Are you an entrepreneur with a small turnover, and do VAT returns give you the jitters? Then the small business scheme (KOR) might be just the thing for you. It may sound like a dusty tax term, but it can save you a lot of time and hassle. In fact, in most cases you'll even have a bit more money left over.
The KOR is a scheme from the Tax Authority (Belastingdienst) designed especially for small entrepreneurs. It gives you the option of no longer being liable for VAT. This means you no longer have to charge VAT on your invoices and no longer have to file a VAT return. Less paperwork and more time to focus on your business. However, it also means you can no longer deduct VAT on business costs. So if you're planning to invest heavily in your business, that's something to think carefully about.
You're also free to experiment with the scheme for a while to see whether it suits you. If it turns out not to work for your business after all, you can deregister in the meantime. Bear in mind that your deregistration must reach the Tax Authority at least 4 weeks before the start of the new quarter. You must also deregister immediately if you no longer meet the conditions.
Decided to deregister?
Then it's good to know that you can't simply rejoin. You can only use the KOR again once both the current year and the full year after it have passed. If you meet the conditions again by then, you can register again.
Conditions of the KOR
- You are an entrepreneur and work independently. The scheme is available for every legal form, from sole proprietorships (eenmanszaak) to foundations.
- Your turnover stays below €20,000 a year. If you go above it, the scheme ends immediately. The amount by which you exceed the limit is also the first amount on which you have to pay VAT again.
- Your business is established in the Netherlands.
When does the KOR pay off?
The KOR pays off for entrepreneurs who mainly work with private customers. If you no longer have to charge VAT, you have two options. You can make your prices more attractive to consumers. This can give you a competitive edge. Or you can keep your prices the same and make more profit, because you no longer have to pay 21% on this income to the Tax Authority.
When is the KOR less attractive?
Although the KOR sounds appealing, it isn't a smart choice for everyone. If you regularly invest in your business and incur a lot of costs with VAT, the KOR means you can't reclaim the VAT on those investments. This can add up quickly, especially if you make large purchases such as equipment or software.
Do you incur a lot of costs to deliver your products or services? Then the KOR may not be an attractive move for you. You aren't allowed to reclaim VAT on your purchases and expenses, so your costs go up while your income stays the same. In the end, that means you're left with less profit.
Whether the KOR is a winning formula or ends up working against you depends on your personal situation. Take the time to go through all the numbers and use the following questions as a guide:
- Is my turnover below €20,000 a year, and do I expect it to stay that way in the coming years?
- Do I have no plans to move my business abroad in the coming years?
- Do I mainly work with private customers?
- Do I incur a lot of costs on which VAT is charged?
- How much time and energy do VAT returns cost me?
Can't figure it out or still in doubt? Feel free to get in touch with us!
How do you register for the KOR?
Convinced that the KOR is right for you? You can submit a request by filling in the application form via Mijn Belastingdienst Zakelijk. Note: your application must arrive at least four weeks before the new quarter. The scheme always starts at the beginning of a new quarter.