Law Changes 2020: Entrepreneurship
The Dutch government is implementing a large number of rules, regulations, and law changes at the stroke of midnight on January 1. Below is a summary of changes made in the category Entrepreneurship:
At the end of 2019 sole proprietorships in the Netherlands will receive a new VAT identification number for communication with customers and suppliers. The VAT ID is an alternative to the current VAT number, which contains the citizen service number (BSN). Using the VAT ID instead of the VAT number is intended to enhance privacy and reduce the risk of identity fraud. From January 1st, sole proprietorships will therefore have two VAT numbers - a VAT ID for communicating with customers and suppliers, and a VAT number for communicating with the tax office. More information here.
The welfare benefit for the self-employed (Bbz) will be adjusted on a number of points from January 1st. Currently entrepreneurs aged 55 and older with a non-viable business can receive this financial support benefit until retirement age. But as the aim of this benefit is for entrepreneurs to continue their business and eventually no longer need support, this separate scheme will be phased out. From January 1st, inland shipping entrepreneurs can apply for Bbz from their municipality of residence, instead of a central municipality. The possibility of applying for Bbz retroactively is scrapped as of January 1st.
The small business owner regulation (KOR) will be modernized as of January 1st. Currently entrepreneurs who pay less than 1,883 euros VAT in one year can get a tax eduction or an exemption from VAT. From next year the KOR will apply to entrepreneurs with a turnover up to 20 thousand euros in the Netherlands per year. These small business owners can opt for an exemption from turnover tax, which means that they do not charge VAT to their customers and can therefore no longer include VAT on their account. The also no longer have to submit VAT returns and are exempt fro the associated administrative obligations. On the downside, the cannot deduct the VAT that other entrepreneurs charge them. More information here.
From 2020, the self-employed person's allowance will gradually decrease to 5 thousand euros in 2028. This will happen in eight steps fo 250 euros each and one step of 280 euros. 2020's step takes the allowance from 7,280 euros to 7,030 euros. By reducing the self-employed person's allowance, the government wants to reduce te tax differences between self-employed and employees.
A package of measures being implemented next year is intended to make payment obligations to sick employees easier to manage and cheaper for entrepreneurs with small- and medium sized businesses. An SME absent care insurance is intended to support employers with their reintegration obligation towards a sick employee. The insurance covers financial risks and helps employers with the obligations and duties related to continued payment of wages in the event of illness. There will also be an allowance for the costs of continued payment of wages of a total of 450 million euros. Small employers in particular will benefit from this allowance.
The tax rate on profits from a substantial interest is increasing from 25 percent to 26.25 percent as of 1 January 2020. In 2021, this rate will be 26.90 percent. Those with a substantial interest in a company - at least 5 percent of a company's shares - are taxed in box 2 of the income tax.
Unlike previously planned the high corporate tax rate will not be reduced in 2020 and remains 25 percent. But the rate for the first 200 thousand euros in profit is decreasing from 19 percent in 2019 to 16.5 percent in 2020.
The government is increasing the general tax credit - a discount on income tax and national insurance contributions - in 2020 and in 2021. Everyone is entitled to the general tax credit - how much credit you get depends on your income. Lower incomes get more discount than higher incomes.
Entrepreneurs who trade across the border with other EU countries will benefit simplified rules around who pays VAT, where and when. From January 1st, these VAT rules will be the same for various EU countries.
Entrepreneurs who invest in energy saving can in 2020 also get an allowance for investments that reduce CO2 emissions, such as heat infrastructure. In 2019 this Energy Investment Allowance only applied to energy saving technologies.
Entrepreneurs working on development- or research projects can next year apply for part of the costs and expenses to be reimbursed via the WBSO tax innovation scheme four times per year, instead of three times per year. The application will also have to be submitted less in advance.
Good news for the customers of entrepreneurs who sell e-books. From January 1, 2020, digital books, newspapers and magazines will fall under the low-VAT rate of 9 percent. This concerns the electronic delivery or lending of a book, daily newspaper, weekly newspaper, magazine or other publications that appear at least three times per year.
Entrepreneurs who have insurance that covers the continued payment of wages to sick employees, will not have to pay insurance tax on this insurance in 2020.
On January 1st the tax regulation for the private use of company bicycles is changing to make it easier for employers to let their employees use a company bicycle privately. The employer pays for the bike and usually the costs of maintenance and repair, the employee will face an addition to the salary that will result in the employee paying a few euros extra tax per month. The addition is 7 percent over the consumer recommended price of the bike and accessories per year. The employer adds this amount to the salary, and the employee pays tax on it - but does not have to buy and maintain their own bicycle. More information here.
A business acquisition fund for starting farmers and horticulturists will launch in 2020 to help starting farmers or gardeners create a sustainable and future-proof business. The Asset Enhancing Credit Guarantee Scheme will help agricultural entrepreneurs with financing based on a future-oriented business plan. More information here.
Companies who trade plant propagating material will face new rules next year intended ot better protect the EU against harmful organisms. The current European Plant Health Directive will be replaced by two new European regulations - the Plant Health Regulation and the Control Regulations. This means that more plants will need a "plant passport", there will be a new classification of harmful organisms, companies trading in plant propagating material will be registered in a national company register, and there will be new import and export procedures.
For entrepreneurs in the agriculture sector, the government wants to make broad insurance against extreme weather more appealing. The 21 percent tax on this insurance premium will therefore be scrapped. In this way, the government hopes that more farmers will take out this insurance policy so that the premium can also be reduced. A broad weather insurance policy insures farmers against damage to crops caused by extreme weather such as drought, hail, heavy rainfall, snow, and lighting, among other things. More information here.
Other Rules Affecting Many Workers
From January 1st, administrative penalties will no longer be deductible from corporation tax or income tax. Employers will also no longer be able to refund these penalties to employees tax-free.
The government is increasing the labor tax credit - a tax cut for everyone in the Netherlands who works - for the years 2020 to 2022.
The government wants to introduce the transition to two income tax bracket, instead of 3 tax brackets, in 2020 instead of 2021. From next year there will be one tax rate (37.35 percent) for all incomes up to 68,507 euros, and one tax rate (49.5 percent) for all incomes above that. More information here.
From next year employers will be able to give employees more rewards due to a broader work costs regulation (WKR). Employers will be able to give staff up to 2 thousand euros higher tax-free allowances and benefits. Currently, employers can give tax free allowances up to 1.2 percent of the wage bill - the wages of all employees together. This free space will be increased to 1.7 percent for the first 400 thousand euros of the wage bill next year. For any amount above 400 thousand euros, the current percentage of 1.2 percent remains applicable. More information here.
The Labor Market In Balance Act will be implemented next year. This Act is intended to decrease the gap between permanent and flexible employees. It contains measure for flexible work, dismissal law, and unemployment benefits. For example, employers will pay a low unemployment insurance premium for permanent employees and a high unemployment premium for flexible workers. The difference between the premiums is 5 percent. Workers will be eligible for a transition allowance from their fits day, instead of the current after two years at a company. If a worker is dismissed, they will receive a transition allowance equal to a third of a monthly salary per year worked. Employers with fewer than 25 workers who have to close their business because they are retiring, sick, or dying can receive compensation for the transition allowance. Employers can keep staff on a temporary contract for longer, and can re-hire temps after a 3 month break instead of 6 months. On-call workers must be informed at least 4 days in advance. And payroll employees must receive at least the same employment conditions as employees employed by the employer. More information can be found here.
The gross amounts of the statutory minimum wage is increasing as of January 1st. For full time employees aged 21 and over, the gross minimum wage will be 1,653 euros per month, or 381.60 euros per week, or 76.32 euros per day. More information, including amounts for the youth minimum wage, can be found here.
Other Rules Affecting Some Entrepreneurs
Entrepreneurs who dump or incinerate foreign waste in the Netherlands will have to pay waste tax on this from next year. About 25 percent of waste dumped or incinerated in the Netherlands comes from abroad. More information here.
Those who organize charity lotteries with a license will soon have to pay less to the charity. In 2020 only 40 percent of lottery tickets sold will have to be paid to the charity, instead of the current 50 percent, thanks to a change to the Gaming Decree.