Project Work with no eenmanszaak registration

[Mel Tan]

Dear Experts,

I am new to freelancing as I just finished graduate school here in the NL.  I am still looking for regular employment so I do not want to register as a ZZP'er fulltime.  In the meantime, there are freelance opportunities I have come across: 

 

My situation: 

I have potential freelance work with a virtual design company (incorporated in Texas, USA) and they bill by the hour or per day basis.  Their employees are all freelancers. The work is unpredictable, maybe they will only give me one or two projects and we stop. My questions are:  Can I file taxes as normal for any contract I win without registering as a business or ZZP'er?  Can I charge them VAT but without a KVK registration? If I don't register as a business, can I remit the collected VAT to the Belastingdienst anyway when I pay regular taxes as an individual?  Or should I not charge VAT if that is the case and just pay income tax as an individual?

 

A friend of mine says that a ZZP'er requires 2 - 3 different customers to qualify as a real ZZP'er. If I only have 1 client I work with, is that sufficient reason to register as a ZZP'er? 

 

Is there a tax course or primer done by the Immigration office or the local gemeente? Can you refer me to one to teach me how to file taxes online? 

 

Thank you! 

[Maxn]

Op 2-8-2021 om 12:52, Mel Tan zei:

I have potential freelance work with a virtual design company (incorporated in Texas, USA) and they bill by the hour or per day basis.

 

Generally speaking (there are a few exceptions depending on the exact service provided), no VAT is due if supplying a service to a company located outside the EU.

 

(Can still make sense to register as a company though.

E.g. for other jobs, or to be able to reclaim VAT on your business purchases)

 

Would not recommend filling your own tax return if you do not speak Dutch fluently. The wording the tax office uses on the forms and in communication is at times difficult enough to confuse native speakers...

[prinsrachid]

Op 2-8-2021 om 12:52, Mel Tan zei:

  Their employees are all freelancers. 

 

🙄

[TwaBla]

Welcome on MFC Mel Tan, you explained your case really good. 

 

What are you doing beside this assignment. Are you a student, looking for a regular job or do you have perspective on more freelance work?

 

There are many local groups offering assistance to migrants with tax issues. I am sure you can find a volonteer in The Hague that can help you with the KvK (Chambre of Commerce) and the Belastingdienst, if they dont have english pages to explain these matters. For now it seems you have a 'bijverdienste' and not a regular income.

 

When it concerns small projects via a (virtual) middleman, it is not going to be too complicated. 

[Mel Tan]

Dear Maxn,

Thank you for your quick replies! Very helpful.  

On 02/08/2021 at 13:56, Maxn said:

Generally speaking (there are a few exceptions depending on the exact service provided), no VAT is due if supplying a service to a company located outside the EU.

Basically, my task is to do user research (i.e. interview, analyse etc.). I am confused because a colleague who does the similar same thing and is a ZZP'er includes a VAT for every invoice that she issues (both for EU and larger non-EU projects).  That really makes me confused or if she simply means income tax but not VAT. 

 

On 02/08/2021 at 13:56, Maxn said:

(Can still make sense to register as a company though.

E.g. for other jobs, or to be able to reclaim VAT on your business purchases)

I did think about this and I would like to do so but what puts me off is that I might be spending more money paying an accountant to file taxes quarterly compared to what I am actually bringing in. I really wish that the Dutch tax process is simpler, transparent, and more streamlined! 

 

On 02/08/2021 at 13:56, Maxn said:

Would not recommend filling your own tax return if you do not speak Dutch fluently. The wording the tax office uses on the forms and in communication is at times difficult enough to confuse native speakers...

I was hoping to avoid this but you might be right because another friend who is Dutch native always gets his tax returns wrong and either gets penalized or receives refunds! 

 

[Mel Tan]

On 02/08/2021 at 14:00, prinsrachid said:

🙄

Hi Prinsrachid,

 

I know!!! I got surprised because not one thing on their website indicated that the UI/UX designers and researchers that they hire are all freelance. I only found out during the first call that they are virtual. The job description did not not even indicate that they work remotely or that they require freelancers!

That said, their projects remain intriguing. I hope that I get a project with them!  

[Mel Tan]

On 02/08/2021 at 14:11, TwaBla said:

What are you doing beside this assignment. Are you a student, looking for a regular job or do you have perspective on more freelance work?

Dear TwaBla,

Thanks for your vote of support! 

I am currently transitioning into a different career and have been busy creating work portfolio. However, I am no longer a student (graduated already) and just interviewing. The freelancing work was just a side option until I find a more permanent position. This is why I am not so convinced about setting up a KVK and just filing as an individual. 

On 02/08/2021 at 14:11, TwaBla said:

For now it seems you have a 'bijverdienste' and not a regular income.

I read up on the bijverdienste (Student entrepreneurs and student finance | Business.gov.nl) but it only refers to actual students still enrolled in school. So I think that this might not be my category? I could be wrong. 

 

On 02/08/2021 at 14:11, TwaBla said:

When it concerns small projects via a (virtual) middleman, it is not going to be too complicated. 

I believe with this virtual design agency, they are the direct employers and not a middleman. It leaves the burden on me to file taxes, etc. 

 

On 02/08/2021 at 14:11, TwaBla said:

I am sure you can find a volonteer in The Hague that can help you with the KvK (Chambre of Commerce) and the Belastingdienst,

Good suggestion! I will look further in the Hague for groups that help migrants with tax issues! Very helpful since the gemeente there addresses more foreigners than let's say Delft or Rotterdam. 

[Maxn]

Op 2-8-2021 om 15:11, Mel Tan zei:

Basically, my task is to do user research (i.e. interview, analyse etc.). I am confused because a colleague who does the similar same thing and is a ZZP'er includes a VAT for every invoice that she issues (both for EU and larger non-EU projects).  That really makes me confused or if she simply means income tax but not VAT. 

 

For that kind of service there should only be 21% VAT on her invoices for customers that are located in the Netherlands.

 

If outside the EU, no VAT.

 

If the customer is a VAT registered company in another EU country, no Dutch VAT either.

VAT should be diverted to the customer instead.

Which does require that she submits a quarterly ICP return, in addition to the VAT return.

Yes, more paperwork...

 

In all cases you do pay income tax over the profit.

 

 

Also be aware that if you (or parents if still living at home) receive any financial support from the government due to low income, or for example have the municipal taxes waived, that can also be affected if you start a company.

So I am afraid things may not always be as simple as finding a volunteer that helps with the KVK registration.

2 augustus 2021 aangepast door Maxn

[TwaBla]

Op 2-8-2021 om 15:57, Maxn zei:

So I am afraid things may not always be as simple as finding a volunteer that helps with the KVK registration.

 

Unfair. Belastingen were mentioned too. The combination of advice on this forum and actual help from local volunteers who assist migrants find their way in the long march through the institutions is not a bad suggestion.

 

Mel Tan already learned how to complain (mopperen) about the authorities, so inburgering is happening. 

[Maxn]

Op 2-8-2021 om 16:14, TwaBla zei:

Unfair. Belastingen were mentioned too. The combination of advice on this forum and actual help from local volunteers who assist migrants find their way in the long march through the institutions is not a bad suggestion.

 

But can you name a volunteer organization that helps migrants with the taxes and administration of a company?

 

(I did help a couple international friends submit their regular (non-company) income tax return last year, because their local VWN office (which normally does theirs) was closed down due to covid at the time.

Did not had the impression they knew any other organization they could go to.

So have my doubts there are that many, let alone for the more complex case of the tax return of a company).

2 augustus 2021 aangepast door Maxn

[TwaBla]

Op 2-8-2021 om 16:42, Maxn zei:

But can you name a volunteer organization that helps migrants with the taxes and administration of a company?

 

Making it sound very complicated. Probably its just a (former) student with 'bijverdiensten' and not 'a company'. Keep it simple, stupid. And start with the first step. Contact IDHEM, via the website or Facebook. If they can't help, they will probably know someone who can.

[Maarten Visser]

Op 2-8-2021 om 15:11, Mel Tan zei:

I really wish that the Dutch tax process is simpler, transparent, and more streamlined! 

We would like that too!

[Mel Tan]

On 02/08/2021 at 15:57, Maxn said:

For that kind of service there should only be 21% VAT on her invoices for customers that are located in the Netherlands.

 

If outside the EU, no VAT.

 

If the customer is a VAT registered company in another EU country, no Dutch VAT either.

VAT should be diverted to the customer instead.

Which does require that she submits a quarterly ICP return, in addition to the VAT return.

Yes, more paperwork...

 

In all cases you do pay income tax over the profit.

Dear MAXN,

Thanks for a clear explanation of the subtle differences on submitting a VAT. 

Can you explain further about the requirement for a quarterly ICP return, in addition to the VAT return (even though assuming that no VAT has been charged for this example). 

 

My question then:  

Can you file the said ICP returns and VAT documents as an individual or you must register as a ZZP'er? 

I now found out that the said virtual design agency has set up a business here in the NL so I most likely have to charge VAT but I want to do it as an individual if that is even possible! 

 

[Mel Tan]

On 02/08/2021 at 16:14, TwaBla said:

Mel Tan already learned how to complain (mopperen) about the authorities, so inburgering is happening. 

Dear TwaBla,

 

I am so happy that you see me as becoming integrated! I didn't know that complaining is a Dutch thing :p 

 

On 02/08/2021 at 21:42, TwaBla said:

Contact IDHEM, via the website or Facebook. If they can't help, they will probably know someone who can.

 

Thanks so much for this referral, although they are mostly for Central and Eastern European migrants, I am pretty sure that they know someone who can help with this! They seem welcoming to all sorts of migrants! 

[Maxn]

Op 3-8-2021 om 15:19, Mel Tan zei:

Thanks for a clear explanation of the subtle differences on submitting a VAT. 

Can you explain further about the requirement for a quarterly ICP return, in addition to the VAT return (even though assuming that no VAT has been charged for this example). 

 

In the theoretical case that you provided 1234 EUR worth of services, to a company in say Ireland, that let you know their VAT number is IE1234567890 the steps are:

 

1) you double check the VAT number the customer provided is correct at: https://ec.europa.eu/taxation_customs/vies/

 

2) on the invoice you issue to the customer you do not charge VAT. But instead write a note on it mentioning the reason for that, and the VAT number of the customer.

E.g. "Service provided to company in other EU member state. VAT reverse charged to IE1234567890"

 

3) at the end of the quarter you need to submit an ICP return that lists all the VAT number of the customers in other EU countries you had that quarter, and the total amount of services you provided to that customer.

 

So you put IE1234567890 and 1234 EUR on there.

 

4) you also still need to submit a VAT return, even if there is nothing you need to pay that quarter. On the return there is a field asking for the total amount of services/deliveries you made to other EU countries. Should have the same amount there as the total on the ICP return.

 

 

Op 3-8-2021 om 15:19, Mel Tan zei:

My question then:  

Can you file the said ICP returns and VAT documents as an individual or you must register as a ZZP'er? 

 

Would at least need to register as a company for VAT purposes in that case.

 

You are not always considered a company for income tax purposes, and may be able to fill in the total profit in the "inkomsten uit overig werk" field on your income tax return instead of a more extensive return, which I think Twa was hinting at.

However you still pretty much need to maintain the same amount of administration to be able to proof how you got to that number, in case a tax inspector ever wants to check.

[prinsrachid]

To be honest, I think these discussions about 'freelancing' are kind of academic and not even relevant as this feels like a simple employment. This foreign company is simply hiring  a legal resident of the Netherlands who works in the Netherlands. This means they have to adhere to Dutch law and are required to withhold Dutch wage tax and Dutch social premiums.

[TwaBla]

Op 3-8-2021 om 18:21, prinsrachid zei:

To be honest, I think these discussions about 'freelancing' are kind of academic and not even relevant as this feels like a simple employment. 

 

Feelings are not the most solid basis to question all what was said before.

 

These discussions are per definition not 'academic' as the topic starter is asking about matters that affect his real life and real work. 

 

What do we know? A Texas-based company 'employs' people via the net to work on 'projects' doing 'user research' and get paid by the hour or day. I am not sure if the long arm of the Dutch Belastingdienst reaches all the way to Texas to impose Dutch rules on companies and tell them how they should orchestrate their freelancers/employees. But it wouldn't surprise me if the Belastingdienst has a pragmatic view on income derived from online assignments (online diensten) as described by Mel Tan.

 

 

[Joost Rietveld]

Of course the arms of the Dutch tax offices don't reach all the way to Texas. But that doesn't mean that Mel Tan is, therefore, a freelancer. If - by Dutch law - the Dutch tax offices see reason to judge that Mel's work for the Texas based company meets the requirements of employmentship, then they can levy taxes on Mel's end accordingly.

 

Income derived from foreign employment is indeed a category of the Dutch income tax system. This will eliminate freelancer's tax benefits at Mel's end.

 

This will also eliminate the vat and the need to register as self-employed at the chamber of commerce

[TwaBla]

 

We are creating a prisoners dilemma for this poor guy now.

 

If this is 'inkomsten uit overige werkzaamheden' would it really matter if this should be classified as 'freelance work' or 'employment'? He would simple declare it as such and pay taxes. 

 

I did not include all complications when he still lives at home.

[Joost Rietveld]

It does matter, since under  "inkomsten uit overige werkzaamheden" he has the right to deduct expenses, which is not the case with foreign employment.

 

It also matters since he has to file a W8ben form with the USA IRS if he would explain his work as being freelance

 

[Maxn]

Op 4-8-2021 om 08:48, Joost Rietveld zei:

It also matters since he has to file a W8ben form with the USA IRS if he would explain his work as being freelance

 

Isn't that also the case if you do are operating as a company, that supplies services to an American company?

 

The well known companies most people working in the IT field deal with (Apple, Google, etc.) demand you to fill such forms even if you have a limited liability company (although then it is the W8BEN-E).

4 augustus 2021 aangepast door Maxn

[Joost Rietveld]

Yes, that is the case, and therefore important to know as what entity you are submitting the W8BEN or W8BEN-E

[Mel Tan]

Thanks so much, guys! 

Very helpful. Let me summarize the different points: 

 

1. There seems to be a distinction between an individual income tax identity (the "imkomsten uit overig werk")  and the VAT tax identity as pointed out by Maxn and also by the Belastingdienst. Their site doesn't explain the difference between the two. 

 

On 03/08/2021 at 16:37, Maxn said:

Would at least need to register as a company for VAT purposes in that case.

 

You are not always considered a company for income tax purposes, and may be able to fill in the total profit in the "inkomsten uit overig werk" field on your income tax return instead of a more extensive return, which I think Twa was hinting at.

However you still pretty much need to maintain the same amount of administration to be able to proof how you got to that number, in case a tax inspector ever wants to check.

 

This two-filing / identity dilemma was also raised by TwaBla: 

1. If I can just file ordinarily under "inkomsten uit overige werkzaamheden" does that mean I don't have to register as a ZZP? Will I be classified like a temporary casual work (i.e. like an Albert Heijn worker) assuming that company is in NL but MIGHT also cover unpredictable overseas work? Can I can just simply file ordinary income taxes and as Joost mentions, and I can also deduct expenses from doing the job e.g. equipment and software?

 

On 04/08/2021 at 08:48, Joost Rietveld said:

It does matter, since under  "inkomsten uit overige werkzaamheden" he has the right to deduct expenses, which is not the case with foreign employment.

 

It also matters since he has to file a W8ben form with the USA IRS if he would explain his work as being freelance

 

2. However, if I use the category "inkomsten...." will I have to register as a ZZPér?

On 03/08/2021 at 21:54, TwaBla said:

If this is 'inkomsten uit overige werkzaamheden' would it really matter if this should be classified as 'freelance work' or 'employment'? He would simple declare it as such and pay taxes. 

 

The Belastingdienst doesn't seem to list project work as examples of internet work and therefore difficult to assess if it is freelance or irregular employment. 

 

I hope to hear your thoughts on this two-identity problem.

 

6 augustus 2021 aangepast door Mel Tan

[TwaBla]

Op 6-8-2021 om 17:02, Mel Tan zei:

The Belastingdienst doesn't seem to list project work as examples of internet work and therefore difficult to assess if it is freelance or irregular employment. 

 

Belastingdienst does mention the supply of services to third parties as a source of 'inkomsten uit overige werkzaamheden'. If it is just a marginal source of income I wouldn't look forever for the right answer, but use the most convenient option and write to the Belastingdienst that this is the way you will file it. Is that correct? 

 

You will have to decide if other circumstances are relevant, like sharing a household with others or additional sources of income.

 

Someone may bite my head of for giving a wrong advice. 

[Joost Rietveld]

The main difference lies in the answer to the question if you are performing your work under a relationship of authority from the contractor towards you. If so, then the Dutch tax services have every right to earmark your work as income from foreign employment.

 

If not, or if questionable, then filing taxes as a freelancer is in the realm of options. This relationship of authority stems from where you perform your work, at what times, with what means, under guidance and instructions and having to answer to a 'boss'. Not at all clear cut, I know. Welcome to Dutch law