All you need to know about KOR scheme

Grow your small business by applying to the KOR scheme
The new small business scheme (KOR) came into effect in 2020 and is an important scheme for self-employed people! Especially if you are an entrepreneur who does not make much turnover relatively speaking. Before, it was implemented as a VAT deduction, but today it’s a VAT exemption. That is why the term will most likely ring a bell with most starting entrepreneurs.

What is the small business scheme?

As mentioned, KOR is a VAT exemption. This means that you don’t charge VAT on the income from your company, and you no longer need to file VAT returns. Please note: this also means that you can no longer reclaim VAT on your expenses.

You can opt for the KOR if you have a turnover that does not exceed €20,000. Participation in the KOR applies for a period of at least 3 years or as long as the turnover per calendar year dstays below €20,000 (ex. VAT).

You are eligible for the KOR if:

• your company is registered in the Netherlands (or has a permanent establishment here).

• you are a VAT entrepreneur.

• your turnover does not exceed €20,000 per calendar year.

Under the KOR, amounts including VAT may be deducted on income tax because no set-off is possible via turnover tax.

Any entrepreneur, regardless of legal form, can opt for the this scheme. This also applies to an association or foundation (VOF).

How does this work?

You do not have to give your customer an invoice, but you can. If you do, then you do not show a VAT percentage or VAT amount. Instead, you have to add the following legal sentence: “Invoice exempt from VAT due to Article 25 of the Dutch Tax law” (“Factuur vrijgesteld van OB o.g.v. artikel 25 Wet OB”) will appear. If you participate in the KOR, your possible invoices do not have to meet the invoice requirements.

What if you are exceeding the €20,000 limit?

Do you make more than €20,000 in turnover in a calendar year? If so, you must immediately step out the KOR scheme. From that moment on, you need to start charging VAT again and issue invoices. You must also resume normal VAT records. Turnover before exceeding the limit remains VAT-free. In consideration to this exceed, you cannot apply to the small business scheme again for the next three years.
pros of this sheme:

• Less administration: you no longer have to submit quarterly VAT returns

• A more competitive price for your customers: no more VAT is added to your rate, making you cheaper especially for private customers

cons of this scheme

• No VAT reclaiming from the Inland Revenue

• No VAT deducting on investments and business expenses

So if you are considering to make major investments the next years, it is not wise to opt for this scheme.

How to apply for the small business scheme (kor)?

If you are interested in taking part in the KOR system, you need to register with the tax authority here (Belastingdienst) no later than 4 weeks before the start date of the declaration period in which you want the KOR to start.

After sending your registration, you will receive an acknowledgement of receipt within 15 days.

Once your application has been processed, you will receive a letter containing the final effective date of the KOR. You will continue to submit a VAT return until the effective date in this application letter.

Let’s give you some tips if you should join the KOR or not?

You can ask yourself the following questions to help influencing your choice:

For example, do I get VAT refund every year? Am I going to make a lot of investments in the coming period? Do my clients are mainly private or business customers?

If you need help or are unsure about the choice you have to make, ask a bookkeeper to calculate with you to determine whether the KOR is the right choice for you or not.

Need more advice? Just click here!

Christel Berrod</br>and Guillaume van den Hoek

Christel Berrod
and Guillaume van den Hoek

Respectively ZZP’ers Satisfaction Officer
and Personable bookkeeper for international ZZP’ers at De BoekhoudHoek

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