Q: I have a small business registered at the Chamber of Commerce, but I don’t really have an office or staff. Is that a problem?
"Yes, it could be. The tax office now looks at whether your company is really active in the Netherlands, not just on paper. If you can’t show actual work, like clients, invoices, or a place where you run the business, they may not see it as a “real” company."
Linda Pavan
The Dutch Tax Authority has recently published a decision under the Open Government Act (Woo) concerning the criterion of “substantial economic activity” in the Corporate Income Tax Act.
It may sound like dry legal jargon, but for owners of micro and small businesses, this principle can directly affect how your company is judged, whether as a genuine business or as a structure that exists only on paper. Let’s break it down in clear terms.
1. From Paper to Practice: What Counts as Real Activity?
Authorities and European case law increasingly look at whether a company actually conducts business in the Netherlands.
- It is not enough to have a Chamber of Commerce registration or a mailbox.
- You must show real presence: staff working here, decision-making happening here, and a business that serves clients or produces value.
For small entrepreneurs, this means your company must be more than a legal shell, it must be tangible in daily operations.
2. Why Is This Relevant Now?
The Dutch government faces pressure from Europe to prevent tax abuse. Structures that exist only to shift profits or avoid taxes are being targeted.
The “substantial economic activity” test is part of this. If you run a micro or small company, the tax office may ask:
- Is your company truly active here, or is it just a financial passageway?
- Are your contracts, invoices, and decisions made locally?
- Do you add value to the Dutch economy?
These questions are no longer theoretical, they are becoming standard checks.
3. The Risk for Small Entrepreneurs
Here’s where it gets tricky. Large corporations have armies of advisors. Small businesses don’t. Yet the rules apply to everyone.
- If your business lacks proof of substance, you may risk challenges from the tax office.
- If your administration doesn’t clearly show activity, you may face questions you are not prepared for.
- If you rely on “holding” or “management” structures, you may be treated with suspicion unless you can prove real work is done.
The danger for small entrepreneurs is not intentional abuse, but administrative blind spots, simply not realizing what counts as “enough activity.”
4. What You Can Do Now
To protect yourself, think practically.
- Document your operations: keep evidence of meetings, decisions, and client work.
- Show local presence: even small things, like workspace rental, staff contracts, or signed agreements, demonstrate substance.
- Don’t ignore the criterion: “substantial activity” is not only about big multinationals; it applies to you too.
If the tax authority challenges you, your best defense is clarity: being able to prove with simple facts that you are running a real business in the Netherlands.
5. Final Word
The Woo decision makes clear that the government is serious about this. For micro and small entrepreneurs, it’s not about complex legal tricks, but about being transparent and well-prepared.
Running a business is already demanding. My advice: don’t let administrative fog create unnecessary risk. Make your company’s substance visible, because in the eyes of the tax authority, substance is now the proof of legitimacy.
SOURCE: BESLUIT STAATSSECRETARIS VAN FINANCIËN 2025-478
Co-Founder of Xtroverso | Head of Ledger and Tax Compliance
Linda Pavan brings disciplined precision to Xtroverso, anchoring its financial, fiscal, and operational integrity. As a ZENTRIQ™ Certified Auditor, she translates complexity into clarity—ensuring every decision is traceable, compliant, and strategically sound. Her quiet rigor empowers businesses to act with confidence and accountability.
