Small business scheme: applying for & stopping the KOR

Introduction

If you are a business owner, you may have heard of the small business allowance, better known as KOR. But what exactly is this scheme, and what are its advantages and disadvantages? We'd like to help you get started with this comprehensive guide to the KOR.

What is small business regulation?

The small business scheme, often abbreviated as KOR, is a scheme designed to relieve smaller entrepreneurs in the Netherlands of VAT. If you qualify for the KOR, you do not have to file a VAT return and you have an exemption from VAT. In that case, you do not charge VAT to your customers. Natural persons (sole traders), combinations of natural persons (vof) and legal persons such as foundations and associations can make use of the small business arrangement.

Registration threshold and small business regulation 2023

As a business owner, you must report your business for VAT unless you meet all of the following conditions:

1. The maximum turnover per calendar year is € 1800.
2. You don't want to deduct the VAT you charge.
3. You have not registered your company with the Chamber of Commerce. By the way, this is not mandatory either.

In this case, you can apply the registration threshold and automatically use the KOR. So you do not have to register for VAT and the KOR in this situation.

If your annual turnover is more than € 1800, then the KOR may be an interesting scheme for you. You can apply for the KOR if you meet the following conditions:

• You are a VAT entrepreneur.
• You are an entrepreneur based in the Netherlands.
• Your turnover does not exceed €20,000 per calendar year.

The following turnover counts toward the small business scheme:

• Supply of goods or services normally taxed with Dutch VAT.
• Certain VAT-exempt sales also count that relate to financial services, insurance services, real estate, and means of payment and securities.

You can check whether you qualify for the KOR on the Tax Office website.

Benefits KOR

Using the small business arrangement offers the following benefits:

• Your administration is simplified and you do not have to file a VAT return.
• You don't have to charge your customers VAT. This makes supplying goods or services to individuals cheaper.

Disadvantages KOR

The small business arrangement also has some drawbacks.

• You cannot reclaim VAT on your expenses and investments.
• You must inform your clients that you are applying the KOR. Clients might find this unprofessional.

KOR for self-employed workers

For ZZP'ers, the small business allowance can offer benefits. As a ZZP'er you often have less turnover than larger companies, so the KOR can be a godsend. By spending less time on VAT returns and administration, you can focus on your core business. However, ZZP'ers must be careful to stay below the €20,000 turnover limit and to inform their customers correctly.

Applying for KOR

Do you want to make use of the KOR? Then you have to apply for it with the tax authorities. To apply for the small business scheme, you can find a special KOR form on the website of the tax authorities. Make sure you have all the required information at hand, such as your company details and your VAT number.

You send the KOR form by mail to the Tax Office and within 6 weeks you will receive a reply stating the effective date of the KOR. The scheme starts per a new VAT period. So if you want to make use of the small entrepreneurs scheme, you have to apply for it in time. Please note that you cannot apply the KOR retroactively.

Unsubscribe KOR

If you signed up for the KOR, you can only stop the scheme after 3 years, unless your turnover exceeds €20,000 in one calendar year. In that case, you must immediately deregister from the KOR. This can be done via the deregistration form small entrepreneurs scheme.

KOR invoice example

If you use the KOR, you must also mention this on your invoices. Therefore, include the following information on your invoice to your customer.

• Company name
• Address
• Zip code and city
• VAT number
• Invoice number and date
• Description of services or products provided
• Total amount (excluding VAT)
• Indication: 'Small business scheme applied'

KOR and income tax

The small business scheme offers exemption from VAT returns. This is separate from income tax. So you just have to process your turnover in your administration and file an income tax return. So the KOR offers no income tax benefits.

KOR and turnover outside the Netherlands

Do you use the small business scheme and sell goods or services within the EU. In this case, modified rules apply and it can be difficult to determine whether or not you need to charge VAT. You can use the Incidental VAT return tool to check for yourself what you need to do in these cases.