Sole proprietorships (one-man businesses) and general partnerships are fiscally transparent in the Netherlands. For these fiscally transparent businesses there is no difference between company property and the private property of the owner(s). Meaning that on the one hand you can use company property any way you want, but on the other hand that you are also personally responsible for what your company does (and any debts the company may incur). But what does fiscal transparency mean for your taxes?
Taxes for a fiscally transparent sole proprietorship
If you are the owner of a fiscally transparent business, your business will be taxed the same way as if it were a private person. There is no difference in how the profit of your company is taxed versus any income you might generate as a private person. Both are taxed as income tax in the Netherlands (inkomstenbelasting or IB). The Dutch Belastingdienst sees a fiscally transparent sole proprietorship as linked to you as a private person, and not as an independent company. Therefore, the profit of your company is always part of your income as a private person. Your profit is taxed directly as income in box 1 of the Dutch income tax (IB), similar to how a salary is taxed when you work under an employment contract. And similarly to taxes over salaries, you will be taxed progressively in box 1. Progressive taxing means that the more you earn, the more you pay as a percentage of your income.
If you own a company that is not fiscally transparent, like a BV (or Ltd.), you cannot use company assets and profits privately as freely as under a sole proprietorship. Therefore you do not pay income tax over the profits that your company makes. Instead, your company is considered a completely separate entity that is taxed in a completely different way. By paying company taxes (Vennootschapsbelasting or VB). The VB is not (or hardly) taxed progressively and you pay a fixed percentage of profits regardless how high they are.
Private withdrawals from your sole proprietorship
Private withdrawals do not affect your fiscal records, or how much taxes you pay, when you own a fiscally transparent company. It does not matter what you are using company assets and profits for, because you pay the same type of income tax on both your business profits as well as any private earnings. Everything is owned by the same person that pays taxes over both business, and private income. For example, if today a customer pays your invoice, then you can use that money anyway you like. You can use it to buy a computer the very next day, no questions asked.
As a sole proprietorship there is no need to register any private withdrawals from company funds. Not even if you pay yourself a monthly salary, because fiscally speaking that is not what you do. In fact, there is no need to even have two bank accounts: one for business and one for private. You can use any money any way you want, regardless of where the money is held. And having a business account is generally a waste of money.
If you own a company that is not fiscally transparent, like a BV (Ltd.), then private withdrawals have a huge effect on the taxes you need to pay. If you want to use money from a BV for private use, then you always need to pay taxes first. It could be that you need to pay income tax over work you performed for the company, or dividend taxes over payouts to the owners of the company. Regardless of the circumstances, you cannot freely use company assets that you received as money. You always need to pay taxes, and you always need to keep track of any withdrawals you make from your company.
And unlike a sole proprietorship, you do need a business account for a BV. After all, you are not allowed to use funds privately. So you need an account that is owned by the business itself instead of you personally. Get your free N26 bankaccount today.