Workshop for Eindhoven Startups Foundation about Dutch Tax Advantages Sole Proprietorship (eenmanszaak) vs Private Limited Liability Company (besloten vennootschap, B.V.) Questions? Contact me by: Phone: +31 (0)40 244 42 88 Email: info@dewert.nl Twitter: @jurgenvdsande

1. NL tax advantages
Sole Proprietorship
vs
Private Limited
Company
by
Jürgen van de Sande
8 June 2016

2. Let’s introduce myself
Jürgen van de Sande AA
accountant partner
starting companies and growers SMEs
annual reports, fiscal declarations
finance, structure/organization, acquisition
dwo and accountancy departments

3. OUR VISION
An entrepreneur’s life is full of important events. Like starting
your company, growing or downsizing, cooperating or ending
your business. Each and every choice you make will affect the
future of your company.
De Wert is your partner of choice. We have been supporting
entrepreneurs since 1959 with accountancy, tax and HR advice,
payroll and administrative services. Therefore, no matter what
phase your company is in: rest assured with De Wert.
Introduction De Wert

4. The first step is the hardest …

5. Little ones grow

6. Sometimes it hurts to let go

7. Program
• Introduction to the legal forms in NL
• Introduction to NL tax regime
 Sole Proprietorship
 Private Limited Liability Company
• How To Calculate Your Net Income

8. Scope for today’s program
• Introduction will be short!
• More details
 How and why to start as a Sole Proprietor
http://www.slideshare.net/senoltapirdamaz/how-and-why-to-start-
as-a-sole-proprietor
 Starting as a Private Limited Company
http://www.slideshare.net/jurgenvdsande/starting-as-a-private-
limited-company-in-nl

9. B.V.
Which legal forms do we know in NL?
stichting
V.O.F. coöperatie N.V.
and more...
eenmans-
zaak
B.V.
eenmans-
zaak

10. Common legal forms
• Sole proprietorship (eenmanszaak)
• General partnership (vennootschap onder firma, V.O.F.)
• Limited partnership (commanditaire vennootschap, C.V.)
• Professional partnership (maatschap)
• Private limited liability company (besloten vennootschap, B.V.)
• Public limited liability company (naamloze vennootschap, N.V.)
• Cooperative (coöperatie)
• Foundation (stichting)

11. Choice legal forms
• Income tax
• Corporate income tax
• Fully liable
• Limited liability
Tax regime versus Liability

12. Sole Proprietorship
• Entrepreneur’s allowances
• Retirement reserve
• SME profit exemption
• Income Tax
Based on Tax Legislation 2016

13. Entrepreneur’s allowances
• Entrepreneur
• Hour criterion (1.225 hours)
• Deduction before taxes
 Self-employed persons’ allowance € 7.280
 Starters’ allowance € 2.123

14. Retirement reserve
• Deduction before taxes
 9,8% of the profit
 Maximum of € 8.774
• Look out!
 Tax-deferred retirement reserve
• Addition to your taxable income
 Ending your company
 National old age pension (AOW)

15. SME profit exemption
• Deduction before taxes
 14% of the profit after entrepreneur’s allowances
• Also in case of losses
 Lowering your fiscal loss

16. Private Limited Liability Company
• Salary director/shareholder
• Additional costs
• Corporate Income Tax
• Income Tax (salary, dividend and substantial interest)
Based on Tax Legislation 2016

17. Salary director/shareholder
• Usual wage settlement (article 12a Wage Tax)
 A minimum wage of € 44k applies for employees with a
substantial interest in the employer
 Not applicable when the usual wage is less than € 5k per year
• Others have a higher wage?
 75% of that higher usual wage, but at least € 44k
 The salary of the highest-paid employee
• No profits to pay € 44k salary as a startup?
 Request for a decision
“reducing usual wage”

18. Additional costs
• Initial / startup costs
 Notary for deed of incorporation + € 600
 Accountant / lawyer for several contracts
(employment, management, loans) + € 900
• Yearly costs
 Salary administration + € 300
 Annual report, publication report, minutes + € 1.200
 Corporate income tax declaration + € 300
 Income tax declaration / profit calculation -/- € 300

19. Corporate income tax
Tax base and rates
• CIT is charged on the taxable profits earned by the company in any
given year less the deductible losses.
• The following are the applicable corporate income tax rates for
2016:
Profit from Profit up to and including Rate
€ 0 € 200k 20%
> € 200k 25%

20. Corporate income tax
Dividend (tax)
• Pay out profits to the shareholders
• Tax rate is 15%
• Advance tax payment on CIT and income tax

21. Income tax
Boxes
Box I: Taxable income from work and home
Box II: Taxable income from substantial interest
Box III: Taxable income from
savings and investments
(no further explanation)

22. Income tax: Box I
Taxable income from work and home
• Profits from business activities
• Income from current employment
 Salary director/shareholder
• Tax rate is progressive to a maximum of 52%

23. Income tax: Box II
Taxable income from substantial interest
• Minimum of 5% of the issued capital of shares
• Regular benefits and/or sales benefits
 Dividend
 Sale of shares
• Tax rate is 25%

24. How To Calculate Your Net Income
Get started!

25. Model report - Profit and loss account
net turnover
cost of sales
gross margin
personnel costs
amortisation/depreciation of (in)tangible fixed assets
housing costs
car and transport costs
sales costs
other costs
total operating expenses
operating result
financial income and expense
result before taxation
taxation
result after taxation

26. How To Calculate Your Net Income
Sole Proprietorship
(eenmanszaak)

27. Profit and loss account
net turnover 600.000
cost of sales 310.000
gross margin 290.000
personnel costs 80.000
amortisation/depreciation of (in)tangible fixed assets 10.000
housing costs 20.000
car and transport costs 14.000
sales costs 15.000
other costs 12.000
total operating expenses 151.000
operating result 139.000
financial income and expense 5.000-
result 134.000

28. Income tax declaration
profits from business activities 134.000
substract: addition to retirement reserve 9,80% 13.132
max 8.774 8.774
substract: entrepreneur's allowance
- self-employed persons’ allowance 7.280
- starters’ allowance 2.123
9.403
profits from business activities before SME profit exemption 115.823
substract: SME profit exemption 14% 16.215
taxable profits from business activities 99.608
income tax box 1 43.323
income related contribution health care insurance act 2.902
total tax 46.225
net income 87.775

29. Income tax declaration
profits from business activities 134.000
substract: addition to retirement reserve 9,80% 13.132
max 8.774 8.774
substract: entrepreneur's allowance
- self-employed persons’ allowance 7.280
- starters’ allowance 2.123
9.403
profits from business activities before SME profit exemption 115.823
substract: SME profit exemption 14% 16.215
taxable profits from business activities 99.608
income tax box 1 43.323
income related contribution health care insurance act 2.902
total tax 46.225
net income 87.775
deferred tax (for retirement reserve) 1.330
net income after deferred tax 86.445
total tax including deferred tax 47.555

30. How To Calculate Your Net Income
Private Limited Liability
Company
(besloten vennootschap, B.V.)

31. Profit and loss account B.V.
sole pro-
prietorship
additional
costs B.V. B.V.
net turnover 600.000 600.000
cost of sales 310.000 310.000
gross margin 290.000 290.000
personnel costs 80.000 67.000 147.000
amortisation/depreciation of (in)tangible fixed assets 10.000 10.000
housing costs 20.000 20.000
car and transport costs 14.000 14.000
sales costs 15.000 15.000
other costs 12.000 1.500 13.500
total operating expenses 151.000 68.500 219.500
operating result 139.000 68.500- 70.500
financial income and expense 5.000- 5.000-
result before taxation 134.000 68.500- 65.500
taxation 20% 13.100
result after taxation 52.400

32. Profit and loss account B.V.
sole pro-
prietorship
additional
costs B.V. B.V.
net turnover 600.000 600.000
cost of sales 310.000 310.000
gross margin 290.000 290.000
personnel costs 80.000 67.000 147.000
amortisation/depreciation of (in)tangible fixed assets 10.000 10.000
housing costs 20.000 20.000
car and transport costs 14.000 14.000
sales costs 15.000 15.000
other costs 12.000 1.500 13.500
total operating expenses 151.000 68.500 219.500
operating result 139.000 68.500- 70.500
financial income and expense 5.000- 5.000-
result before taxation 134.000 68.500- 65.500
taxation 20% 13.100
result after taxation 52.400
available for dividend 52.400
dividend tax 15% 7.860
net dividend 44.540

33. Income tax declaration
income from current employment
salary 67.000
taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
total tax 27.485
net income 39.515

34. Income tax declaration
income from current employment
salary 67.000
taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
income from substantial interest
dividend 52.400
taxable income from substantial interest 52.400
income tax box 2 25% 13.100
substract: dividend tax 7.860
total tax 27.485 5.240
net income 39.515 39.300 78.815

35. Income tax declaration
income from current employment
salary 67.000
taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
income from substantial interest
dividend 52.400
taxable income from substantial interest 52.400
income tax box 2 25% 13.100
substract: dividend tax 7.860
total tax 27.485 5.240
total tax including corporate income tax 53.685
net income 39.515 39.300 78.815

36. Income tax declaration
income from current employment
salary 67.000
taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
income from substantial interest
dividend 52.400
taxable income from substantial interest 52.400
income tax box 2 25% 13.100
substract: dividend tax 7.860
total tax 27.485 5.240
total tax including corporate income tax 53.685
net income 39.515 39.300 78.815

37. Income tax declaration
income from current employment
salary 67.000
taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
income from substantial interest
dividend 52.400
taxable income from substantial interest 52.400
income tax box 2 25% 13.100
substract: dividend tax 7.860
total tax 27.485 5.240
total tax including corporate income tax 53.685
net income 39.515 39.300 78.815
deferred tax (for income from substantial interest) 5.027
additional costs B.V. 1.500
total tax with deferred tax and additional costs 47.112

38. So … summarizing
Sole proprietorship (eenmanszaak) Private limited liability company (B.V.)
business result 134.000 business result 134.000
salary entrepreneur 67.000
substract: addition to retirement reserve 8.774 additional costs B.V. 1.500
substract: entrepreneur's allowance 9.403 result before taxation 65.500
substract: SME profit exemption 16.215 corporate income tax 13.100
taxable profits from business activities 99.608 result after taxation B.V. 52.400
salary 67.000
income tax box 1 43.323 income tax box 1 26.367
employed person's tax credits - employed person's tax credits -1.784
health care insurance act 2.902 health care insurance act 2.902
deferred tax (for retirement reserve) 1.330 deferred tax (for income box 2) 5.027
additional costs B.V. 1.500
total (deferred) tax 47.555 total (deferred) tax and additional costs 47.112

39. … are you ready to make
a better decision for your
own business?
So …

40. Questions?