Income tax for freelancers in the Netherlands: what to expect

The single most common surprise for internationals going freelance here: the VAT you file every quarter is not your tax bill. Income tax comes separately, once a year, and nobody withholds it for you. Here is how the two fit together.

Two different taxes, two different rhythms

VAT (btw) is money you collect from your clients on behalf of the tax office and pass on, usually every quarter, by the last day of the month following the quarter. It is never really yours.
Income tax (inkomstenbelasting) is due on your profit, filed once a year, normally before 1 May for the previous year. An extension is easy to request.

Profit is your turnover minus your business costs. Not your turnover, and not what you happened to spend.

Are you an entrepreneur for income tax?

The Belastingdienst looks at things like how many clients you have, how independent you are, whether you invest and how much risk you carry. That judgement decides whether you qualify for the entrepreneur deductions below.

Related to this: Dutch rules on false self-employment (schijnzelfstandigheid) are being enforced actively again, which mainly matters when you work long-term for a single client who directs your work like an employer would. If your situation looks like that, get advice before it becomes a correction.

The deductions that lower your bill

If you qualify as an entrepreneur, several deductions can apply:

Zelfstandigenaftrek, the self-employed deduction. It has been shrinking every year, so check the current amount rather than an older figure you read somewhere.
Startersaftrek, an extra amount in your first years, for a limited number of years.
MKB-winstvrijstelling, the SME profit exemption: a percentage of your remaining profit is untaxed. You get this one without meeting an hours criterion.

The first two require the urencriterium: at least 1,225 hours spent on your business in the calendar year. Keep a record of your hours, including quotes, admin and marketing, not just billable work.

How much should you set aside?

A common rule of thumb is to reserve roughly 35 to 45 percent of your profit for income tax and national insurance contributions, on a separate account. The exact share depends on your profit, your deductions and any other income.

The tax office can also issue a preliminary assessment (voorlopige aanslag), letting you pay in monthly instalments during the year. That is a lot more comfortable than a single bill afterwards.

The 30% ruling and freelancing

The 30% ruling is a facility for employees recruited from abroad. It does not apply to profit from a sole trader business. If you move from an employed job with the ruling to freelancing, you generally lose it.

There is one route where it can survive: being employed by your own BV, which then has to meet all the normal conditions, including the salary threshold. Whether that is worth the extra cost and administration depends entirely on your numbers, so run it past an advisor before restructuring anything.

Non-resident, or taxed in two countries?

If you live abroad and run a Dutch business, or the other way round, a tax treaty decides which country may tax what. Do not assume it follows your invoices. This is the point at which a bookkeeper or tax advisor pays for itself.

What helps in practice

Invoice promptly and keep every invoice for seven years, in and out.
Keep business and private money on separate accounts.
Track your hours from January, not in December.
Set the VAT aside the moment it arrives, and never treat it as turnover.

With factuurmaken your invoices are numbered, stored and calculated correctly, which is the part your annual return depends on. For the tax figures themselves, check the Belastingdienst or a bookkeeper: rates, deductions and thresholds change every year.