Small Entrepreneur Scheme (KOR)
The Small Business Scheme (KOR) is a tax scheme that exempts small entrepreneurs in the Netherlands from paying VAT. This means that as a self-employed person who participates in the KOR, you do not have to put VAT on your invoices. A participant of the KOR also does not have to send a VAT return to the Dutch tax authorities (Belastingdienst). The purpose of the KOR is to reduce financial administrative burdens and stimulate entrepreneurship.
Conditions for Participation in the KOR
To be eligible for the KOR, entrepreneurs must meet the following conditions:
- The scheme is available for self-employed people, VoFs, and BVs. However, the KOR is primarily intended for small business owners.
- The maximum of the annual turnover is not higher than €20.000 (excluding VAT) per year.
- Entrepreneurs who are already exempt from charging VAT are not eligible for the KOR.
- The KOR is only valid for business owners with a company in the Netherlands.
Registration and application KOR
Business owners must register with the Belastingdienst to apply for the KOR. In addition, business owners must anually check their own turnover to see if they still meet the conditions. If the turnover is higher than €20.000 (ex. VAT), then deregister as soon as possible from the KOR, because any revenue made after you exceeded the maximum of €20.000 will not fall under the KOR. Contact the Belastingdienst for advice and guidance.
When you make use of the KOR as a business owner, you do not charge VAT. However, in return you cannot deduct your business expenses. Because you do not charge VAT and cannot deduct your business expenses from the VAT, you do not have to file a VAT return.
If you have a lot of business costs, it can sometimes be more financially beneficial to not participate in the KOR, because with a lot of costs and therefore a high input tax, you can potentially get money back from the Belastingdienst.
Advantages of the KOR
The main advantage of the KOR is the exemption from VAT which is otherwise not possible. This allows business owners to reduce their financial administrative burden and save costs. Furthermore, business owners who use the KOR are also not required to submit quarterly VAT returns, which reduces the administrative burden.
Registration threshold KOR
If your annual turnover is less than €1.800 and you do not have to register with the Dutch Chamber of Commerce (KVK), you can use the VAT exemption for small business owners. In that case, you do not have to register as an entrepreneur for VAT with the Belastingdienst. This falls under the voluntary registration threshold and there is no minimum application period of three years. When you are exempt from VAT, you cannot use the KOR.
Multiple company names
If you use multiple trade names within one company, the KOR will apply to all trade names. You cannot selectively choose whether or not to participate in the KOR for individual trade names, the KOR must apply to all other trade names. It is important to keep in mind that your combined turnover is not higher than €20.000, because you have to add up the turnover of all your trade names within your company.
EU and KOR
If you do business within the European Union and at the same time apply for the KOR, adjusted rules will come into effect. Sometimes it can be complex to determine how to deal with VAT. In such cases, it is often necessary to file occasional VAT returns. You can use a tool from the Dutch Belastingdienst to determine whether or not you need to file an occasional VAT return.
Opting out of the KOR
If you signed up for the KOR, you can only opt-out again after 3 years. But if you make more than €20.000 (excluding VAT) in turnover in one year, you must deregister from the KOR immediately. The KOR can be cancelled via a form from the Dutch Belastingdienst that must be sent in.