KOR Scheme in the Netherlands, or How to Pay 0% VAT

Kleineondernemersregeling, or KOR, is a tax exemption scheme any small businesses in the Netherlands can benefit from given that their annual turnover doesn’t exceed €20,000 (excluding VAT). Using it means that you:

• don’t charge your customers VAT;
• don’t file VAT declarations;
• cannot deduct VAT on business costs and investments.

Take note: in some cases you still need to file a VAT return. For example, if you make a big purchase in another EU country, or if you have foreign customers or transactions for which you reverse-charge VAT.

It probably also needs to be mentioned that any other taxes, such as income tax, are not part of the deal, and you still need to file those under this scheme.

If you decide to take part in the Small Business Scheme, two things can happen: you either commit to it for at least 3 years (after which it automatically renews if you still want it), or your business grows beyond the €20,000 turnover threshold. If the latter is the case, you must notify the Tax and Customs Administration immediately and the scheme will no longer apply to your business. That means you’re going to have to pay and declare VAT from then on, starting with the first payment that exceeded the limit.

That’s not the worst thing in the world though, because a) it means you’re doing well enough, and b) the KOR scheme is not always financially beneficial. For example, if you receive VAT back annually, or if you’re planning to make some investments in the near future, the scheme will probably end up costing you more than what it saves.

Some businesses also deal with strongly fluctuating turnover, when it’s below €20,000 one year and above it the next. Whatever the situation is, as soon as you reach the threshold, the KOR scheme expires and you’re unable to participate in it for the next 3 years. It’d be best to keep that in mind.