The small business scheme has been introduced to financially support small companies. The old scheme offered a tax reduction when annually paying income tax. This reduction has been changed into an exemption.
You’re eligible to take part in this scheme if:
- You pay mandatory VAT
- Your business is located in The Netherlands
- Your turnover is less than €20.000 a year
Important to note is that it’s voluntary to join the small business scheme and that it applies for a minimum of three years. Once your turnover exceeds €20.000 in a calendar year the scheme is no longer applicable and your participation is excluded for three years.
An application has to be handed in to the Belastingdienst four weeks before the start of a new declaration period. If you want to join per the first of April 2020, the Belastingdienst needs to have received your application before March 3rd 2020 at the latest.
An advantage is that due to the VAT exemption, you’re excluded from any administrative obligations. Not having to declare VAT, means not mentioning it on your invoice or reclaiming it later on. Another plus side is that it can save you a lot of money. Paid VAT in recent years? Chances are high that you’ll be spared these costs from now on if you join the scheme.
Unfortunately, the new small business scheme might disadvantage you. You can’t reclaim VAT when joining this scheme. In some cases you receive more VAT than you’ve declared. If this is the case for you, the scheme might not be beneficial as you’ll lose money by joining.
The scheme is not necessarily advantageous, so it’s your own decision to join. Crucial in deciding to join is an accurate estimate of your revenue. The Belastingdienst offers a helpful estimating tool. They explain which revenue counts in the small business scheme.
To clarify we’ve come up with an example:
Theo owns a massage parlor and pays annual VAT. His customers are individuals and can’t deduct VAT. His revenue is 12.000 euro. He declares 9% VAT, which comes to a total of 1080 euro. In the meantime he’s bought goods for a total of 1200 euro. For these goods he’s declared 21% VAT, which comes to 252 euro.
In total Theo pays 828 euro VAT. By partaking in the small business scheme, he’s exempt from paying VAT. In other words, he can keep his 828 euro.
Several blogs advise you not to decide too quickly. They not only advise you to estimate your revenue, but also take into account expected costs. They also warn you for other schemes, such as the VAT review.
Take your time to analyse your finances to see if the new scheme is advantages or not.
Have you decided to join the small business scheme? Use this application form to join. (Dutch only)