given the fact that only 70% of the salary is taxed. Note that the maximum tax free amount will become 27% starting 2027.
Maximum tax free amount.
Starting 2024 the 30% ruling application can only be processed on a salary of max € 233.000 for employees who received the ruling in 2023. Starting 2026 the maximum will apply also to employees who falls under the transitional period (employees who got the ruling before 2023).
Here are the tax rates for 2024:
| Box 1 tax rates 2024 (including social security premiums) | |
|---|---|
| € 0 – € 75.518 | 36,97% |
| € 75.518+ | 49.50% |
B.V. taxes
After all company costs are deducted, the profit will be taxed. The corporation tax in the Netherlands for 2024 is 19% up to 200,000 euros and 25.80% if more. The net profit after taxation can be paid out as a dividend to the shareholders whenever desired.
However, if the 30% tax ruling applies, it might be more beneficial to distribute an additional salary instead of a dividend. The dividend tax which the B.V. is obliged to withhold is 15%. Additionally, the dividend payment is taxed with another 9.5% (2024) in Box 2 when the shareholders file their personal income tax return, which makes the total rate 24.50%, The total tax burden on distributed dividends is therefore around 39 % in the first bracket.
The box 2 rate for dividends above € 67.000 is 33% in 2024 and in 2025 probably 31% .
An appropriate alternative
The B.V. structure in combination with the 30% ruling application may be an appropriate alternative if you are planning to start your business in the Netherlands. Especially if you expect to generate a sufficient turnover and expect a growth of your business over multiple years. The B.V. gives also more flexibility with salary payment and dividends. Note that if you choose to start with the sole proprietorship, you would not be able to apply for the 30% ruling application at a later stage.
