In the Netherlands, every year approximately 90,000 sole proprietorships cease. In the first quarter of 2022, there were already over 38,000 (!). When you decide to terminate your business, it has consequences. This includes your VAT matters, such as canceling your Dutch VAT number. In this blog, we tell you what you need to consider when you want to terminate your business in the Netherlands.
Notify the Chamber of Commerce (KVK)
If you shut down your business, you must notify the KVK. On this page of the KVK, you can dissolve your company. You look up your company in the trade register, select ‘dissolve company,’ and then fill out the form to stop your VAT number. You can find your company using your Dutch VAT number. Be careful! When you shut down your business, it may have consequences for certain matters such as financing, (business) bank account, pension fund, insurance, and municipal permits. It’s essential to first check the websites of these agencies to see what the consequences of deregistering are for you before you deregister with the KVK.
After you have deregistered with the KVK, they will notify the Tax Authority. Then you will receive a letter from the Tax Authority informing you of the consequences for your income tax and VAT.
Handle your last VAT matters
In the letter you receive from the Tax Authority, it states whether you have to file a VAT return one last time. Only after you have done the final return will the Tax Authority deregister you as an entrepreneur for VAT, and they will cancel your Dutch VAT number. You may receive a request to file a VAT return even if you haven’t deregistered yet. Do it! Your deregistration may take some time.
You will receive another letter from the Tax Authority confirming your deregistration with the KVK. This also confirms that they are canceling your Dutch VAT number. The letter also contains a request for a tax settlement, meaning that you must finalize your tax matters. You must file income tax one last time.
Consider other financial consequences
Besides VAT matters, it’s essential to keep an eye on other financial consequences. You must cancel ongoing business insurance and terminate ongoing contracts. Also, think about permits, phone numbers, domain names, and subscriptions of your organization. Before you close your business bank account, make sure to download all statements or the annual overview, stop ongoing direct debit agreements, and periodic transfers, and cancel linked credit cards.
The administrative aftermath
You’ve deregistered with the KVK, completed your last VAT filings, and canceled your Dutch VAT number. What now? Concerning business administration: you must keep it. It’s essential to store your administration correctly; otherwise, the Tax Authority will determine how much revenue and profit your company generated and tax it accordingly. If you disagree with their calculation, you will need your administration as evidence: this is called the reversal of the burden of proof. It is also essential to keep your administration up to date so that you can claim certain schemes, such as the small business scheme (VAT) or investment deduction (income tax).
The retention period is seven years, and sometimes even ten years. It depends on the type of information your administration contains and is legally required. Administration with data about immovable property (such as company premises) must be kept for ten years, for example. Also, if you sell products/goods to customers/private individuals in the EU who do not have to report VAT, and if you have chosen the OSS (One Stop Shop) system, you must keep the information for ten years.
Keep your administration:
This is what you must keep at a minimum in your administration:
- General ledger
- Accounts receivable and payable administration
- Inventory administration
- Purchase and sales administration
- Payroll administration
- Important data for third-party tax assessments
Don’t feel like storing all that paperwork? It is also allowed to scan and keep it digitally. But: if you have digital files, a printed copy alone in the administration is not enough. In the event of an inspection, the digital files must be usable, and the programs with which the files are used must work.
If you prefer to handle it differently, it is possible to make arrangements with the Tax Authority. You can discuss whether you may keep non-basic data for a shorter period, in what form you keep the administration, and at what detail level you keep the data. Be careful with this, because the arrangements you make only apply to the Tax Authority. For other government agencies, the retention period of seven years still applies. Even if your business stops, you must comply with the retention period.
What to do if you have employees?
If you have employees, you must deal with them fairly so that they have enough time to find new work. First, you must apply for a dismissal permit. Additionally, you can set up a social plan. This is not legally required, but you can set certain agreements in it. Think about a transition payment for your staff, and whether/what help they will get in finding a new job. You must also report the dismissal to the Tax Authority. What you must report exactly, you can find in step 17 of this handbook.
And what now?
Canceling your business doesn’t always have to be negative. Space may emerge for a new future – you can retrain (through a scheme), return to employment, or consider starting a new business.
Haven’t had enough of entrepreneurship yet? Then you are free to set up a new organization. Maybe you will reorganize your business: it fits you or the times better. Or you go into employment and engage in part-time entrepreneurship. It is also an option to take over an existing business. This has several advantages: you also take over customers, brand awareness, and a physical workplace. There are sites where you can find businesses that you can take over.
Not done with entrepreneurship, but need help with VAT?
Then you are in the right place. Schedule a no-obligation consultation so we can discuss your situation together. Then we will see which tax picture best fits you and the company.