If an individual or a group of individuals decide to set up a business in the Netherlands (often contemplated by the spouse of an expatriate), we usually advise the start-up that a choice for a limited liability company (hereafter BV) is a lot less tax advantageous than becoming sole proprietor (eenmanszaak) or a (personal) partnership (VOF). Please note that setting up a business, let alone a BV, may in certain cases be impossible from an immigration point of view.
26 nov 2018
Laatst gewijzigd: 16 dec 2018
mr. Leon van Baal
The five reasons for a sole proprietor (eenmanszaak) or (personal) partnership (VOF)
- € 7.280 income profit deduction, if active for at least 1.225 hours per calendar year (zelfstandigenaftrek);
- increase of aforementioned deduction for starting entrepreneurs during the first 3 years of € 2.123 (startersaftrek); for R&D activities this deduction is much higher;
- starting entrepreneurs may depreciate business assets at will during the first 5 years (willekeurige afschrijving);
- additional personal income tax exemption of 14% of profits (MKB-winstvrijstelling);
- carry-back term of tax losses is 3 years for private entrepreneurs (BV’s: 1 year).
Tax disadvantages of a BV
A starting BV cannot carry back its initial losses because it does not have any profit history. In case of a sole proprietorship or a partnership the private entrepreneur can carry back its losses to any positive private (wage) income of the past 3 years. Moreover, in a BV a certain market wage is taxed to its main directors/shareholders (sometimes even if the BV is not yet profitable). Based on the above, it is usually better to postpone the BV for a couple of years and to migrate into a BV tax-free when profits exceed say € 150,000.
Still a BV, but with the tax advantages of a sole proprietor
In some cases a BV can otherwise be necessary (limitation of liability, venture capital participation, franchising conditions etc.). In these cases we can investigate if we can combine a BV with a sole proprietorship to achieve the best of both worlds.
Please contact me, if you have any question about your case.
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