If you work in the Netherlands as a freelancer or ZZP, you are considered to be an independent contractor without any employees. You are not entitled to the legal protection of an employee-employer relationship but you have the independence to determine the manner with which you conduct your own business. You are personally responsible to get your own insurance and pay for turnover/income tax as well the administration of all your tax-related books and documents. In spite of the limitations of being a freelancer, their numbers are growing and they are enjoying their independence.
Self employed freelancers as entrepreneurs
Just like any other entrepreneur in the Netherlands, you are required to register your business with the Dutch Chamber of Commerce and the Dutch Tax and Customs administration to determine your status as a self-employed entrepreneur for the purpose of the turnover/income tax. You need to take into account that the tax authorities will not consider you as a ZZP’er if you fit any of the following conditions in your profile:
- If you only have one or two clients
- If you do not have the independence to determine your work
- If you acquire work through an intermediary
- If you do not maintain direct communication with your clients or do not actually know them
- If you do not determine your own rates according to consultation with clients
- If your income does not vary and if you do not send out any invoices to clients
- If the proofs of payment or invoices do not include VAT or value added tax
- If you fail to register your business with the Dutch Chamber of Commerce
If you fail to meet the criteria of being a self employed entrepreneur, the Dutch authorities will treat your income as regular incidental income and you will not be entitled to the tax breaks of an entrepreneur.
Tax breaks for the entrepreneurs
In order to promote entrepreneurship in the Netherlands, the Dutch government provides the self employed entrepreneurs with tax breaks. In order to qualify for the self-employment tax deductions, you are required to have rendered at least 1,225 hours of work a year. Hours work includes the actual time spent in completing a project, travel time, administration, research and marketing. It makes sense to keep administrative records of every hour spent in work because this will be your basis in reporting your turnover tax.
VAT for freelancers
In the Netherlands, it is compulsory for a freelancer to deduct VAT from the client’s invoice. The VAT that you will be charging your client can be offset against the VAT the supplier is charging him. VAT returns have to be filed with the Dutch tax authorities every quarter. In cases of high turnover, VAT can be filed monthly. However, take note that there are freelancers exempted from VAT like journalists, authors and those who work in the medical field. VAT rates in the Netherlands are 21% (standard) or 6% (reduced rate) and 0% (for supply in the EU Inter-community supplies and export). Administration of VAT and taxes can be complex and you will better off hiring an accountant or a bookkeeper.