You might’ve heard of the Kleineondernemersregeling before, or you might think: is there a way to simplify my accounting? Yes, there is, if you have less € 20,000 in revenue per year that is subject to Dutch VAT.
VAT exemption – Kleineondernemersregeling (KOR)
You can apply for a VAT exemption. The processing time for this is 4 weeks, so be sure to apply one month before the quarter you plan to be making use of this scheme. Once you apply, you can only cancel the exemption by exceeding the threshold of € 20,000 in revenue with Dutch VAT. Once the application is accepted, you are off the hook VAT-wise. If you have freelance work in another EU country, you will however still need to file a quarterly ICP.
The invoice that makes you exceed the threshold of 20,000 in revenue subject ot Dutch VAT will then immediately have to be charged with VAT again and you should contact the Belastingdienst to cancel the exemption again. Services that are exempt from VAT by law are not included in this revenue criterion. Examples of those are music education to minors below 21 years old and the fees for composers and authors.
What should you put on your invoices?
For the application of the VAT exemption you should include these phrases on your domestic invoices and of course not bill any VAT anymore:
Dutch: Factuur vrijgesteld van OB o.g.v. artikel 25 Wet OB (Kleineondernemersregeling)
English: Invoice exempt from VAT in accordance with article 25 of the Dutch revenue tax law (small business scheme).
ICP (Intracommunautaire prestaties – phew!)
However, for invoices to clients abroad, the KOR doesn’t apply, but the standard VAT reverse-charge schemes:
Dutch: btw verlegd
English: VAT reverse-charged
And then you should also include the VAT-number of the client. If the client doesn’t have a VAT-number, the invoice automatically falls under the Dutch VAT regime, which means 9% for stage performances and 21% otherwise. If you are under the KOR, you will send an invoice without VAT of course, with the wording as mentioned above (article 25 etc.)
What’s the catch?
The disadvantage of the VAT exemption is that if you always get refunds in VAT, this will change because the VAT on your expenses will be non-refundable. Refunds might occur if you invest a lot in a given year or if you have only 9% revenue and a lot of expenses with 21% VAT. If you expect to invest a lot, it might be wise to postpone the application for the KOR until after the investments.
It will be deductible as expenses in the income tax return. You will enter the expenses including VAT in your adminstration and set the VAT rate to 0% or “vrijgesteld” or anything that is without VAT. If you have work in another EU country, you still need to file a quarterly ICP.
More info can be found on https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/btw/hoe_werkt_de_btw/kleineondernemersregeling/kleineondernemersregeling