Tax10 September 20265 min read

Income tax return for freelancers in the Netherlands: how it works

The VAT return comes back every quarter, but the Dutch income tax return, the aangifte inkomstenbelasting or IB, comes once a year and covers something else entirely: your profit. For many freelancers this is the return that raises the most questions, because the hours criterion and the entrepreneur allowances hang off it. Below you will find what happens in that return, when you count as an entrepreneur, and what you need in order to file.

Twelve binders stand in a row on a desk, one of them orange; a hand puts the last one in place. A year planner hangs in the background.

What is the Dutch income tax return for a freelancer?

As a freelancer you declare your business result as profit from business, which falls in box 1, the same box as wages from employment. So the Dutch tax authority, the Belastingdienst, looks at your total income for the year: your profit, plus any wages from a job on the side, minus the allowances you are entitled to.

This is entirely separate from the VAT return. With VAT you are a conduit: you collect VAT from your clients and remit it, and those amounts are neither your revenue nor your costs. Income tax is about what remains after that VAT: your revenue excluding VAT, minus your business expenses.

The return has to be in before 1 May of the following year in principle. If you cannot make it, you can request an extension, and many entrepreneurs do so through their bookkeeper. Request that extension in time, because requesting late is the same as not requesting at all.

When do you count as an entrepreneur for income tax?

This is a separate assessment, independent of your Chamber of Commerce registration and independent of your VAT number. The Belastingdienst looks at, among other things, the size of your revenue, the number of clients, the independence with which you work, the business risk you run and whether you invest in your business.

The consequence of that assessment is significant. If you count as an entrepreneur for income tax, you qualify for the entrepreneur allowances. If you do not, you declare your income as income from other activities: you may still deduct costs, but the entrepreneur allowances do not apply.

So you can be a VAT entrepreneur without being an entrepreneur for income tax. That sounds contradictory, but they are two separate tests with their own purpose. If you are unsure where you stand, have a bookkeeper assess it rather than filling it in yourself, because a wrong assumption carries through for years.

What is the hours criterion and why does it weigh so heavily?

The hours criterion, the urencriterium, means spending at least 1,225 hours a calendar year on your business in order to qualify for a number of entrepreneur allowances. That is roughly 24 hours a week across a full year, and it applies even if you only start partway through the year: the figure is not reduced pro rata.

Those 1,225 hours are not only billable hours. Acquisition, admin, writing quotes, maintaining your website and travel time to clients all count, as long as they are hours for your business. That is precisely why people underestimate it: they only count what they invoiced.

The problem almost never lies in the number but in the evidence. In an audit you have to make it plausible that those hours were worked, and an estimate after the fact will not do that. A time record you keep during the year, with date, duration and description, is the only thing that holds up.

Which entrepreneur allowances are there?

The best known is the self-employed deduction, the zelfstandigenaftrek, for which you have to meet the hours criterion. Its amount has been phased down step by step over recent years, so always look up the current figure for this year with the Belastingdienst rather than going by what you saw last year.

There is also the starter's deduction, an increase of the self-employed deduction that you may apply a limited number of times in your first years. And there is the SME profit exemption: a percentage of your profit after the entrepreneur deduction that stays outside the levy. That last one applies even without meeting the hours criterion.

Investments can also come into play through the small-scale investment deduction, if you invest above a certain amount in business assets in a year. These schemes stack on one another and the order in which they are applied determines the final figure; that is the sort of calculation software or a bookkeeper exists for.

What do you need in order to file?

Complete records for the whole year: all sales invoices, all purchase invoices and receipts, your bank statements and the reconciliation between them. Your revenue and your costs come out of that, and with them your profit. If receipts are missing you lose deductions and your figures cannot be substantiated.

In addition your time record if you want to claim the self-employed deduction, and your mileage record if you drive for business in a private car or privately in a company car. Those are the two records that cannot be reconstructed afterwards and therefore have to run alongside all year.

And the balance sheet items: what clients still owe you, what you still owe suppliers, your business assets and the depreciation on them. If you work with bookkeeping software those overviews roll out of it; if you work with a spreadsheet, this is where most of the manual work sits.

Frequently asked questions

When is the Dutch income tax return due?

Before 1 May of the year following the tax year, in principle. If you cannot make it, you can request an extension, which many entrepreneurs do through their bookkeeper. Request it in time; requesting late counts as not requesting.

What exactly is the hours criterion?

Spending at least 1,225 hours a calendar year on your business in order to qualify for the self-employed deduction, among others. Acquisition, admin and travel time count too, not only billable hours. The figure is not reduced if you start partway through the year.

Do I have to file both a VAT return and an income tax return?

Usually yes, and they are two separate things. The VAT return covers the VAT you collected and paid, normally per quarter. Income tax covers your profit once a year: revenue excluding VAT minus your business expenses.

This article is general information, not tax or legal advice. When in doubt, consult an adviser; rules can change.