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You are not an entrepreneur – no loss deduction


You are not an entrepreneur, states the tax office to you. That is not a nice thing to state, especially if that causes you to lose a loss deduction.

You are not an entrepreneur

“ You are not an entrepreneur” states the Dutch tax office. Happy days, no need any more to file the entrepreneurs tax return. Collect the proceeds tax free. No more accounting fees. What if you actually did not collect and proceeds, only paid costs. Maybe not so happy days at all.

You are not an entrepreneur

Court case – you are not an entrepreneur

A lady created art. Beauty is in the hand of the beholder, apparently only in her hand. Nobody purchased anything from art creating lady. In the 2019 income tax return the EUR 5.630 loss was denied by the Dutch tax office. The tax office argued that the art creating was not a source of income, but a hobby.

The lady went to court. The court received from the Dutch tax office an overview that since 2008 till 2020 only losses were shown in the income tax return for the art business. A structural loss making business was proven. The only profit made was in 2018 when the building of the company was sold, not the art.

The lady provided no proof of being able to make a profit in the near future. She did give it a try with statements that some art exhibits were soon to be sold to buyers. None of this could be substantiated with documents. Hence waived as evidence. The court did not dismiss the ability to create art, but the type of art that does not sell. Hence not a source of income. Therefore the tax office was correct to deny the loss in 2019  and onwards.

What is the problem of the tax office in a loss making art company?

The court made available the fact that since 2008 no profit was made. How can you survive in life at more than 10 years loss? Or you were rich enough, or you have employment income that supports the loss making business. The latter is the problem. The loss of the company set off against the employment income creates a refund supporting the hobby. That the tax office does not accept.

How to become an art entrepreneur?

If you are creating art then you can instantly start a company and try to make a living. At the same time you need to reflect if what you create is sellable. If you learn nothing is sold, or some is sold but do not cover the costs, you need to change strategy.

Either you stop the company and continue the hobby. Or you adjust your creative style towards the market. Maybe this conflicts a little with your inner art desire, but the proceeds of the sale pay the bills and brings food on the table.

Tax is exciting

We think tax is exciting. Helping entrepreneurs set up their business accounting and tax wise is what we do best. Then again, also we have sometimes an entrepreneur client how makes loss on loss on loss. We are the messenger bringing the news this is a hobby, not a source of income.



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