How it works
Sole traders and partners who spend at least 1,225 hours a year on their business, and more than half of their working time, deduct a fixed amount from their profit. In 2026 that amount is €1,200. Starters get the starter’s deduction on top, €2,123 in 2026, in three of their first five years.
The deduction has been reduced every year since 2020 and reaches €900 in 2027, the last step. The starter’s deduction becomes €10 in 2027 and ends in 2028. The idea behind it is to narrow the tax gap between employees and the self-employed.
The deduction is applied before the SME profit exemption. The tax saving is the amount times the rate in the second bracket, capped by law at the rate of the first bracket for high incomes.
For a business that grows, the falling deductions are one of the reasons to compare the sole proprietorship with a BV every year. The break-even point goes down as the deductions shrink.
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
All 2026 figures: Netherlands tax rates 2026 · the 2027 figures: Netherlands tax rates 2027.
Questions people ask
Do hours spent on administration count?
Yes. All hours spent on the business count: work for clients, acquisition, administration and travel for the business. A simple hour log is enough as proof.
Does the deduction apply to a part-time business next to a job?
Only when the 1,225 hours are met and more than half of the total working time goes to the business. For most part-time businesses next to a job the deduction is out of reach.
Holdwise, Hoofddorp. Definition and explanation maintained with the Dutch and German glossaries; figures from the central rates source, year 2026. Updated 16 September 2026.
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