Through recent years, changes to economics have encouraged focuses to be turned towards flexibility within the Dutch labour market. What this has led to is a demand for payrolling and increased legislation regarding contractor expenses in the Netherlands, in turn providing brilliant opportunities for foreign and domestic providers of payroll services. Yet, working in the Dutch market requires a complete understanding of all aspects in regards to Dutch Payroll tax and contractor expenses.
Liability, in a legal sense, holds a different definition depending on the country in question; The Netherlands are no exception. Dealing with Dutch Payroll tax and contractor expenses within Dutch borders is a complicated matter for service providers internationally; getting to grip with all intricate details can use up a vast amount of valuable time.
Under law, each overseas or foreign company sending expatriates and contractors to the Netherlands will automatically become a ‘virtual resident’. What this means is that employees are liable for Dutch Payroll tax during the duration of their contract. Therefore, the legal employer is indebted to construct a complicated payroll administration to ensure correct payment of Dutch payroll tax, with subsequent attributes around contractor expenses. If these rules are not adhered to then the consequences can be extreme with large amounts in fines and often long legal procedures taking control from your business.
During the first half of 2014, self employed workers and contractors made up 15% of the country’s overall work force – a massive 4.6 million people. Whether you see yourself as self-employed, freelance or a sole trader then you are able to claim expenses and costs that are exclusively for your business or company.
Contractor Expenses: General Questions
However, not everything is classed as a business expense. We’ll outline here exactly what you can and can’t claim for in regards to contractor expenses.
Contractor Expenses: Can I claim mileage if I use my car for Business Travel as a Contractor?
Short Answer: Yes, you can claim 45p per mile for the first 10,000 miles and 25p per mile after that.
Should you use your car for business purposes you can claim 45p per mile for the first 10,000 miles travelled with 25p per mile being claimable thereafter. If you are self-employed but do not operate through a limited company then you can claim per mile or for a proportion of usage. If you choose to claim for a proportion then you will first need to calculate the total yearly cost of running the car – which would include fuel, insurance, tax, tyres, maintenance, repair work and so on. After this, you will then need to determine the percentage of the yearly mileage that were for the business and apply this percentage to the totalled running cost. The number you are therefore left with is the complete amount that you can claim expenses for.
Contractor Expenses: Can Childcare Costs be paid through my Business?
Short Answer: Unfortunately, No.
In the eyes of the government and the accountants, childcare is not a business cost and therefore is not able to be claimed as a business expense.
Contractor Expenses: Can I expense the cost of an iPad?
Short Answer: If you use it exclusively for work, then yes, this is classed as a contractor expense.
Should you use an iPad for work only and it is vital to the running of your business then your costs can be expensed. Likewise, you can claim for hardware, software, laptops or computers if they are used exclusively for business purposes. However, to avoid a rather nasty BIK (benefit in kind) charge, contractors and freelancers must be able to prove that their iPad, tablet or huddle, etc. has been bought principally for business use only, and that any personal use is utterly insignificant.
Contractor Expenses: Can Business Suits and Dresses be claimed as a Business Expense?
Short Answer: Sadly not.
Clothing that can be used everyday or form part of an everyday wardrobe (such as business dress or a suit) is not seen or classed as an expense. Yet, if your line of employment requires any protective clothing or a branded uniform (such as a tunic, apron, hat, hardhat or blouse) then this cost can be classed as an expense.
Contractor Expenses: Can I Claim the Cost of My Lunch?
Short Answer: Up to a Value of £5
Should you not be at your usual staple or office of work then you might be able to claim the cost of a meal, usually only up to a value of £5.
Contractor Expenses: I’ve received a speeding fine, can the fine be paid through my business?
Short Answer: No.
Regardless of whether you incurred the fine on a business trip or not, speeding tickets or parking fines are not related to the running of your business in the eyes of the laws and therefore cannot be claimed as an expense.
Contractor Expenses: I’m using my personal mobile phone, am I entitled to claim any expenses?
Short Answer: Yes, but only a percentage of minutes/texts.
You can only claim expense on the percentage of the texts and minutes used for business purposes. If you only use your personal mobile phone for 30% of your credit, then you can only claim back for 30% of the amount you pumped into your mobile phone.
Contractor Expenses: I’ve donated to my clients preferred charity, is the donation a business expense?
Short Answer: No. But it might be eligible for tax relief.
Any donations to charity or charitable donations are not directly linked to the everyday running of your business and so, therefore, cannot be claimed as a business expense. However, the donation may be eligible for tax relief if you speak to your accountant.
Contractor Expenses: Are accountancy fees eligible as an expense?
Short Answer: Some professional fees, yes.
The costs racked up from some professionals and their fees (such as insurance, accountancy or legal costs) can be claimed as a business expense.
Contractor Expenses: Are the costs of medical treatment claimable as an expense?
Short Answer: Unfortunately not (Eye tests aside).
Although eye tests can be claimed for, other medical costs can very seldom be claimed for unless it can be clearly demonstrated and proved to be vital and essential to your business.
Contractor Expenses: Are School Fees able to be claimed as a business expense?
Short Answer: No.
The cost of private education at independent schools is not viewed as being directly relevant to the running of a business, or your business, and therefore cannot be claimed as an expense.
Contractor Expenses: Can the cost of makeup be claimed as an expense?
Short Answer: If you are a clown, then yes.
As make-up is not classed as a business expense, you therefore cannot claim it. There are very unique cases where it can be claimed as part of a costume, such as being a child’s entertainer or clown but simply to look the part for a client is not viewed as a business expense.
Contractor Expenses: Can hotel rooms be expensed?
Short Answer: If you are travelling to meet a client, then yes.
Should your business require you to stay away from your home or registered address then you can claim for reasonable hotel costs, just keep your receipt. When we say reasonable, constant calls of room service or choosing to stay in a 5-star establishment when cheaper are available will affect your expense claim. It may void it completely.
Contractor Expenses: Is Gym membership seen as an expense?
Short Answer: Unless proven to be essential, then no.
Unless a professional acrobat, athlete or otherwise then gym membership or renewal fees cannot be claimed for unless proven to be absolutely essential to your business.
Contractor Expenses: I work from home; can my business contribute towards the household bills?
Short Answer: Yes.
Should you work from home then you can claim for a portion of your total household bills (electricity, gas etc.) up to £4 per day.
Contractor Expenses: I need an eye test, is that classed as an expense?
Short Answer: Yes.
Should your employment require that you use a computer, iPad or similar then you can claim the cost of the eye test as an expense.
Contractor Expenses: In Summary
All expenses are required to be solely for use in business, Her Majesties Revenue and Customs may ask, at any point, to provide evidence. For example, to demonstrate and prove that they were actually accumulated as an incurred business expense or that you couldn’t have worked that day without the expense in question.
- Always keep hold of your receipts, whether they are digital or in paper form, as Her Majesties Revenue & Customs can ask to see them up to seven years after they were incurred
- In terms of balance, expenses are always deducted from your annual turnover. As you will only be taxed on profits, the larger your expenses then the lower your tax bill will be.
- Finally, don’t forget to discuss and check with your accountant that all claims are valid.