The Dutch sole trader is an excellent business solution for entrepreneurs who want to start their own small business. This business form provides a wide range of opportunities and can be used in all business fields. The owner becomes his own employer and may enter into business relations and contracts.

The sole trader in the Netherlands is called the ZZP zelfstandige zonder personnel and it must be registered with the Dutch Chamber of Commerce. Our company formation agents in the Netherlands can help you complete this process and start working for your own business.

The characteristics of the Dutch sole trader

The one-man business is a preferred option for many entrepreneurs who want to pursue their own business and start with a simple business form that is easy to incorporate. While the sole trader allows for business flexibility, an important characteristic is that the founder is liable for the debts of the sole proprietorship.

Before starting a new business it is also helpful to have a complete business plan and a clear vision of the future development of the business. Sole traders can later be transformed into partnerships if two of more entrepreneurs want to share business goals or be converted into a limited liability company that provides a clear distinction between the business and the individual.

For these corporate structure changes for existing businesses you can rely on the services provided by our company formation agents.

Sole trader registration in the Netherlands

The entrepreneur also needs to make workspace arrangements. This type of company is subject to taxation in the Netherlands and it also applies to expatriates who start their own business here.

Registration with the Chamber of Commerce is mandatory for all businesses, including the ZZP. This step needs to be completed within one week after the actual business activities commence. The following documents are required for sole trader registration in the Netherlands:

- valid identification document for the individual;
- registration form;
- proof of registration fee payment.

The registration process for the ZZP is simpler than for other business types, like the corporations. However, entrepreneurs should remember that they may require additional special permits and licenses if they perform some activities. Permits for catering, transport or environment are applicable.

What to consider when opening a sole trader in the Netherlands

The first and important thing to consider when setting up a Dutch sole trader or proprietorship is that it has no legal personality, compared to other business forms, such as the private limited liability company (BV). Then, the person operating under this structure must be ready to:

take responsibility for all the business’ financial obligations, including its debts;
from the same point of view, the owner will be liable to the extent of his/her entire assets/wealth;
a person can only set up one sole proprietorship, while when registering a BV, for example, the same person can have more than one businesses;
the sole trader must still meet specific financial requirements, even if he or she has no obligations of filing financial statements with the Trade Register.

There are both advantages and disadvantages linked to a sole trader in the Netherlands, and the structure chosen by a person will depend on various aspects. Often, the most important ones are the size of the business and if the settlor can work independently and has easy access to a clients or customers’ database. Also, until recently, the fact that there was no need for a minimum share capital imposed by the law was a major benefit for this entity as it had a great impact on the business start-up costs.

If you are a freelancer, the sole proprietorship can be a good solution until your profits reach a higher limit when changing it to a corporate form can become more advantageous. Our Dutch company formation agents can provide more information on all these aspects.

Liability of a sole trader in the Netherlands

The liability for the business’ actions and financial situation is one of the most important issues to consider when deciding to open a sole proprietorship in the Netherlands. Compared to a corporate entity where the shareholder can detach him/herself from the problems of the company, the sole trader will need to pay attention to matters that can create difficulties in order to avoid bankruptcy. This is why, this entity is suitable for small enterprises. Once the business grows, the sole trader can easily change the business structure into a more beneficial one.

As a matter of fact, it is quite common to transform sole proprietorships into BVs, as the procedure is straightforward. Our company registration advisors in the Netherlands can help you.

Taxation of a Dutch sole trader

From a taxation point of view, the sole trader needs to register with the Tax Administration and pay the personal income tax under the Box taxation system. In other words, a Dutch sole proprietorship is not subject to the corporate tax.

The following taxes also need to be considered by a sole trader in the Netherlands:

- the payroll tax for employees;
- the VAT, if the sole trader is registered as VAT payer;
- social insurnaces.

There also several tax advantages a sole trader can benefit from. Among these:

- if the sole trader works at least 1,225 hours per year, a private business ownership allowance and a tax relief for new businesses can be obtained;
- a 14% tax relief can also be added thanks to the SME profit exemption;
- VAT exemptions for various professions (for VAT registered sole traders).

A sole trader can also hire staff, case in which he or she must also register as an employer.

In the case of this entity, tax returns must be filed annually, and the deadline is May 1^st of the current year for the past one.

Setting up a sole proprietorship in the Netherlands is simple and the procedure can be completed in a few days.

If you are a foreign citizen and move here based on a residence permit, you can create a sole trader with the help our agents. They can also explain the requirements you need to meet in order to qualify for various tax benefits awarded by the government to expats working here.

Our specialists can offer more information on the tax allowances available for expats. You can also watch our video below:

How many sole traders operate in the Netherlands?

The Dutch government keeps track of all entities operating in the country, as well as on the trends on the business market. Sole traders have grown in popularity in the over the years, as the Netherlands encourages entrepreneurship at small scale.

According to the latest statistics:

- starting with 2015, the number of sole traders started growing in the Netherlands;
- from 919,365 sole proprietorships in the second quarter (Q2) of 2015, the number has increased to 1,153 million in Q2 of 2019;
- in the second quarter of 2020, their number has grown further 1,257 million;
- the latest data for Q3 of 2021 indicates 1,328 million sole proprietorships.

You can contact our company formation agents in the Netherlands for more information about the business options you have in the country.

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