Income tax
Income tax is a difficult matter for many entrepreneurs and individuals, while there are so many opportunities for the entrepreneur. It goes without saying that you do not file an incorrect tax return, apply prohibited tax constructions or keep a sloppy administration. When you delve into tax matters, or receive expert tax advice on tax regulations and laws, there are important benefits to be gained and you are protected against sanctions, fines, legal proceedings and the like.
Our reliable expert tax specialists, who all have years of experience, see every opportunity. We turn these opportunities into benefits for our customers and protect them. Often this has immediate results, so that the financial position improves. All our tax specialists have years of experience and the mr. title.
Categories of income tax for entrepeneurs.
The income tax return for entrepreneurs is divided into three different categories.
These are the following:
- Wages from employment; (some freelancers)
- Result from other activities; (e.g. artists)
- Profit from the enterprise. (most entrepreneurs fall into this category)
Every resident of the Netherlands must pay tax on his or her income. Entrepreneurs often have income from multiple sources and have to file their own returns and comply with the tax liability. People who work as employees are obliged to pay wage tax automatically through the employer. The withheld wage tax is then deducted from the income tax. That is why we sometimes speak of a withholding tax on income tax.
Income tax return for entrepreneurs
Entrepreneurs pay tax on profits for income tax, except for certain exceptions.
This income is divided into three boxes:
- Box 1: Income from home and work
- Box 2: Income from significant interest (e.g. dividend).
- Box 3: Income from savings and investments
As an entrepreneur, you add up all deductions that apply to the income tax return.
Private deductions
Collect all private deductions. Consider, for example, an annual overview of your mortgage or your AOV document. (The AOV is not a business deduction).
Calculate enterprise costs and profit
Collect all operating costs together. Operating costs are all business costs such as bank costs, a business hotel stay, a lease car, etc. Add up all the income and take the operating costs away from that. That amount is the profit of the company left.
Tax deductions and requirement hours criterionThe taxable income is calculated by deducting the tax deductions from the profit. For this you must meet the hours criterion. The hours criterion means that you work at least 1225 hours on the company in a year and can demonstrate this if requested by the tax authorities.
The tax deductions are:
- SME profit exemption
- Starter's deduction
- Self-employed deduction
- FOR, reservation for the Fiscal Old Age Reserve
Income-related contribution Health Insurance Act Zvw
In addition to income tax, there is also an income-related contribution to the Health Insurance Act or Zvw. An entrepreneur must pay the contributions. The tax authorities have set a percentage of 6.68% for 2023 with a maximum contribution income of € 66,956.
Income tax entrepreneurs box 1, box 2 and box 3
Every resident of the Netherlands must pay tax on his or her income. Entrepreneurs often have income from multiple sources and have to file their own returns and comply with the tax liability. People who work as employees are obliged to pay wage tax automatically through the employer. The withheld wage tax is then deducted from the income tax. That is why we sometimes speak of a withholding tax on income tax.
The income on which residents of the Netherlands pay tax are divided into three boxes:
- Box 1: Income from home and work
- Box 2: Income from significant interest (e.g. dividend).
- Box 3: Income from savings and investments
In each of these boxes, each calendar year is calculated separately; how high the taxable income is. This split is necessary, because each box has its own rate.
Box 1
In this box, all income obtained from work and home is taxed. This taxable income consists of several components. The code states that income from all categories must be added together below, in order to arrive at the income from work and housing:
- Taxable profit from a company;
- The taxable wage;
- Taxable income from other activities;
- Taxable income from own home;
- Negative personal deductions;
- Negative expenditure in the context of income provision; and
- Taxable part of benefits and other benefits in kind.
Every taxpayer also has the right to use certain items as a deduction. These amounts may then be entered to deduct from the income tax to be paid. This concerns the following matters:
- Personal deduction;
- Deduction due to no or small home debt; and
- Expenditure on income provisions.
Box 1 income tax: what tax rate?
If it is then clear on what amount one is liable for tax, it must be determined what rate should be applied. In the Netherlands we have a progressive tax system. This means that more tax is paid, as more is earned. We generally have two rates in box 1:
- Taxable income up to € 73,031,- --> a rate of 36.93% is applied on this.
- Taxable income from € 73,031,- --> a rate of 49.50% is applied
This means that someone with a taxable income of, for example, € 100,000,-, pays a rate of 36.93% on € 73,031,- and then a rate of 49.5% on the remaining € 26,969,-.
Finally, the rate that has to be paid does not always depend solely on the amount of income. When you have reached retirement age in the Netherlands and therefore receive an AOW benefit, a special rate is applied. People with this age pay a rate of 19.03% on the part of their income up to € 37,149.
Box 2
In this box, income arising from having a significant interest is taxed. A taxpayer has a significant interest if he holds at least 5% of the shares of a private or public limited company. In this box, both the regular income and the income from a sale of the interest are taxed. Regular income is, for example, dividends and distributions. But also the profit made from the sale of shares is taxed in this box.
Currently, a rate of 26.9% is applied. The rate in box 2 will also be progressive in nature from 2024. Up to an amount of € 67,000, a rate of 24.5% applies. Anything above the amount of € 67,000 will then be charged a rate of 31%. This rate must be paid on regular income from the ownership of shares, as well as on any profit obtained from the sale of shares.
Box 3
In this box, the income obtained from savings and investments is taxed. What is striking about this levy is that one does not look at the actual return obtained. Box 3 assumes a predetermined fictitious return. This is also called the flat-rate return. This fixed return depends on the amount of the capital and, since 2022, also on the composition of the capital.
Determining the fixed return is done by looking at the category under which the capital falls.
Currently, the tax authorities hold three different flat-rate returns that are important for determining the amount of tax to be paid. After applying the fixed return, it is determined on which amount of tax must be paid. The current situation is as follows:
Asset category - Percentage of fixed return:
Bank balances 0.36%
Debts 2.57%
Other assets 6.17%
Currently, in box 3, the rate used is 32%. The fixed return is adjusted each year on the basis of the actual returns achieved in the previous year over the different types of investments. Every taxpayer has an exemption in box 3. It is currently set at € 57,000
As you can see, there are large differences in the rates that have to be paid on income obtained. As an entrepreneur, you have some degree of influence over how your income is obtained. It is therefore highly advisable to have yourself as an entrepreneur well advised by an expert tax specialist. This can result in considerable savings or prevent problems.
Questions from entrepreneurs about income tax
The following questions that we regularly receive from entrepreneurs about income tax:
- What are the income tax changes in 2023?
- What deductions are there for income tax and how do I process them?
- What do I do with a negative result in the company?
- How to include in the income tax return?
- How are old-age reserves included in the company and in the income tax return?
- How is the environmental investment deduction item processed in the company?
There are many other tax questions and issues asked to our tax professionals than the above regarding income tax. You can also submit all these questions to us. We provide clarity and solve your tax issue or question.
Why a tax specialist from AGA Fiscalisten with income tax?
AGA Fiscalisten stands for high-quality expert tax advice. All our tax specialists are senior tax specialists, have years of tax experience, and have graduated from the university in tax law and hold the title "mr.".
A (senior) tax specialist specializes in tax law while a tax advisor has only completed tax courses. A tax advisor has much less knowledge than a tax specialist and often makes mistakes with potentially significant financial consequences. It is wise not to settle for a non-qualified tax advisor, but to engage an expert senior tax specialist. This way you avoid problems, fines or procedures and you do not miss out on tax benefits due to advice that is not sufficiently expert.
High quality tax specialist; Master title mr. and years of experience
All our tax specialists have years of tax experience and the "mr." title. The most recent developments and changes concern taxation and all relevant legislation is studied and discussed by our tax specialists. This gives us the opportunity to clarify all the problems and issues about taxation. We achieve the best possible result for our customers. Tax advice, tax returns, financial advice, legal advice or discussion partner, AGA Fiscalisten will arrange it for you!
Contact AGA Fiscalisten
The tax specialists of AGA Fiscalisten can do a lot for you, from an answer or advice to your tax questions to guidance throughout the entire process. If you have any questions or issues and would like high-quality tax advice, please contact one of our expert experienced tax specialists for an intake interview free of charge and without obligation.
NEED TAX ADVICE? Call: 040-8489888 1st free and non-binding intake interview. Available by phone: Monday to Friday between 09.00h and 20.00h) We can also be reached by e-mail: info@agafiscalisten.nl or via the contact form on the right side of our website.
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