Self employed tax deduction (Zelfstandigenaftrek)

For self-employed persons there are tax benefits which are only available to them: the zelfstandigenaftrek (self-employment deduction) and the MKB winstvrijstelling (small business profit exemption). In order to be eligible for these benefits the self-employed person needs to comply with the urencriterium (hour criterion). The urencriterium specifies that a self-employed person needs to have spent at least 1,225 hours on business activities during the year. The proof that this is met must be provided by the self employed person. This can be done by keeping a time card and/or invoices specifying hours billed. Non-billable hours and/or business development hours also count towards the urencriterium.

This was recently reaffirmed by the Court in the following case:

In 2006 a man installed and provided light for performances by musical groups and theatrical productions alongside his regular full-time employment duties. Since 2002 he has declared the profit from these activities as income from self-employment. In 2006 he spent 1,231 hours on self-employment activities, based on an overview which was made after the end of the calendar year. In 2006 he had worked for band G, among others. He performed paid and unpaid work for the band. The paid work was supported by 43 invoices and the unpaid work totalled 300 hours. The tax authorities suggested that the 300 hours of unpaid work were never executed, and in any case do not count toward the urencriterium because they were not part of the regular self-employment activities.

However, the Court found it plausible that unpaid work was done in 2006 in order to gain experience and increase brand awareness and that the number of non-charged hours could be 300. This based on the testimony of the leader of band G, and the explanation of the defendant that the total number of non-charged hours is probably even more than 300. Also the inspector had not sufficiently substantiated his claim that the unbilled hours were not due to self-employment activities, and therefore could not count towards the urencriterium.

So if you are a self employed person it is vital to keep track of all the hours spent on your business and to have proof of it. Otherwise you may miss out on these tax benefits