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Claiming entrepreneurs discount while working full time employment, is that possible?

Ofcourse not. Claiming entrepreneurs discount while working full time is not accepted by the court. What is this about?

Entrepreneurs discount

In the Netherlands you can start your sole proprietor company. We refer to that as one man company or eenmanszaak. The name sole proprietor is better chosen as women can start this company as well.

Sole proprietor stands for one person holding the capital. A sole proprietor can employ as many employees as required. In other words, the conditiona is not one person only working in this company.

If the sole proprietor in a calendar year works more than 1225 hours and earns the majority of the income with this one man company. Then this sole proprietor can claim in his or her income tax return a credit being the entrepreneurs credit and in the first three years of existence a starting entrepreneur tax credit.

The 2020 entrepreneurs discount is EUR 7.030. The 2021 discount is EUR 6.670 and will go down , like all nice tax credits. The discount applies in the lowest tax bracket.

How to proof the hours spend?

Starting entrepreneurs we recommend to keep track of their time spending on the business. That implies time spend on actual business, potential business, creating of the business.

Sometimes the tax office rings the doorbell to inquire about the activities. Often the entrepreneur is taken by surprise and can blur an answer to a question on basis of which the credit is denied. Please then seek help of a professional, as this is not correct.

30% ruling and moment of arrival
How not to claim the entrepreneurs discount

How not to claim the entrepreneurs discount?

A Dutch tax resident who was employed by the Ministry of Defense, by the Firebrigade, by the train company and the airport Lelystad, started his sole proprietor company. The company was next to the employments.

The hours spend on all these employments is 2239. To put this in perspective, a normal working month has 174 working hours. Times 12 that is 2.088. Not only he exceeded the full time employment hours, he claimed on top of that, that he worked at least 1225 hours for his own company.

The issue went to court

The tax office denied him the credit. This person countered the tax office with an excel overview of the hours he spend on the company. However, he was not able to present any agreements with clients, costs made, invoices send. In other words he was not able to proof his statement.

Moreover, no income was made, as he claimed to be paid in kind, whatever that may be. The criteria of the entrepreneurs credit is not only having spend 1225 hours on the company, but also the majority of the income needs to be made with this company. That was certainly not the case.

The court followed the tax office. Also because some of the courses he took. Education enjoyed during that period, appearently he still had time on his hands for education, he had labelled as time spend on the company. That correct. An education is not the same as starting a company, although starting a company can educate you.  Those hours had to be deleted from the excel list.

Tax-is-exciting

We think that tax-is-exciting, paying back tax due to incorrectly claimed tax credits it not exciting. Then again, ticking boxes in the tax return just to get the total tax burden down, without any idea what is being ticked, we do not recommend. Filing the entrepreneurs income tax return, is a tax return we never recommend you to file yourself.

We are excited about filing your entrepreneurs income tax return. Our fee is EUR 550 plus VAT including your tax partner.

Does this post make you want to get in touch? Go for it!

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