KOR (Dutch Small Businesses Scheme): Rules, Requirements and VAT implications

Many entrepreneurs are attracted to the Dutch Small Businesses Scheme (KOR) because it promises something very appealing: no VAT returns and no VAT administration.

However, the KOR is not automatically the best choice for every business. Whether it saves you money depends largely on your customers and your business expenses.

Let’s explore how the scheme works and when it makes sense.

What Is the KOR?

The Kleineondernemersregeling (KOR) is a VAT exemption scheme for businesses with an annual turnover of no more than €20,000.

If you join the scheme:

• You do not charge VAT to your customers.
• You generally do not file regular VAT returns.
• You generally do not pay VAT to the Dutch Tax Administration.

In exchange, you lose the right to reclaim VAT on your business purchases and expenses.
The KOR does not change your income tax obligations. It only affects VAT.

Who Can Use the KOR?

The scheme is available to:

• Sole traders (ZZP’ers or eenmanszaken)
• Partnerships
• BVs
• Foundations
• Associations

To qualify, you must:

• Be a VAT entrepreneur.
• Be established in the Netherlands or have a fixed establishment in the Netherlands.
• Have turnover of €20,000 or less in both the current and the previous calendar year, delivered within the Netherlands.
  You can use the online help of the Belastingdienst to determine which parts of your turnover count towards the €20,000 here.

What Are the Advantages?

The main advantage is simplicity, and lower prices for your customers to pay.

You no longer have to charge VAT and submit VAT returns. Many entrepreneurs appreciate the reduced administrative burden.

The KOR is most beneficial when your customers are mainly private individuals who cannot reclaim VAT themselves. To them – a KOR entrepreneur will be able to offer more competitive prices than those who charge VAT.

Example

A language tutor charges €100 for a lesson.

• Without the KOR, the customer may pay €121 if VAT applies.
• With the KOR, the tutor can charge €100 and keep the pricing simple.

What Are the Disadvantages?

The biggest drawback is that you can no longer reclaim VAT on your expenses, or you may need to submit a VAT revision for previously claimed VAT on investments.

This can become expensive if you:

• Buy expensive equipment, office or shop furniture.
• You claimed VAT on previous investments which are still in your books above a certain threshold.
• Regularly use professional services.

Example

You buy a laptop for €1,210 including VAT.

• Without the KOR, you may reclaim €210 VAT.
• With the KOR, the €210 becomes a business cost.

For businesses with significant expenses, this often outweighs the administrative benefits.

VAT Revision on Previous Investments

If you have recently reclaimed VAT on significant investments, joining the KOR may have additional consequences.

Depending on the type of asset, when it was first put into use, and the amount of VAT originally deducted, part of the VAT previously reclaimed may need to be revised and repaid after joining the KOR. This can apply to items such as business vehicles, equipment, machinery, business property and certain substantial property-related investments.

Before joining the KOR, check whether you have made significant investments in recent years and whether the VAT revision rules could apply.

We’ll cover this topic in more detail in a separate article:
KOR and Previous Investments: When Must You Repay Deducted VAT?

The €20,000 Turnover Limit

The KOR is only available if your turnover remains within the €20,000 annual threshold.
Most taxable turnover counts towards this limit.

If you exceed €20,000 during the year, the consequences are immediate.
The transaction that pushes you above the threshold is no longer covered by the exemption. You must charge VAT on the full value of that transaction and start applying the normal VAT rules again.

For that reason, businesses approaching the limit should monitor their turnover carefully.

Is the KOR Worth it for You?

The KOR is often attractive for businesses that:

• Have few expenses.
• Mostly serve individuals.
• Want to keep administration simple.
• Generate relatively modest turnover.

The KOR is often less attractive for businesses that:

• Make large investments.
• Have significant ongoing costs.
• Work primarily with VAT-registered companies.

If your customers can reclaim VAT anyway, they generally do not care whether you charge VAT. In that case, giving up VAT deductions may not be worth it.

What About Business in Other EU Countries?

Entrepreneurs doing business across the EU may be able to use the EU-KOR.

Under this system, a VAT exemption may be available in one or more EU countries. Additional conditions apply, including the thresholds of the countries in question, and an overall EU turnover limit of €100,000 per calendar year. Note, that not all EU countries have joined the EU-KOR scheme.

Cross-border VAT rules can be complex, so professional advice is often worthwhile before opting in.

Final Thoughts

The KOR can save time and simplify your administration, but it does not always save money.

Before applying, ask yourself:

• Who are my customers: consumers or businesses?
• Do I expect significant business expenses?
• Will I make major investments?
• Am I likely to exceed €20,000 turnover soon?

For some entrepreneurs, the KOR is an excellent simplification. For others, remaining in the regular VAT system is financially more beneficial.

Frequently Asked Questions

General information, not tax advice. I am not a tax adviser (belastingadviseur); for your own situation, consider asking a qualified one.