The tax authorities do not want to register my business for VAT

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Question:

I am starting as a freelance writer here in the Netherlands and wanted to know how I can register for a VAT number? I have spoken with the Chamber of Commerce and they advise that as I only have one customer so far it is difficult to register as a company? Please can you give me some advice on what I need to do?

Answer:

The tax authorities do not automatically regard you as an entrepreneur for VAT purposes. The conditions for VAT are different from the conditions that apply for income tax. Therefore it is possible that you are an entrepreneur for VAT purposes, but not for income tax purposes. The tax authorities apply various criteria to determine whether you are an entrepreneur for VAT purposes.

The same criteria apply to the registration with the Chamber of Commerce and for the VAT:

  • Business takes place in the Netherlands
  • Goods or services are delivered
  • The entrepreneur receives a (more than symbolic) payment for the goods or services
  • The entrepreneur takes part in the normal economic traffic on a regular basis  
  • There is an organization of labor and capital
  • There is more than one client (independency)     
  • The entrepreneur has the freedom to act on his/her own discretion
  • When in doubt the Chamber of Commerce can also consider the amount of time which is invested in the business activities, which should in principle be at least 15 hours.

The last 3 criteria are more important for income tax than for VAT, but they are still relevant for the tax authorities who just want to prevent that VAT is claimed back by entrepreneurs who are actually not making money or for whom the activities are not more than just a hobby.

Of course the Chamber of Commerce and tax authorities depend on the information which is provided by you. You can answer their questions based on the situation in the first year. When you start a business you will indeed have no clients or possibly only one. But that doesn’t mean that you are not aiming to find more clients and that you won’t have more shortly after the registration with the Chamber of Commerce. The questionnaire of the tax authorities also asks about the expected number of clients in the first year. So it seems that the decision of the Chamber of Commerce may be too quick. But on the other hand, you can also wait until you find more clients. If you got the advice not to register for VAT you are certainly not doing something wrong. On the other hand, as long as you are not registered for VAT you will not be able to claim back VAT on your expenses (but you don’t have to charge VAT either).

It is therefore important that you try to expand your client base. As soon as you have an indication that you will get more clients you should contact the tax authorities to get a VAT number. You can also do that now, but in that case it is a matter of convincing the tax authorities that you will get more clients which of course depends on the services you offer.

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