Bookkeeping

The Dutch Tax and Customs Administration does not set any requirements for what your bookkeeping should look like. You can therefore organise and update your bookkeeping in a way that suits your business. Take into account, however, that your bookkeeping is the basis for your returns, so organise it accordingly. In addition, the Dutch Tax and Customs Administration must be able to inspect your accounting records and they must, of course, always be complete. You are obliged to keep your bookkeeping for seven years. During this period, the Dutch Tax and Customs Administration may check your returns. The following components are compulsory:

• In your bookkeeping, you must specify all income and expenditure of your business. This is also referred to sometimes as a ‘general ledger’ (grootboek). It is practical to divide your ledger per quarter if you also file for VAT return.
• You keep an up-to-date record of who you still have to receive money from (accounts receivable records) and who still needs to receive money from you (accounts payable records). Examples include outstanding invoices and loans.
• Do you sell products? In that case, you must also keep up-to-date stock records. You do this by drawing up an inventory of all your stock once per year. The value of your stock is part of your bookkeeping.

Writing off business assets
If you buy business assets that last longer than one year and that are more expensive than €450, you write those off over several years. Examples include a laptop or other expensive equipment. That means that you may not deduct those costs from your profit in one go. You can, however, claim back the VAT on that purchase with the next VAT return. Keep track of which year you purchased which business asset, its value and in how many years you will write off the costs excluding VAT from your profit.

At the end of a calendar year, you close the financial year. In principle, companies are required to draw up financial statements and to file them with the Dutch Chamber of Commerce, but an exception is made for self-employed professionals with a sole proprietorship. Financial statements usually consist of the profit and loss account, the balance sheet and notes. The notes consist of an interpretation and evaluation of the figures. The financial statements can be requested by third parties from the Dutch Chamber of Commerce. As a self-employed professional, you only draw up a profit and loss account and a balance sheet, because you need this for your income tax return. This is not made public and you don’t have to file it anywhere.

The profit and loss account
Organise your bookkeeping and your general ledger in such a way that they automatically calculate a profit and loss account. You do this by balancing the income and expenditure excluding VAT for the entire calendar year. You are left with a loss or profit.

The balance sheet
The balance sheet is a snapshot in time to determine the capital in your business. You can draw up the balance sheet of your business at any time, but you do this at the end of the calendar year for your income tax return. See the Step-by-step plan for drawing up a balance sheet in the Tools tab.

The turnover tax returns
Have you received a VAT number and do you not make use of the small businesses scheme (kleineondernemersregeling, KOR)? In that case, you keep accounting records for the turnover tax. You submit a turnover tax return each quarter.

When submitting your tax return, you state your turnover excluding VAT and also the VAT that you have calculated over this turnover. Make sure that you enter the turnover that is taxed with 21%, 9% or 0% VAT on the correct line. You do not have to report exempt turnover on your VAT return. You enter the input tax at the end of the tax return. That is the VAT on the costs you have incurred. The difference between the VAT on your turnover and the input tax determines whether you get money back or have to pay it. If you have made turnover in the EU, you must also complete the intra-community supplies form (ICP declaration). 

By including amounts including and excluding VAT in your bookkeeping, you can easily seek the information for these returns. Look at the bookkeeping example.

Keeping your general ledger (so noting down your income and expenditure) is easy to do yourself. Setting up your bookkeeping requires some attention the first time. You can make use of the example in Excel (see below, in the Downloads tab) or make use of accounting software. The profit and loss account can be easily determined from your bookkeeping. This is not a difficult calculation.

Returns
The turnover tax returns are not very complicated and the Dutch Tax and Customs Administration clearly explains which amounts are required from you. It may also be nice to submit your first return together with someone who has done this often.

There is more involved in drawing up the balance sheet and income tax return. Submitting a return is explained by the Dutch Tax and Customs Administration and you can fill this in step by step. Take the time for this or do it together with someone. You can call the Dutch Tax and Customs Administration if you don’t understand something. If you are a member of a trade union or professional association, you can also ask for advice from them. You can also outsource drawing up the financial statements, the balance sheet and annual return to a bookkeeper. You can also choose to only do this the first year(s), so that you can gain insight into how this has to be done.

Accounting software often combines different functions and often goes that extra step further than simply listing the income and expenditure. Examples of this include drawing up offers and invoices, a link with your banking affairs and time recording. The accounting software of Informer, GnuCash, Gekko and e-Boekhouden can be downloaded or tested for free. There are also many paid accounting programs. These costs are professional expenses and therefore deductable.

Please note that the Dutch Tax and Customs Administration requires you to keep your bookkeeping for seven years. Therefore, make sure that the apps that you use are reliable, that your data is saved properly and that you download or export yourself too and save it properly. Always keep the original invoices/receipts and contracts.