1. Round off

If you decide to close your sole proprietorship, it is important to check which outstanding debts there are, and which (liquid) assets you have and which activities and contracts are still ongoing. Debts must be repaid, funds withdrawn or transferred and contacts and contracts must be settled. Drawing up a final balance sheet (with your accountant) is a good first step.

a.         Debts

Does your final balance sheet turn out negative? Then it must be determined how outstanding costs are paid off. This flowchart (in Dutch) can help you determine how debts can be settled. If there are debts with the tax authorities that cannot be paid on time, you must report that there is inability to pay (in Dutch). You will not automatically receive a waiver with this notification. Keep in mind that as the owner of a sole proprietorship with your private assets you are liable for (tax) debts. Are you unable to settle the debts? Then you have to file for bankruptcy. If you need help with problematic debts, our sister company Aeslupa can help you with budget advice, management or administration.

b.         Possessions

Stocks and assets - from a mobile phone to a company car - become private property when you close your sole proprietorship. This is not tacit: as an entrepreneur, you deliver your stocks and resources to yourself and invoice them, as if you were delivering to a customer. It is important that you start from the value of the goods at the time of transfer and that you simply charge VAT. You must indicate this later in the final declaration of the sales tax.

c.         Business assets

Balances that you have in your business account (s) or in cash, you transfer to private: these are considered as income (fee) and as such taxed in the income tax for the year that you have transferred the credits to yourself.

d.         Recite

If you are going to close a sole proprietorship, it is necessary in a number of cases (especially contracts), and in many cases desirable (especially with contacts), that you cancel in a good way. To make it easier for you; below is a checklist with cancellations that you must and may arrange.

Closing your sole proprietorship: checklist

Contracts

1. Lease car
2. Rent business premises
3. Insurance
4. Bank account (back up your daily statements)
5. Supply contracts
6. Licences
7. Domain name
8. Telephone/Internet
9. Energy contract
10. Subscriptions
11. Memberships
12. Ads
13. Sponsorship
14. Overwrite company car (put license plate in your own name)

Contacts

1. (Fixed) clientele
2. Suppliers
3. Newsletter
4. Social media
5. Partners

2. Convoke

If you have arranged above, you can deregister your sole proprietorship free of charge. Please note that if you want to apply for benefits, you must do so before you deregister your company. Is this not the case or has it already been arranged? Then you set the deregistration in motion. You can do this by going through the steps on this page (in Dutch) of the website of the Chamber of Commerce. You look up your company, choose 'close one-man business' and then fill in the form. You do not have to deregister yourself with the tax authorities, the Chamber of Commerce arranges that after the deregistration has been received. The tax authorities will then contact you; you will receive a letter stating the consequences for income tax and VAT.

3. Settle

a.         Business assets

Balances that you have in your business account (s) or in cash, you transfer to private: these are considered as income (fee) and as such taxed in the income tax for the year that you have transferred the credits to yourself.

b.         VAT and income tax

If you close your sole proprietorship at the Chamber of Commerce, the Chamber of Commerce will pass on your deregistration to the tax authorities. You will then receive a letter from the tax authorities stating when the obligation to declare expires for turnover tax (VAT) and income tax. Please note that you continue to file a declaration until this moment, even if you have nothing to declare. You then prevent by means of a nihilan declaration that you are in default with regard to your tax obligations. At the next income tax return after the termination of your case, you must make a final statement. Your accountant can help you with this. To give you some insight into what you can possibly expect, we explain here what the consequences of a strike can be for your declaration.

c.         Strike profit

When you stop your business, there is a chance that you will have to pay for strike profits. Strike profit arises when the value of your sole proprietorship at the time of cessation is higher than the book value. This can be done, for example, under the influence of silent reserves or through accumulated old-age reserves. The amount that your company is worth more than was determined on paper is considered a profit by the tax authorities. You must pay for this in your income tax return. Because determining strike profit is very complex, it is best to have this done by your financial advisor.

Divestment addition

When you stop your business, do you sell an asset (to yourself or someone else) for which you have had investment interest when purchasing? And did you make use of this investment deduction less than five years ago? Then you have tocompensate part of the deduction by adding it to your strike profit.

Strike deduction

In some cases, you may be eligible for strike deductions. You then have to pay less tax on strike profits. Strike deduction can amount to a deductible amount of up to €3,360,-. 

4. After closing your sole proprietorship

Now that you have arranged all practical matters, your company is officially no longer in operation. Now it is important to look forward to the next step. Maybe you have to look for a new job, you are going to enjoy your retirement or you are making a new start as an entrepreneur. As you look to the future, don't forget to keep the records of the defunct sole proprietorship. You have a retention obligation of at least 7 years.

Further reading

If you want to delve further into the closure of your sole proprietorship, then this step-by-step plan (in English) on the site of the Dutch Chamber of Commerce is a good starting point. You will also find information about the (tax) cessation of your company on the website of the Tax And Customs Administration(in Dutch). Our sister company Lexlupa explains more about strike deductions in this article and helps you further here if you want to know more about pension and annuity as a (former) self-employed person.