February 27, 2023
When are you an entrepreneur for income tax purposes?
Many entrepreneurs think that all entrepreneurs are also entrepreneurs for income tax purposes. This is just not entirely true. For example, if you work as a zzp'er or if you have a company registered in the trade register of the Chamber of Commerce, this does not automatically mean that you are also an entrepreneur for income tax purposes. First of all, of course, you are not an entrepreneur for income tax purposes if you have a BV or NV. This is because then you pay corporate income tax instead of income tax. But also entrepreneurs with sole proprietorships or partnerships are in some cases not entrepreneurs for income tax purposes. In this article we explain exactly how this works.
When are you a sole proprietorship/venture/partnership or entrepreneur for income tax purposes?
As a sole proprietorship, you are considered an entrepreneur for income tax purposes by the income tax authorities if you are actually doing business. Here you can do the entrepreneur check to find out if you are an entrepreneur for income tax purposes. There are a number of things the tax authorities look at to assess this: continuity, entrepreneurial risk, business size and independence.
Continuity; with continuity, for example, the income tax authorities look at whether you plan to continue with your business and whether you make an effort to find new clients.
Entrepreneurial risk; for entrepreneurial risk, the tax authorities look mainly at whether you are at risk for clients who do not pay and whether you are at financial risk if you do not do your job properly.
Business size; for business size, the tax authorities look mainly at the amount of your turnover.
Independence; here the tax authorities look at whether you work independently with your business or whether you work more for another company. You can think of questions such as do you determine your own sales rates, do you work with your own materials and can you choose how you do your work?
For example, if your business has a turnover of less than 5000 euros per year, the tax authorities will see your business more as a hobby than as an entrepreneur. Or if, for example, you do not make your own sales invoices and do not work with your own equipment, the tax authorities will not see you as an entrepreneur but more as someone who is employed by another company.
What about if you are a sole proprietor/vof/partnership not an entrepreneur for income tax purposes?
If, as a sole proprietorship, you are not considered an entrepreneur for income tax purposes, it does not mean that you do not have to pay income tax. In fact, you still have to file income tax returns. The only thing that changes is the way you fill out the tax return form. You must now declare your income as "income from other work. If you had been an entrepreneur for income tax purposes, you would have had to declare your income as "profit from business. Of course, you also still have to file VAT returns, unless you are exempt for that.
Is it disadvantageous not to be considered an entrepreneur for income tax purposes by the tax authorities?
If you do become an entrepreneur for income tax purposes, you may take advantage of various deductions for entrepreneurs. Examples of these deductions include the start-up deduction and the self-employment deduction. These deductions cause entrepreneurs to pay less income tax. So it is disadvantageous not to be considered an entrepreneur by the tax authorities, because then you are not allowed to use these deductions
So as an entrepreneur, you cannot simply assume that you are also an entrepreneur for income tax purposes. Whether or not you are an entrepreneur for income tax purposes has consequences for how you must file your income tax return and whether or not you can make use of certain deductions. It is therefore important to find out. You can do this by completing the entrepreneur check.
