Employment and self-employment at the same time is possible, but claiming also the entrepreneurs deduction is a challenge.
Employment, self-employment and entrepreneurs deduction
In the Netherlands we are world champion part time work. My father in the 70’s had to work also on Saturday till 13.00 hours. Working on Saturday was no longer standard. Then most people thought of something to do on a Friday afternoon not to be in the office. Then it was in general accepted that Friday is no longer a true work day. Mondays are not always used as a work day. Wednesdays are often known as papa days. I can only assume the rest of the week are mama days.
A result is that people have time. And that can show. For instance, we do work on a Friday. And every Friday we are aware of Friday being criminal day. Only on Fridays we are either challenged to settle a debt or Interpol will pick us up, or we are pushed in a deal that is too good to be true. For instance that civil servant that stumbled over 15 mln and chose us to give the amount to.
Some start genuine companies in the part time days in the week next to their employment. Basically that company is funded by employment.
Most companies started this way and we think starting slowly your company learns you what entrepreneurship implies. Indeed administration and taxation are part of being an entrepreneur.
One of the advantages of being an self-employed entrepreneur in the Netherlands is that you can claim tax credits. That said, you need to meet conditions.
For instance, the entrepreneur deduction. If you spend at least 1225 hours on your company AND you earn the majority of your income with that company, you can make a claim for the entrepreneurs deduction. Even better, during the first five years of your newly registered company, you can use for max three years the starting entrepreneurs deduction on top of that entrepreneurs deduction.
Employment, self-employment and entrepreneurs deduction – court case
A university teacher is employed for 60% of the work week and runs a self-employed company for the remaining time of the week. The teacher claimed the entrepreneurs deduction and the tax office denied this deduction. Mind you, the moment the Dutch tax office does an audit, they do that for a five year period. This implies the entrepreneurs deduction, roughly EUR 7.000 per year, is denied for a five year period.
If you read my article above, you know that the teacher now needs to proof in court that he worked at least 1225 hours for the self-employed company and earns the majority of the income with that company. As the income was not a subjectof the courtcase, he complied with the majority of the income in this case. But the 1225 hours is a problem. Basically 1225 hours is already a 50% work week, so you need to proof you worked 60% employed, 50% self-employed, that implies at least a 110% work week for a five year period.
The court asked proof of the 1225 hours and the teacher made the mistake everybody makes. He fabricated the overview on demand, which is already incorrect. The court expects you to keep track of the hours as you work. Nobody does that, so make the overview as if you kept track of the hours.
Copy paste answer to court
The teacher clearly has not done that. He did what everybody does, one line of hours were made for a week and that was copy pasted. In my previous article some even copy pasted over public holidays like Easter and Christmas. Hard time to explain you did help a student on Christmas morning.
Not only was the teacher doing copy paste, he also averaged out 18 appointments over 101 hours. The court was not willing to accept that every meeting took 5,5 hours. Nor did the teacher provide any information to substantiate his claim. Moreover, the overview showed that every meeting took the identical time for preparation. Which is a result of copy paste method. The teacher also provided no details about the actual work being done . The court dismissed the hourly overview and therefore the entrepreneur deduction.
Tax is exciting
We think tax is exciting. We also understand that you like to file your own entrepreneurs income tax return. You tick some boxes and you see the amount of tax to be paid drop dramatically. Suddenly you find tax also exciting. However, if boxes are ticked without actually knowing what the boxes are about, tax could daunt on you over time. Tax excitement is then often lost.