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Finding enough clients – three year holiday tax office

Finding enough clients comes natural to an entrepreneur. Like breathing, eating and …eh..going to the toilet. Three year holiday, what is that?

Finding enough clients

The moment you walk into the Dutch Chamber of Commerce to register your new company, the Chamber has questions for you. The first and rather important question is: how many clients do you expect to have?

If you answer three or less, they will send you away, like you are a small child. To the Chamber of Commerce that is not a business, but actually employment without the employment obligations.

You cannot blame a Government official of the unawareness that an entrepreneur needs to start with a first client to make a business. So after this meeting you learned to state to the Chamber of Commerce you expect to have at least four clients. That is a simple evolution of the entrepreneur.

The Dutch tax office

The Dutch tax office is more serious. But as our Politicians do not take tax too serious, there is no solution for the following problem: one client is  no client.

The problem is indeed serious, it has to do with employee social premiums. That are the premiums for healthcare, unemployment and disability. If the employer is not paying that for the employee, nobody is paying this premium. This premium is based on shared responsibility of the total group of employees.

If then one employee disconnects from the group and starts a company with one client, the social system is missing out. That is why the Dutch tax office is keen to check if you have one or more clients. As the politicians have no idea how to make legislation for this issue, no stick has yet been provided to the Dutch tax office.

Exception to the rule

The exception to the rule is a client abroad. If you move to the Netherlands and you are able to continue to work for your foreign employer. The foreign employer needs to set up a payroll in the Netherlands. That is a service we offer.

Often the foreign employer does not want the hassle. And it was a choice of the employee to move to the Netherlands. It is contracting, take it or leave it.

That take it or leave it statement makes that this foreign employer was never willing to contribute to the Dutch employee social system. The second best the former employee can do to contribute to the Dutch tax system is contracting. Invoicing the foreign employer from the Netherlands, and pay Dutch tax over the result.

Three year holiday

The three year holiday is offered by the Dutch tax office to starting entrepreneurs to proof they can create a business. Everybody’s starts with the first client. It is not a given that everybody who starts a business to get to a second or third client. The moment no more clients are attracted than the first one, it is either employment or a hobby.

If employment, then the entrepreneur is not so much at risk, but the client of the entrepreneur. The client will be seen as employer and the invoice amounts including Value Added Tax (VAT) is seen as net payment that needs to be crossed up. That does put matters in perspective.

Kevin O’Leary

Kevin O’leary – master entrepreneur

You may think of Kevin what you like. I think you either hate him, or respect him. I do respect him and I think he is right to state that if a company is not successful in a three year period, you might as well go do something that is fun.

The loss made by the company in the third year is no longer accepted by the Dutch tax office. Then the company truly has become a hobby.

Tax is exciting

We think tax is exciting. Assisting a client that has only one client, which is actually employment, is also a problem for us. We need to point this out to the client. The exception to the rule is a foreign one client.

Assisting a person that very much would like to be an entrepreneur, but is not able to get to that level is also not that exciting. You see a lot of private money is lost and then we have to send our invoice on top of that for the work done. A lose lose situation.

Then again, if you do not try what you think is that you are good at, how can you know you are a successful entrepreneur. Hence we support new starting companies and try to push them to a higher level than they had expected themselves.

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

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