Tax return / professional expenses
The following text is issued by the Dutch Musician Federation (NTB) and relates to the deduction of professional expenses in 2017:
Musicians, artists, and DJs whose income derive from various clients and performances are regarded within income tax as freelancer (officially: the one who enjoys the results from other activities) or entrepreneur (depending on the circumstances). As a result, they can deduct their professional expenses.
Musicians, artists and DJs who are permanently employed cannot deduct professional expenses.
The following categories of musicians, artists and DJs can deduct their professional expenses in 2017:
- Those who are covered by the artist arrangement for income tax: musicians and artists with various clients and performances, whether or not using the KVR or a cost compensation decision.
- Those who enjoyed gross income, for example from teaching, royalties or copyright or from activities that don’t have to be payrolled such as weddings.
- Musicians and artists with a model agreement or VAR-WUO (until May 1, 2016) who send invoices to their clients.
The expenses you state in the tax declaration form are the costs you’ve made to earn income from labour (“results from other activities”) or profit from business. For results from other activities, you can complete the yields and deductible costs separately.
For profit from business, you must complete a capital equation (this is the balance sheet of the annual financial statement) and then all the data on the fiscal profit calculation (this is the business economic profit calculation corrected with tax increases and reductions). Ultimately, this results in the taxable profit from business.
Example of professional expenses
The payroll tax deducted from income from various clients and performances in 2016 can be mentioned under the heading ‘payroll artist’ in the section that also includes the turnover and costs from ‘other activities.’
The professional expenses within the artist arrangement are mentioned under “deductible costs and benefits” in box 1: other income, yields from other activities.. The artist needs to register the specific documents and should provide these to the Dutch Tax Office on request. The declaration must include a thorough calculation of revenue and expenses. If necessary, consult your tax advisor.
The following description is specifically aimed at artists who are covered by the artist arrangement. Because the tax return of self-employed artists differs significantly from those who are payrolled, we encourage self-employed artists to contact their tax advisor.
- Repair and maintenance
First of all, the usual maintenance costs of instruments, such as small and large revisions. In addition, the cost of strings, reeds etc. Also additional expenses, such as bow hair or a piano tuner.
- Additional material
The cost of covers and cases can be deducted. Similar to instruments, expensive violin boxes for example (purchase value above € 450) must be deducted over a number of years (minimum five).
- Insurance premium
The insurance premium of instruments is deductible.
Depreciation is made on instruments / equipment with a purchase value above € 450. Depreciation is the annual value decline of the instrument / equipment. The annual depreciation is charged to the result. There are no standard depreciation periods. First of all, it must be determined whether an instrument / equipment decreases in value. If there is no decline in value, there is no depreciation.
Example: A wing piano is purchased for € 20.000. If the value remains constant, the instrument cannot be deducted. For example, if an assessment or insurance report states that after 10 years the value will be € 15.000, than for 10 years € 20.000 minus € 15.000 = € 5.000 divided by 10 years = € 500 may be declared annually. Up to 20 % may be deducted annually.
Entrepreneurs entitled to start-up reduction may depreciate randomly. This means that they can choose whether they maintain the normal depreciation regime or apply a different percentage between 0 and 100 of its value minus the remaining value.
Audio and video equipment
Depreciation of audio visual equipment is deductible, only if needed for professional practice.
The rent of, for example, audio equipment is deductible.
Computer equipment may be depreciated but is limited to the above-mentioned depreciation of up to 20 % annually.
CDs and videos
Costs for CDs and other audio/visual material are deductible, provided that the expenses are made for business purposes.
All costs that are made in order to obtain performances are deductible, such as advertising costs, printing costs or promotional material. This also applies to the cost of demos and promotional CDs.
Membership labour union
Purchase and subscription costs of professional journals are deductible. In case of free sale, valid receipts must be submitted.
Costs for lessons to keep your knowledge up to date. This also applies to participation in competitions and master classes. Costs of congresses, seminars, conferences, excursions, study trips etc. (including travel and accommodation costs) are deductible for 73.5 %. You can state the study costs for acquiring new knowledge at the question that relates to extraordinary expenses. This is not part of the professional expenses.
Cost of visiting concerts, opera and ballet shows etc. are deductible, provided that they are work-related.
For each work-related kilometre (including commutes and irrespectively of the mode of transport) € 0.19 may be charged at the expense of your income. Besides this, you cannot declare other expenses such as parking fees. Such costs should be included in the above mentioned kilometre compensation.
If your car is registered on your company name, you can deduct all car expenses. However, you should make a correction for private car use.
Work-related phone calls and the rent or depreciation of devices can be deducted proportionately. Subscription fees of fixed telephone lines at your home are not deductible. With current (mobile) phone subscriptions, the division between subscription fee and phone call charges is often no longer possible. Therefore you need to decide which phone you use professionally for which percentage to calculate what your deductible costs are.
Work-related office supplies (writing supplies), such as an agenda, paper, stamps, folders etc. are deductible.
Work space in your home
Costs for workspace at your (rental) house are deductible on certain conditions. It’s complicated matter with many ins and outs, but here we list the main provisions:
To determine whether you qualify for deduction of a workplace in your home, you must meet the following conditions:
Your space must comply with the so-called independence claim. That means that the room must have its own entrance and sanitary facilities and it should be an independent unit suitable for rent to third parties. Therefore, a room in your house will generally not meet the requirements for deduction.
If your workplace at home meets the “independent requirement” and if you also have a similar workspace elsewhere (for example, at your employer), expenses of your workspace at home only deductible if you earn more than 70 % of your total income from working at your workspace at home. If you do not have a similar workspace at your disposal elsewhere and you are confined to your workspace at home, you can deduct these costs if you earn more than 70 % of your income from working at this workspace. In addition, you must fulfil the condition that you earn 30 % of that income in your workspace at home.
In the latter case, it seems that the Dutch Tax Office accepts musicians to earn 70 % of the income by spending 30 % of the time (income) in the office at home. This could be preparation time or study time.
Amount of deduction
In case of a private house, 4 % of the value of the part that is used as workspace can be deducted. This does have fiscal consequences: please properly inform yourself on this matter. In addition, other costs that are related to the workspace can be deducted proportionately.
If the surface of your workspace exceeds 10 % of the total surface, you are eligible for cost deduction. The previously mentioned ‘independence requirement’ does not apply to a rental house. To determine the surface, you can add up different parts together but be realistic. A living room with only your desk doesn’t count completely, only the part with the desk and some surrounding space.
If you use more than 10 % of your house for professional purposes, you can deduct a proportional share of the rent and a part of the rental costs (for example, energy costs and indoor painting costs).
Rental right (business-related)
In certain cases, it is possible for a rental house to recognize the entire rental right as business-related and to process a correction for private use in the (annual) financial statement. Ask your tax advisor if this option could apply to your situation.
Removal and installation costs
In case you needed to move for your activities, you can deduct the removal costs (this may not apply to artists with many different clients). The costs of moving the furniture are fully deductible. For the remaining removal costs you may deduct € 7750, regardless of the actual expenses.
The fee of a tax advisor is only deductible if it relates to your business activities. The costs of an income tax return are not deductible. Attorney fees are only deductible if they are related to your business activities.
In principle, the costs of personal care for musicians and artists are deductible. Any possible private savings should be deducted from the total costs. For example: if you have to go to the hairdresser before each performance, you need to deduct 9 hair treatments from the total costs. The Dutch Tax Office regards these 9 treatments (once every 6 weeks) as common. What is considered personal care, other than visits to a hairdresser, entirely depends on the nature of your activities.
All costs of work clothes such as tuxedo, tailcoat, tuxedo- and tailcoat shirts, black/white bow tie, cummerbund and evening gown are fully deductible for artists (and presenters). In addition, all costs for repair, laundry and dry cleaning are deductible.
Food and drinks (work-related)
The costs of work-related lunches, dinners and consumables (for example before or after a performance) is deductible for 73,5 %.
Job application costs
Costs of job applications, test plays, precents, auditions etc. are deductible. They may also be deducted if they are unsuccessful. The costs of stamps and postal paper are deductible, as well as travel expenses. The costs of visiting your labour union or professional association are also deductible.
Paid interest only refers to professional expenses if it concerns a loan for the purchase of, for example, a work-related instrument or if you had to pay interest for your professional bank account.
Tip: Don’t forget to deduct received cost compensation (based on cost dispensation (KVR) or a cost compensation decision) from your deductible costs. Moreover, the compensation is principally included in the annual tax statement. The compensation should be listed as gross salary. Please check this with your clients/employers to prevent double listing of compensation.
Professional expenses for artists beside their regular job
If you receive income from salary and in addition are payrolled via the artist arrangement (thus perform activities as an artist beside your regular job), it must be determined to what extent professional expenses can be deducted.
Professional expenses that are solely made for the profession of artist may be deducted for 100 %, possibly after a correction for private use. In general, expenses related to activities and income as an artist are deductible, unless they are excessive.
If costs could relate to multiple sources of income (for example membership of a general labour union), the costs must be divided between the two sources based on actual use. Sometimes an estimate should be applied because the actual use is difficult to determine. In this respect, professional expenses are not fully regulated, but with a reasonable approach no serious problems should arise.