How do I comply with the hour criterion?
If you are an entrepreneur for income tax purposes, you may be eligible for certain types of entrepreneur deductions. For some of these entrepreneur deductions you have to meet the (reduced) hours criterion. Read on this page of the Tax Authorities what the hour criterion is.
You have to work for at least 1,225 hours, the so-called hour criterion.
Conditions hour criterion
According to the Tax Authorities; you generally meet the hour criterion if you meet the following 2 conditions:
You put in at least 1225 hours in your company in the calendar year. Regardless when you start in the year.
You must spend more time in your company than in other activities ( for example salaried employment).
Were you not an entrepreneur in 1 of the previous 5 years? Then according to the Belastingdienst you do not have to meet this condition.
Are you incapacitated for work? (arbeidsongeschikt)
1 of the conditions for obtaining a starter's allowance in the event of incapacity for work, is the reduced hours criterion. As an entrepreneur, do you spend at least 800 hours on your company(ies)? Then you meet the reduced hours criterion.
Did your pregnancy interrupt your work as an entrepreneur? If so, the hours not worked over a total of 16 weeks count as hours worked.
Benefits of the hour criterion
If you put 1,225 hours per year into your company and can demonstrate this, you are eligible for the tax benefits of an entrepreneur. One of the most important is the Self-Employed Deduction (read here how much that is in which financial year): this is a deduction on the taxable income of entrepreneurs. Because you can deduct this amount from your profit, your assessment can be considerably lower.
Did you start your company not so long ago. Then you can probably also claim the Starter Allowance. Read here what the Starter Allowance is.
If you are a customer of The Bookie, we apply all entrepreneurial benefits for you if this is applicable, you do not have to worry!
Which hours count?
Your hours can be divided into direct and indirect hours.
The direct hours is the time you worked for your clients. In short; billable hours.
The indirect hours include hours you need to run your business. These include hours you spend on acquisition, administration, marketing and commuting. It also includes hours to deepen your business such as reading relevant articles and attending network meetings.
Which hours do not count?
Unfortunately your hours do not count when you are sick or on vacation. In addition, 'being available' also does not count. So even if you expect contact (mail or phone) from potential clients, you are not 'at work' for your company so the hours do not count.
It is important to be able to prove all hours at all times, especially if you get a book check from the Tax Authorities. This means that you register the hours via one system (analogue in a paper agenda or preferably digital via an Excel, special hours app or a digital agenda). Keep in mind that you must keep your administration and therefore your time registration for 7 years and be able to explain it. In this way not only make it clear to the tax inspector, but above all to yourself whether you have achieved the hours and what you have spent them on.
Tip - If you work in Google Calendar, you can use a handy tool to add up all your hours automatically.
Hour criterion during Corona
Due to the ongoing Corona crisis, it is quite possible that you have not been able to meet the hours criterion, which would make you ineligible for the self-employed tax deduction. The Tax and Customs Administration has decided the following to limit this risk:
- Between the period 1 March 2020 and 1 October 2020, you may indicate that you have spent at least 24 hours per week on your business. Even if you have not actually achieved that number.
- If you are (partially) incapacitated for work, an hour criterion of 800 hours per calendar year applies. In that case, for income tax purposes, you may indicate that you have spent 16 hours per week on your company for the aforementioned period.
- If you are a seasonal entrepreneur whose work peak falls in the above period, you may indicate the hours you spent on the enterprise in the same period of 2019. However, you must be able to prove this if the Tax and Customs Administration asks for it.