The three boxes
Dutch income tax is split into three boxes:
- Box 1: income from work and your business. Your profit is taxed in this box.
- Box 2: income from a substantial shareholding. This box is for owners of a BV (besloten vennootschap, the Dutch private limited company).
- Box 3: income from savings and investments.
As a sole trader, you pay tax on your business profit in Box 1.
Box 1 rates in 2026
| Taxable income | Rate |
|---|---|
| Up to €38,883 | 35.75% |
| €38,883 to €78,426 | 37.56% |
| Above €78,426 | 49.50% |
From profit to taxable income
You pay tax on less than your full profit, because you first subtract the deductions.
Tax credits
On top of the deductions, everyone also gets tax credits ("heffingskortingen"), such as the general credit and the labour credit ("arbeidskorting"). The Tax Authority deducts these credits directly from your final tax bill.
Provisional and final assessment
Many entrepreneurs pay tax during the year through a "voorlopige aanslag" (provisional assessment). This is an estimate based on your expected profit. After the year, you file your return. The Tax Authority then settles any difference in the final assessment.
Setting money aside for tax
As an entrepreneur, you receive your income before tax, unlike an employee, whose tax is withheld automatically. You must set money aside yourself. Many entrepreneurs reserve 35% to 40% of their profit for tax. Adjust this to your own situation.
Do you want to know what these figures mean for your own company? You get this calculated on the 2026 and 2027 rates, in writing, in our structure review.
If you live outside the Netherlands, the steps are the same in every country. An employee of the notary's office signs the deed for you with your power of attorney. The company is then registered with the KVK, the Dutch chamber of commerce, and gets its tax numbers. See company formation in the Netherlands for non-residents for an overview.
Related articles
You can read more about box 1, 2 and 3 for entrepreneurs in the Netherlands. See also how much tax to set aside as an entrepreneur and which business costs are tax-deductible.