Sole Proprietorship (Eenmanszaak or ZZP) in the Netherlands
In the Netherlands, a sole proprietorship, also known as an eenmanszaak or ZZP (Zelfstandige Zonder Personeel), is a popular business structure for entrepreneurs and freelancers. This guide will walk you through the requirements, process, and additional documents needed to set up a sole proprietorship, as well as tax obligations and other important considerations.
Read more about the process below or request a free quote for setting up a sole proprietorship in the Netherlands.
Requirements for Setting Up a Sole Proprietorship in the Netherlands
Before starting the registration process, ensure you meet the following requirements:
- You must be at least 18 years old.
- You must be a resident of the Netherlands. This means you need a valid BSN-number. Especially the second requirement is often misunderstood. Whereas anyone in the world can start a private limited company (BV) in the Netherlands, the sole proprietorship requires residency in the Netherlands. Furthermore, if you decide to move from the Netherlands after you have successfully set up a sole proprietorship, the sole proprietorship can continue to exist. Such a decision will most likely lead to a change in your tax situation, so it is wise to consult an international tax advisor.
- You need a Dutch address for your business (a postal address is in most cases also acceptable). If you do not want or you cannot register at home, you can register an office address. If you do not have one, we can recommend you a few. Find them below.
To set up a sole proprietorship, follow these steps:
- Choose a trade name: Your trade name should be unique and not misleading or offensive. A trade name check can be done through the Dutch Chamber of Commerce (KVK) website.
- Register with the KVK: Fill out the registration form and submit it to the nearest KVK office. You will need a valid ID and your business address. A one-time fee of €75 will be charged for registration.
- Apply for a VAT number: The KVK will automatically forward your details to the Dutch Tax and Customs Administration (Belastingdienst), who will then provide you with a VAT number (BTW-nummer) and a VAT identification number (BTW-id). Both numbers are essential for invoicing and tax obligations. It takes on average about a week to receive the VAT number.
Optionally, you can open a separate Dutch business bank account. It is allowed to use your personal bank account, but we strongly recommend you to keep your personal finances separate from your business. That is why a company bank account is useful. You can connect this bank account to an accounting program of your own choice and maintain your administration with just a few clicks.
Moving from the Netherlands with an active sole proprietorship / eenmanszaak
If you decide to move from the Netherlands after setting up a sole proprietorship, several things may happen depending on your new residency status and the nature of your business operations. Here are some possibilities:
You maintain the sole proprietorship: If you continue to conduct business in the Netherlands and maintain your BSN number, you can keep your sole proprietorship. However, you will need to keep your Dutch tax obligations in mind, such as filing income tax returns and VAT returns (if applicable). You may also need to consider the tax regulations in your new country of residence and whether there are any double taxation agreements between the Netherlands and your new country.
A second option might be to change the business structure. If you plan to expand your business or add partners, you might want to consider changing the business structure from a sole proprietorship to a different legal form, such as a private limited company (BV). This legal form is more suited to non-resident entrepreneurs. This would require a new registration with the Dutch Chamber of Commerce (KVK) and may involve different tax implications.
You could also decide to terminate the sole proprietorship. If you decide to cease your business activities in the Netherlands, you will need to deregister your sole proprietorship with the Dutch Chamber of Commerce (KVK) and settle any outstanding tax liabilities. Make sure to arrange this well in collaboration with your accountant or bookkeeper.
Transfer the business: You may also choose to transfer your business to another individual, who would take over the sole proprietorship. This would require a new registration with the Dutch Chamber of Commerce (KVK) for the new owner.
Get your business in the Netherlands started?
Get in touch with us to learn more about our company services. We want to help you move your business in the Netherlands forward.
Legal Contracts for a Sole Proprietorship
Having appropriate legal contracts in place can safeguard your business and prevent misunderstandings. Here are a few essential contracts for a sole proprietor:
- Independent Contractor Agreement: If you plan to hire other freelancers or subcontractors, an independent contractor agreement is crucial. It outlines the terms and conditions of the contractor's work, such as project scope, deadlines, payment terms, and confidentiality.
- Confidentiality Agreement (Non-Disclosure Agreement): This contract is essential when sharing sensitive information with clients, suppliers, or partners. It ensures that the receiving party will not disclose or misuse your confidential information.
- General Terms and Conditions: These are the standard terms that govern the sale of your goods or services. They can be included in your service agreements or provided separately. General terms and conditions typically cover payment terms, delivery, liability, and dispute resolution.
Tax Situation and Obligations
As a sole proprietor in the Netherlands, you are responsible for paying taxes on your business income. Here are the main taxes and obligations you should be aware of:
- Income Tax (Inkomstenbelasting): Sole proprietors pay income tax on their business profits. The tax rate depends on your total taxable income, which is divided into three brackets. The progressive rates are as follows:
|Personal Income Tax (IB)||2022||2023|
|Bracket 1||37,10% up to €68.508||36,93% up to €73.031|
|Bracket 2||49,50% from €68.508||49,50% from €73.031|
- Value-Added Tax (BTW or VAT): If your annual turnover exceeds €20,000, you are required to charge VAT on your goods and services. The standard VAT rate is 21%, but reduced rates of 9% and 0% apply to certain goods and services. You must report and pay VAT quarterly to the Dutch Tax and Customs Administration.
- Small Business Scheme (KOR): If your annual turnover is less than €20,000, you may qualify for the Small Business Scheme (Kleineondernemersregeling or KOR). This scheme allows you to be exempt from charging VAT on your invoices, but you also cannot reclaim VAT on business expenses.
Deductions and Allowances
Sole proprietors are eligible for certain deductions and allowances. The most notable tax advantages/deductions for a sole proprietor are the zelfstandigenaftrek, startersaftrek en mkb-winstvrijstelling. These can mean a significant tax break for sole proprietors and entrepreneurs in the Netherlands. It is important to understand the requirements for each deduction and to file your taxes accurately in order to claim the deductions that you are entitled to.
MKB-winstvrijstelling / SME deduction
In 2023, the SME profit exemption is 14% of the profit, after you have reduced it by the entrepreneur's allowance. In 2023, the deduction of the SME profit exemption will be limited. The benefit is calculated with a rate of 36.93%.
Zelfstandigenaftrek / self-employed deduction
Are you an entrepreneur, that works fulltime for your own business and have you not yet reached state pension age at the start of the calendar year? In that case, the self-employed deduction in 2023 is an amount of € 5,030. In 2023, the tax benefit of the self-employed deduction will be limited. The benefit is calculated with a rate of 36.93%.
Startersaftrek / starter's deduction
The startersaftrek (starter's deduction) is a tax deduction that is available to entrepreneurs who have started a new business in the Netherlands. The deduction is based on the amount of income that the entrepreneur earns from their business. The amount of the deduction is currently €5.275, and it is phased out for entrepreneurs who earn more than €20.000.
To keep your taxable income as low as possible, you can deduct certain expenses from the income in your sole proprietorship. Below is an overview.
|Costs||Which part is deductible?||Notes|
|Home workspace||0% (some exceptions apply)|
|Food, drink, stimulants||A threshold of € 4,600 applies.|
Instead of this threshold, entrepreneurs working as sole proprietor or in a partnership are allowed to deduct 80% of these costs and entrepreneurs for corporation tax (bv) 73.5%.
|The item 'food' includes business lunches and dinners (including tips).
Think of 'drink' to coffee, tea, milk and soft drinks.
With 'stimulants' you should think of, among other things, cigarettes and cigars.
|Representation, congresses, seminars, study trips|
(including travel and accommodation costs)
|Instead of this threshold, entrepreneurs working as sole proprietor or in a partnership are allowed to deduct 80% of these costs and entrepreneurs for corporation tax (bv) 73.5%.||'Representation' includes the costs of receptions. Promotional gifts also generally fall under 'representation'
You may deduct a maximum of € 1,500 for the travel and accommodation costs. Was it necessary for your work to attend a conference and the like? Then this maximum does not apply.
|Telephone subscription at home||0%|
|Business phone calls at home||100%|
|Workwear||100%||Work clothing is clothing that you can wear (almost) exclusively within the framework of your company. This must be evident from the appearance of the clothing, for example: a uniform or overall. Is the clothing also suitable for wearing outside of your company? The clothing must then be provided with a logo with a surface area of at least 70 cm2. The logo must refer to your company.|
|Clothing (no work clothes)||0%|
|Briefcases and similar||100%|
|Equipment and instruments that do not|
belong to the business assets
|Business costs of private car||A fixed amount of € 0.19 per kilometer.|
|Business travel costs public transport, taxi and plane||100% of the costs actually incurred||You must be able to prove that you actually incurred these costs. For example, save your train ticket. Are you traveling with an OV chip card? Then make a print out of your journeys.|
|Vessels for representative purposes||0%|
More on this topic in our guide on taxation in the Netherlands.
Find a bookkeeper or accountant
Social Security and Insurance
As a sole proprietor, you are not automatically covered by employee social security schemes. Therefore, it is essential to consider your options for social security and insurance:
Income protection: You can choose to take out voluntary insurance for unemployment, disability, and sickness benefits. This is done through private insurance companies for income protection.
Pension Plan: Since you are not covered by a company pension plan, you should consider setting up a private pension plan or investing in a bank savings pension product (banksparen). This will ensure that you have financial security during your retirement years.
Health Insurance: Health insurance is mandatory in the Netherlands. As a sole proprietor, you must arrange your own health insurance policy. You do this in your personal capacity, not as a business. You can choose from a range of insurance providers and select a policy that best suits your needs. The most well-known comparison website is Independer.
Professional Liability Insurance: Depending on the nature of your business, it may be wise to consider professional liability insurance. This coverage protects you from claims resulting from negligence, errors, or omissions in your professional services.
Business Insurance: To safeguard your business assets, you might want to consider additional insurance policies, such as property insurance, business interruption insurance, and cybersecurity insurance, depending on your specific needs.
Listed below are a few business insurance providers active in the Netherlands:
Flipping point: Switching from Eenmanszaak to BV
The flipping point to choose a sole proprietorship (eenmanszaak) in the Netherlands versus a BV is when your business starts to grow and you need to protect yourself from personal liability. Once you are there, you can relatively easily transfer the eenmanszaak into a BV. There are several ways of doing this, explained in more detail in this article.
A sole proprietorship is a transparent entity, which means that you are personally liable for the company's obligations. This means that if your business goes bankrupt, you could be forced to sell your personal assets to pay off the company's debts. A BV, on the other hand, is a limited liability company, which means that you are not personally liable for the company's obligations. This means that if your business goes bankrupt, your personal assets will not be at risk.
Another factor to consider is the tax implications of each structure. A sole proprietorship pays income tax on the profit, while a BV pays corporate tax on the profit and dividend tax on the profit distribution. In addition, the BV must pay a salary to the main director-shareholder (DGA), on which the DGA pays income tax. Tax advantages such as the 30-percent ruling, can also make the BV a more attractive option, depending on the circumstances.
Finally, you need to consider the cost of each structure. A sole proprietorship is much cheaper to set up than a BV. However, the BV has a number of advantages, such as limited liability and tax benefits. Maintaining the BV is also more costly, mainly due to accounting and reporting costs.
Ultimately, the decision of whether to choose a sole proprietorship or a BV is a personal one. You need to weigh the pros and cons of each structure and decide what is best for your business.
Our professional business, legal and tax advisers can help you make the right decision.
Setting up a sole proprietorship in the Netherlands is a relatively simple process, but it's essential to understand the requirements, registration process, legal contracts, and tax obligations involved. Additionally, consider your social security and insurance options to ensure a secure and successful business operation. By following the steps outlined in this guide, you can confidently establish and grow your eenmanszaak in the Netherlands. If you need any assistance, reach out on our platform with professionals or contact us directly using the below form: