If you, as an entrepreneur, want to qualify for entrepreneurs’ deduction, which includes the self-employed person’s deduction and the starter’s deduction, you must meet the hours criterion. This means that you must work 1225 hours per year on your business and that you must also spend more than 50% of your working time in your company (this last requirement does not apply to starters). The entrepreneur’s deduction can earn you thousands of euros, because you can earn at least 10,000 euros tax-free.
Jan Kees de Jager has expanded the hour criterion to make life easier for small entrepreneurs, as was stated triumphantly on all business sites, in the newspapers and on the news last week. Even the Government Gazette mentioned it. From now on, entrepreneurs may also count the time they spend on acquisition, administration and further study, it was said. “With this measure, I respond to the signals that self-employed people without employees are often hit hard by the crisis. I am counting on the fact that the vast majority of this group will still be eligible for the self-employed person’s deduction,” said De Jager. What he did not say was that this measure mainly amounts to hot air: these fixed parts of the entrepreneurial life have been subject to the hours criterion for many years. So we all had this gift from the Ministry of Finance for a long time. At most, civil servants are now slightly less critical when assessing your time use, but you were always within your rights, as long as you could justify the hours.
If you want to qualify for entrepreneurs’ deduction, you must meet the hours criterion. This means that you have to spend 1225 hours on your business(es) per year. That’s almost 25 hours a week, without vacation days. So expect that it will be difficult to meet this requirement if you also have a full-time job or if you only start your business halfway through the year. The required hours are not adjusted proportionately to time: even if you start in June or October, you must work 1,225 hours to be eligible for an entrepreneur’s deduction.
50% of your working time
In addition, the requirement is that you must spend more than 50% of your working time in your company. So if you work 30 hours per week in your company, you are not allowed to spend more than 30 hours per week in an employment contract. This requirement does not apply to starters (entrepreneurs who have only been running their business for three years).
In case of disability or pregnancy
If you are entitled to disability benefits, a reduced hour criterion applies, then you only have to work 800 hours per year in your company. Even if you are pregnant you have to work fewer hours. Then the time you normally work will continue to be counted during the period that you cannot spend time on your business. In practice, this also amounts to a criterion of 800 hours.
Those 1225 hours do not all have to be billable: all hours you spend on your company count. This also includes the time you spend on consultations with customers, maintenance, telephone conversations, e-mailing, administration, maintaining your website or blog, designing business cards and standing in traffic jams. Commuting time also counts.
What do you get then?
If you enjoy profits from your business (this means that you are accepted by the Tax Authorities as an entrepreneur and you then have a VAR-wuo) you are entitled to an entrepreneur’s deduction. The entrepreneur’s deduction consists of the following facilities:
- Self-employed deduction
- Starter deduction
- Special starter’s deduction in the event of disability,
- Deduction for research and development work (R&D)
- Collaborative finishing
- Strike deduction
To avoid conflicts with tax officials, it is very wise to keep good time records. This can be done in an Excel file or on paper, but there are also various useful software programs. One we can recommend is ActiTime. This is a free and very extensive online time registration program.