Why you need a tax reserve

An employee's tax is deducted from the salary automatically. As a sole trader, you receive the full amount and owe tax later. If you spend it all, you are left empty-handed when you receive the assessment. Many entrepreneurs in their first year get into trouble this way.

Two things to reserve for

  • VAT (BTW): the VAT you charge clients belongs to the Tax Authority. You collect it for them.
  • Income tax: you owe income tax on your profit, paid via provisional or final assessments.

How much for VAT

Reserve the entire VAT amount you charge. If you invoice €1,000 plus 21% VAT, the €210 belongs to the Tax Authority. Set it aside as soon as the payment comes in.

How much for income tax

Many entrepreneurs reserve 35–40% of their profit for income tax. The percentage applies to your profit, which is your turnover minus your costs. Lower earners may need less. Higher earners who reach the 49.5% bracket may need more. Adjust the percentage when your profit changes.

A separate account for tax

  1. Open a separate savings account just for tax.
  2. Each time you get paid, transfer the VAT plus your income-tax percentage into it.
  3. Use that account only for paying the Tax Authority.

Use a provisional assessment to spread the cost

You can ask the Tax Authority for a "voorlopige aanslag" (provisional assessment). You then pay income tax in monthly instalments during the year. This way, you are less likely to spend the tax money by accident.

The rates are the same for everyone. The result for you depends on how your company is set up. You can have your structure checked against the 2027 figures in a written structure review.

Are the Dutch terms new to you? Start with company formation in the Netherlands for non-residents. There you can read about the legal forms, the documents, the costs and the comparison with Germany.

Also useful

See also which business costs are tax-deductible, income tax for entrepreneurs in 2026 and company car tax in 2026.