No self-employed deduction for entrepreneur who also works for partner’s bv

An entrepreneur is entitled to the self-employed deduction if he meets the hours criterion. This means he must spend at least 1,225 hours on his business in a calendar year. The Tax Authorities denied the self-employed deduction to an entrepreneur who also worked for his partner's bv. The hours he spent on the bv did not count towards the hours criterion. The question is whether this is justified.

Entrepreneur's Position

The entrepreneur argues that he meets the hours criterion if all worked hours, including those for the bv, are counted.

Inspector's Position

The inspector believes that the hours worked for the bv do not count towards the self-employed deduction. These hours are worked in a (fictitious) employment relationship, and the compensation is salary, not business profit. Without these hours, the entrepreneur does not meet the hours criterion.

Court's Judgment

The court rules that the compensation for the work done for the bv constitutes salary. Working for a bv in which the entrepreneur or his partner has a significant interest is considered an employment relationship. Only the hours spent on the entrepreneur's own business count towards the hours criterion. Therefore, the entrepreneur does not meet the hours criterion.

Conclusion

Entrepreneurs who also work for a bv in which they or their partner own at least 5% of the shares must be careful. The law automatically considers these activities as an employment relationship, resulting in:

• the compensation being treated as salary;
• the application of the customary salary scheme;
• the bv having to withhold and pay payroll taxes;
• the hours worked for the bv not counting towards the self-employed deduction.

Do you have questions about the self-employed deduction for entrepreneurs? Ask your account manager at Kop of Munt!