Income tax for freelancers in the Netherlands
8 min read
As a sole trader your profit is taxed in box 1, together with any salary, benefits or mortgage interest deduction. The order of the calculation is what surprises people: several reliefs come off before the rates are applied, so your effective rate is well below the headline bracket.
The order of the calculation
Every step below happens before the next one.
- Revenue minus business costs and depreciation = profit.
- Minus the self-employed deduction, if you worked at least 1,225 hours in your business.
- Minus the starter's deduction, in three of your first five years.
- Minus the small-scale investment allowance (KIA) if you invested enough.
- Minus 12.7% SME profit exemption on what is left.
- Plus salary and other box 1 income, minus deductible items = taxable income.
- Apply the box 1 brackets, then subtract the general and labour tax credits.
- Separately: the ZVW healthcare contribution on your profit, up to the annual maximum base.
Why your bill jumps in year three
Two things happen at once for many freelancers: the starter's deduction runs out, and the self-employed deduction has been phased down year after year. Combined with a growing profit, the amount owed can rise much faster than turnover. This is the single most common cause of a nasty assessment letter — a reason to re-check your reserve percentage every January rather than every December.
Provisional assessment (voorlopige aanslag)
You can pay income tax in monthly instalments during the year instead of one lump sum afterwards. Ask for a provisional assessment based on a realistic profit estimate and adjust it as soon as your year turns out better or worse — an estimate that is too low leaves you with a bill plus interest, one that is too high simply comes back to you.
Loss years are not lost
A loss can be carried back one year and forward nine, offsetting profit in those years. Declare the loss in your return even when there is nothing to pay: that is what establishes the amount you can use later.