From January 1, 2020, a new rule for regulating the reporting of small entrepreneurs, the so-called KOR (kleineondernemersregeling), comes into effect.

We have already written that the KOR rule will change from next (2020) year. Now, finally, we can talk in detail about how exactly. The outgoing scheme was somewhat more complicated than the new one, which is good news. However, before deciding if a new rule is right for you, take a close look at it.

The main differences between the old rules and the new ones:

As you understood from the table, the new scheme involves not just tax benefits, but exemption from VAT and related administrative obligations. That is, it should no longer appear in invoices and declarations. This is very convenient, since you no longer have to keep track of VAT and issue a refund. Whether it is financially profitable is not obvious, since it will also be impossible to receive the paid VAT. An important point is related to this, which is worth paying attention to: if you plan to make serious investments in your business, and, accordingly, pay a lot of VAT, you will not be able to return it.

The application of the new KOR is optional and entrepreneurs who find it financially disadvantageous can apply the normal VAT rules.

Is it beneficial for you to use the new KOR rule?

If you qualify for the new KOR, you will definitely become more comfortable, since you no longer have to run the VAT administration and submit a VAT return.

However, it is important to consider the following:

• If you are going to make investments in your business, then according to the new rules, you will not be able to deduct VAT from these investments.
• If in the last 5 years you have deducted VAT on investments as income tax, you will have to revise the VAT. If it turns out that the VAT deducted for this period, divided by 5 years, exceeds 500 euros, you will have to return this VAT amount. When investing in real estate, this period is increased to 10 years.
• If you are renting a taxable property, you cannot use the new KOR.
• If you work in the B2B sector, i.e. mostly with other entrepreneurs or businesses, you will not be able to deduct VAT on purchases and business expenses on the new KOR. This means that your purchase prices will go up. To keep the balance, you will have to raise the VAT-excluded prices for your goods or services. This, in turn, can lead to the fact that your product or service becomes less interesting for your customers.
• If you work mainly with individuals and organizations that cannot refund paid VAT, with the same sale price, you will receive more. Then the new KOR is interesting to you.
• If you have overseas clients or transactions with VAT shifted, you will still have to file your tax return.

What if you have exceeded the € 20 limit?

If at some point in the reporting year, your turnover exceeds 20 euros, you will have to pay VAT on the part of the income that was above the threshold. From this point on, you will also have to run regular administration and file VAT returns. All goods and services that were sold or purchased during the exemption period are not recalculated. You will also need to notify the tax office of this threshold exceeding by sending them a special form.

How to use?

If you want to take advantage of the new KOR rule from 2020, make sure you register with the tax office first. It is important that registration takes place before November 20, 2019. If you are already using the KOR rule, you will automatically be transferred to the new scheme. Check your mail, you should have received a letter about this from the tax office. If you just want to start using the exemption, you must submit an application to the tax office no later than November 20, 2019. Keep in mind that if you decide to take advantage of the new rule, your choice cannot be changed for 3 years or until your turnover exceeds the € 20 threshold.

If you are still in doubt, consult a tax advisor. Nalog.nl will be happy to help you understand all the intricacies of the new law.