Hourly criterion and hourly administration of the entrepreneur EMZ (ZZP)
10.05.2023In order to be considered a self-employed person (so-called ZZP* or EMZ*) in the Netherlands, it is sufficient to be registered with the KvK (chamber of commerce).
But in order to be considered a private entrepreneur for the tax, it is necessary, in addition to registration in KvK, also meet the requirements of the hour criterion (devote at least 1.225 hours a year to your entrepreneurship). Moreover, this must be done every calendar year, since the tax office will decide annually whether you meet the necessary criteria or not.
Why is it so important to be considered an entrepreneur for the tax?
This is beneficial because it allows you to get a number of tax benefits, significantly reduce taxes and, accordingly, increase the net profit from the business. Among these benefits:
- tax deduction for self-employment - zelfstandigenaftrek (in 2023 is 5030 euros);
- starter deduction - startersaftrek (increase in the self-employment deduction, but not more than three times during the first five years from the start of doing business; in 2023 the amount of the deduction is 2123 euros);
- innovatiebox tax regime (with WBSO certificate from Rijksdienst voor Ondernemend Nederland; more about this in our article);
- helping partner deduction - meewerkaftrek (if your partner is employed in your business for at least 525 hours a year).
And only one tax credit is granted regardless of the number of hours worked. This is the Small and Medium Business (MKB) benefit - mkb-winstvrijstelling. It is provided simply upon registration (anyone who has registered his business with KVK is entitled to a tax exemption of 14% of his profits).
So, the hour criterion:
- You must work for your entrepreneurship (individual entrepreneur / company) for at least 1225 hours during a calendar year. If you have multiple companies, the cumulative hours worked are considered. However, according to the hourly criterion, "recalculation" is not possible. This means that even if you are not starting at the beginning of the calendar year, for example, because you are a budding entrepreneur, you still need to work the same minimum number of hours until the end of the year. That is why entrepreneurs who registered shortly before the end of the reporting year often cannot qualify for tax benefits (they did not work 1225 hours).
- And the second condition, you should spend more than 50% of your total working time on your business. If, for example, you are just starting your own business and at the same time continue to work for hire, such work can take more than 50% of your time, especially at first, while your business has not yet gained momentum.
However, there are exceptions to this. If you are a budding entrepreneur: you do not need to fulfill the requirement that more than 50% of your time is spent on your company. Plus, you can count the hours you've spent getting ready to launch your project.
Also, if you start your business after disability benefits, you are not required to spend 1225 hours on your business, you only need to spend at least 800 hours in a calendar year.
Since meeting the hourly criterion is a prerequisite for being an entrepreneur in a tax sense, do not neglect the detailed accounting of your work activity.
Do this in such a way that, in the event of a possible inspection by the tax authorities, you are fully armed, that is, in a position to prove that you really worked the required number of hours. To do this, your hourly administration must be detailed enough so that you can see what exactly and how much time you spent.
And, of course, it's very important that you can verify your records so that all information is as verifiable as possible. This can be done, for example, using train tickets, correspondence or invoices.
How to keep track of working hours (hour administration)?
You can lead it as you please, there are no restrictions. You can do it in Excel or another similar program right on your computer, you can do it in an online application, but if you want romance, then you can just in a notebook. If you want to optimize the process, then the hourly administration program can be combined with the billing program.
For those entrepreneurs who are on a service subscription in the Nalog.nl company, we provide templates for conducting hourly administration, although, if they wish, they can still conduct it in any form convenient for them.
What to include and what not to include in your working hours?
All direct and indirect actions in the interests of their company can be taken into account in the hourly administration and, accordingly, be taken into account when calculating the hourly criterion. Whether these actions are logical from an entrepreneurial point of view is not evaluated here. Just as it is not judged whether it is productive or not.
An entrepreneur himself decides how to run his business; the tax authorities cannot determine for him how to do it. It is important that you can justify the hours worked, for example by using hourly administration.
Direct working occupations:
- Preparing for the assignment
- Assignment
- Trips: to the customer of the service, but also to and from work
Indirect work activities:
- Administration maintenance: bookkeeping, invoicing, payment of invoices
- Business development: communication with potential and existing customers, collecting tasks, advertising
- Training: taking courses or other training, reading professional literature
- Workspace: computer maintenance, office cleaning
- Networking (forming a professional circle of acquaintances): establishing contact with potential clients at thematic meetings
- Purchasing equipment for the enterprise, such as a phone or laptop
- Marketing: website creation and support
Is there a sick leave for an entrepreneur?
Alas, no, illness or disability is not considered a mitigating circumstance if you do not work the required number of hours. You can only count the hours that you actually worked, not the hours that you could work if you were healthy.
The only exception is if you suspend work due to pregnancy, you can continue to count your hours of work for 16 weeks as if you were still working. Moreover, if you have gone on maternity leave, you can receive entrepreneurial maternity money, which is requested separately. And Nalog.nl can help you with this too!
Order the EMZ/ZZP registration service at link. If you have any questions, you can book a consultation with our experts.
