For a long time, the government tried to encourage the Dutch to start their own business. After all, a large company often starts small. To compensate for the entrepreneurial risks, there is the self-employed deduction. This is a deductible item for self-employed persons who work at least 1225 hours a year. In 2022 it will be 6310 euros, which is already less than in 2021 when it was 6670 euros.
thorn in the eye
It drops for a reason. Although the cabinet says it would like to see Dutch people do business, the growth in the number of self-employed people is a thorn in the side. The government believes that permanent jobs should become the norm again. And some of the self-employed are bogus self-employed. They do exactly the same work as people in paid employment and are dependent on their clients.
Think, for example, of package deliverers and meal deliverers who are often forced to be self-employed and earn less than they should, but also of a doctor or teacher who quit their job and are hired for more money as self-employed. The poorly paid self-employed in particular ran into problems during the corona crisis and applied for assistance.
1. What will change with regard to the self-employed deduction?
It goes down quickly. Two years ago it was still the intention that the self-employed deduction would be phased out in 2036 up to 3240 euros. But now the cabinet wants the deduction to be only 900 euros in 2027. How much that costs you depends on the tax bracket you fall into.
“The first year is all about small differences,” says Frank Alfrink, chairman of the Stichting ZZP Nederland. The employed person’s tax credit is intended to keep work rewarding, as the government has announced that it will increase for all workers, the self-employed and those in paid employment. It is not yet known by how much it will increase.
“But in 2023 there will be a decrease in the self-employed person’s deduction from 6310 euros to 5030 euros per year, or about 100 euros per month. Depending on the tax bracket, it is about five tens, which will be equal to the compensation, we expect.”
In 2027, however, it is about much more and that is against the sore leg of the industry club. “We are in favor of measures against bogus self-employment. But you also take away their benefits from the group of real entrepreneurs and you don’t give anything in return. Remember, self-employed people also include, for example, a shopkeeper who runs the business together with his wife. “
The Platform Independent Entrepreneurs (PZO) is also not happy with the measure. “Everything is becoming more expensive due to inflation. The government is trying to improve purchasing power for employees. It is then astonishing that the self-employed deduction with seven-mile boots will be reduced to 900 euros in 2027,” said Margreet Drijvers, director of PZO.
2. The FOR will disappear next year, what does that mean?
The FOR stands for fiscal old age reserve. Entrepreneurs reserve a part of their profits in the bookkeeping. No tax is levied on that part. The FOR is released when you retire or stop the company. In that case, the tax must still be paid on the FOR that has been built up over several years. This often concerns the top rate of 49.5 percent, unless you spread it over several years via an annuity insurance policy. Then the rate may be lower.
In 2022, the self-employed can still deduct 9.44 percent of the profit, up to a maximum of 9632 euros, from tax as a reserve for their old age. From 2023 they can no longer reserve a profit share, which means that they have less to deal with or can invest less in their company in the short term.
According to PZO, the cabinet does not listen to small entrepreneurs who contribute to the economy.
“With the curtailment of the tax facilities with which the cabinet aims to achieve a greater balance between permanent and flexible work, the cabinet is seriously missing the point,” says Drijvers. “Independent entrepreneurs are unable to invest and grow in their own business in this way.”
3. The averaging rule is disappearing, what does that mean?
Self-employed people sometimes have an irregular income. One year you have a turnover of 90,000 euros, the next year due to illness or bankruptcy of a large customer only 30,000 euros. The averaging scheme offers the self-employed (and employees) with a strongly fluctuating income the opportunity to average their income over three years. Overpaid tax will be refunded to you.
How much this makes a difference, of course, depends on turnover and tax scale. It can vary from hundreds of euros to thousands of euros.
The Dutch Self-Employed Association is concerned about whether self-employed workers will be able to make ends meet in the future. Chairman Cristel van de Ven: “These measures are taken by entrepreneurs who cut your hair, give music lessons to your children and repair your roof when it leaks. And they also suffer a lot from the increased costs of purchasing and living. group of entrepreneurs not worth it.”
4. Why is the government doing this?
Money, dukue, cents, dimes. Its all about the money. The treasury is running out and the government needs money. The budget memorandum states that the accelerated phasing out of the self-employed deduction will yield the cabinet 173 million euros in 2023, a year later that is 345 million euros, 518 million in 2025 and 688 million in 2026.
The results of abolishing the FOR and the averaging scheme have not been calculated exactly.
5. Will nothing stay the same?
Yes, the starter’s deduction and cooperation deduction will continue to exist. The starter’s allowance is intended for starting entrepreneurs. They can claim an extra deduction of 2123 euros three times in the first five years that they are an entrepreneur. So you pay less tax on your profit. The government wants to make it extra easy for starting entrepreneurs to start a business.
The co-operation deduction also remains. It concerns a deductible item if a tax partner cooperates free of charge in your company. Consider, for example, a construction worker who has his wife do the bookkeeping.
1.1 million self-employed
Self-employed people, there are more and more of them in the Netherlands. In 2021 there were 1.1 million people with a main job as a self-employed person, which is 12 percent of all workers, according to Statistics Netherlands. This puts us in sixth place in Europe. By way of comparison: In Italy 15 percent are self-employed.
In addition to the self-employed who get almost all of their income from their own work, there are also many who still have a job as an employee. Especially starting entrepreneurs do not immediately completely give up the certainty of a fixed income.
No unemployment benefits
As a self-employed person you have no income if you have no assignments. There is no unemployment benefit, nor is there any sick pay, unless you have disability insurance and are ill for a long time. Social assistance is there, self-employed people also pay tax for it.