Deducting Startup Costs as a New Entrepreneur: How It Works

You’ve decided to become an entrepreneur. Maybe you’ve just registered with the Dutch Chamber of Commerce (KVK), or you’re about to start your business. What many starters forget? There’s a good chance you’ve already made business-related expenses before officially launching.

The good news: in many cases, you can still include these costs in your bookkeeping. These are called startup costs. And often, they can provide immediate tax benefits.

In this article, we’ll explain step by step how startup costs work, which expenses you may include, and what you should pay attention to.

What Are Startup Costs?

Startup costs are business expenses you made before officially starting your business.

Examples include:

• A course or training related to your business
• Website or branding costs
• Advice from an accountant or lawyer
• Promotional materials
• Software or subscriptions
• Equipment you need for your business

Did you already purchase items privately with the intention of using them for your business? In many cases, you can still bring them into your business as business assets.

It is important that the expenses are clearly business-related and directly connected to your company activities.

Reclaiming VAT: Often an Immediate Refund

You’ve probably paid VAT on many of your startup expenses. In many cases, you can reclaim this VAT as input tax in your first VAT return.

As a result, you may pay less VAT or even receive money back from the Dutch Tax Authorities. This can provide a strong financial start for your business.

Please note:

• the invoice must be correctly issued,
• the expenses must be business-related,
• and your business must perform VAT-taxed activities.

Paying Less Income Tax

Startup costs can also reduce your income tax.

Many business expenses are deductible from your business profit. This lowers your taxable profit, meaning you ultimately pay less tax.

Be careful with larger purchases. Some investments cannot be fully expensed immediately. Think of laptops, cameras, or office inventory. These sometimes need to be depreciated over multiple years.

If you later use privately purchased items for your business, they are usually included at their fair market value at the moment your business starts.

Not sure how this works? Then it’s wise to have it reviewed properly.

No Invoice or Receipt = No Deduction

This is where things often go wrong in practice.

The Dutch Tax Authorities must be able to see that expenses were genuinely business-related. Always keep:

• Invoices
• Receipts
• Payment confirmations
• Contracts
• Digital purchase confirmations

Even small expenses can add up quickly. Good bookkeeping helps prevent missing out on tax benefits.

How Do You Process Startup Costs?

Startup costs are usually processed in the financial year in which you officially start your business.

For VAT

The VAT on business startup costs is processed as input VAT in your first VAT return.

For Income Tax

Business startup costs reduce your profit. Larger investments are sometimes capitalized and depreciated over multiple years.

This often gives you two advantages:

• reclaiming VAT,
• and paying less income tax.

Starting Smart Means Less Financial Stress

Many entrepreneurs mainly focus on clients, marketing, and revenue. Understandably so. But a strong financial foundation is just as important.

By processing your startup costs correctly, you:

• avoid missing tax benefits,
• start your business financially stronger,
• prevent corrections later on,
• and gain better insight into your bookkeeping from day one.

That gives peace of mind. And peace of mind helps your business grow.

Need Help With Your Startup Costs?

Not sure if your startup costs have been processed correctly? Or do you want to make sure you’re not missing out on tax benefits?

At Balancify, we make sure your bookkeeping is set up properly from day one. For a fixed monthly fee, you get personal contact with your own bookkeeper and always know where you stand.

👉 Schedule a free introductory meeting today and start your business without tax worries.