Starters Guide: Deducting Business Costs

When it comes to deducting business costs, the rules themselves aren’t complicated — but there are a few general principles that are worth getting right from the start. These apply to costs that are deductible in the year they relate to.

Let’s walk through them in plain English.

Business costs and VAT: usually exclude it

Most business expenses come with VAT (btw). In most cases, that VAT isn’t an actual cost for you, because you can reclaim it via your VAT return.

That’s why:

• Business costs are normally deducted excluding VAT when calculating your profit.

There are exceptions.

For some expenses, VAT cannot be reclaimed as input VAT. In those cases:

• You deduct the cost including VAT.

This VAT treatment happens separately from your profit calculation, so it’s important not to mix the two.

Costs made before you officially started

You don’t have to wait until your business is registered to start building up deductible costs.

If you made costs:

• With a clear business purpose, and
• With the intention of starting a business,

then those costs are usually deductible — even if they were incurred before your business officially launched.

In other words: preparation counts, as long as it was genuinely aimed at setting up the business.

Costs only count if they’re in your bookkeeping

This one is straightforward but crucial.

A cost is only accepted as deductible if:

• It is properly recorded in your administration

No record = no deduction.

That’s why keeping your bookkeeping up to date and complete is not just “good practice”, but a legal requirement.

Fully, partly, and non-deductible costs

Not all business costs are treated the same. Many expenses are mixed costs, meaning they have both a business and a private element. Because of that, there are limits.

Some costs are:

• Fully deductible (for example, clearly business-only operating costs)

Some are:

• Partly deductible, sometimes subject to a threshold (such as costs that mix business and personal use)

And some are:

• Not deductible at all (as discussed in earlier articles)

Because of these differences, it’s strongly recommended to structure your administration so that these categories are kept separate. This makes your tax return clearer and avoids mistakes.

One administration for VAT and income tax

The good news:

If your bookkeeping meets the VAT administration requirements, the Dutch tax authorities will usually also accept it for income tax.

Within that framework:

• You are free to design your own cost categories, as long as your administration is clear, complete, and consistent.

The bottom line

When deducting business costs, remember to:

• Deduct costs excluding VAT unless VAT is non-recoverable
• Include legitimate start-up costs
• Record every cost properly in your bookkeeping
• Clearly separate fully, partly, and non-deductible expenses

Good bookkeeping isn’t just about compliance — it’s what gives you clarity over your numbers and confidence in your tax position.

Frequently Asked Questions

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