How it works
Sole traders and partners who spend at least 1,225 hours a year on their business deduct a fixed amount from their profit. These hours must also be more than half of their working time. In 2026 the amount is €1,200. Starters also get the starter’s deduction of €2,123 in 2026, in three of their first five years.
The deduction has been reduced every year since 2020. In 2027 it is €900, the last step. Under the proposal, the starter’s deduction becomes €10 in 2027 and ends in 2028. The government wants to make the tax difference between employees and the self-employed smaller.
The deduction is applied before the SME profit exemption. The SME profit exemption is then calculated on a lower profit, so the tax saving is 87.3% of the amount times your income tax rate. In the first bracket that rate is 35.75% (2026). For high incomes in the 49.5% bracket, the saving is still capped by law at the second-bracket rate of 37.56% (2026).
If your business is growing, compare the sole proprietorship with a BV every year. The deductions are getting smaller, so the break-even point is getting lower.
Example
A consultant works 1,600 hours in her sole proprietorship and makes €60,000 profit in 2026. She deducts €1,200 and, as a starter, €2,123. After the SME profit exemption her taxable profit is about €49,500.
The figures
Every rate for 2026 is listed in Netherlands tax rates 2026, and the figures for 2027 are in Netherlands tax rates 2027.
Questions people ask
Do hours spent on administration count?
Yes. All hours spent on the business count. This includes work for clients, acquisition, administration and travel for the business. A basic record of your hours is enough as proof.
Does the deduction apply to a part-time business next to a job?
Only when you meet the 1,225 hours and spend more than half of your total working time on the business. With a part-time business next to a job, most people work too few hours for the deduction.
Holdwise, Hoofddorp. We keep this definition in line with our Dutch and German glossaries, and the figures are those for the tax year 2026. Updated 30 September 2026.
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