December 11, 2024
Simple explanation of taxes for new entrepreneurs
When you start your own business, you quickly come into contact with taxes. It may sound complicated, but it’s actually quite simple if you do it step by step. In this article, we explain the most important taxes for entrepreneurs: VAT (Value Added Tax), payroll tax, corporate income tax, dividend tax and income tax.
Value added tax (VAT)
Taxable person
VAT (Value Added Tax), is a tax that you pay to the Tax Authorities as a company. This can be as a sole proprietorship, general partnership, private limited company, but also as a foundation, for example.
When are you required to pay VAT?
As soon as you supply a product or service as an entrepreneur, you are required to charge VAT. You add VAT to your price, the buyer pays the amount including VAT. You must pay that VAT to the Tax Authorities later. VAT is charged to you on products and services that you buy. You therefore pay that to the supplier. You can reclaim that VAT from the Tax Authorities later.
Rates (2024)
There are different VAT rates, below are the most common:
- 21% is the standard rate (almost everything falls under this);
- 9% for food and drinks, for example.
Tax period
This is the period for which you must file a tax return. You usually file a tax return for a period of one quarter.
- Quarter 1: January 1 to March 31 (file by April);
- Quarter 2: April 1 to June 30 (file by July);
- Quarter 3: July 1 to September 30 (file by October);
- Quarter 4: October 1 to December 31 (file by January).
In some cases, you file a VAT return every month or every year.
Payment deadlines
Do you file your sales tax return every quarter? Then these are your payment deadlines:
- Quarter 1: April 30;
- Quarter 2: July 31;
- Quarter 3: October 31;
- Quarter 4: January 31.
Payroll Tax
Taxable person
Who pays this tax to the Tax Authorities? Payroll tax is a tax that you as an employer pay to the Tax Authorities.
When are you required to pay payroll tax?
Do you employ workers? Then you are responsible for withholding and paying payroll tax on their salaries. This is the tax that employees pay on their income, but which you as an employer must withhold on their behalf.
Rates (2024)
Payroll tax consists of two rates:
- 37.07% for an income up to €37,125
- 49.5% for anything above that
Tax period
This is the period for which you must file a return. You file a return for a period of one month, with the deadline for filing the return being the last day of the following month.
Payment deadlines
You must pay payroll tax by the last day of the month following the filing period. Examples:
- January: pay before February 28;
- February: pay before March 31;
- March: pay before April 30, and so forth.
Corporate income tax
Taxable person
Who pays this tax to the Tax Authorities? Corporate income tax is a tax that is mainly paid to the Tax Authorities by B.V.s and N.V.s.
When are you required to pay corporation tax?
As soon as the taxpayer, let's say your B.V., makes a profit, the B.V. must pay corporate income tax.
Rates (2024)
The corporate income tax rate in the Netherlands is:
- 19% on the first €200,000 of profit;
- 25.8% on anything above that.
Tax period
You file your corporate income tax return each year for the profit of the previous year. The deadline for filing your tax return is usually before 1 June, unless you request an extension.
Payment deadlines
Corporate income tax usually has to be paid immediately after filing the return. This can be done in one go or in installments, depending on agreements with the Tax Authorities.
Dividend tax
Taxable person Dividend tax is usually paid by two parties: the one who pays out the dividend and the one who receives the dividend.
When are you required to pay dividend tax?
For example, when a private limited company (B.V.) distributes profits to its shareholders, dividend tax is payable. This is the tax on dividends, or in other words, on profits distributed to shareholders.
Are you a shareholder in your B.V. and do you distribute part of the profits to yourself as a shareholder? Then keep in mind that dividend tax applies.
Profit distributions between operating companies and holding companies are often exempt from dividend tax due to the participation exemption.
Rates (2024)
The dividend tax rate in the Netherlands is:
- 24.5% on the first €67,000 of dividend;
- 33% on anything above that.
Tax period
Dividend tax must be paid immediately with each profit distribution. This means that you must file a tax return for every dividend distribution.
Payment deadlines
Dividend tax must be paid within two weeks of the dividend payout.
Income Tax
Taxable person
If you live in the Netherlands or have income from the Netherlands, you need to pay income tax.
When are you required to pay income tax?
You pay income tax on your income, on financial interests in a company and on savings and investments. There are numerous deductions to take into account, which reduce your taxable income.
Rates (2024)
Income tax is calculated in two brackets:
- 37.07% for an income up to €73,031;
- 49.5% for anything above that.
Tax period
As an entrepreneur, you file your income tax return for the previous year every year. The return must be filed before May 1, unless you have requested an extension.
Payment deadlines
If you still have to pay income tax after the return, this must also be done before May 1. In case of postponement, the payment term shifts to the new postponement deadline.
Conclusion
It may seem like a lot, but as an entrepreneur, it’s important to handle your taxes on time. Whether it’s VAT, payroll tax, or your personal income tax, everything goes through the Tax Authorities. Make sure to file your tax returns and pay your taxes on time to avoid any hassle.
