Pay costs this year or push them forward?

Whether you pay business expenses (zakelijke kosten) this year or push them forward mainly depends on the year in which you expect more profit (winst), because a deduction is worth more in a year with a higher income and a higher tax rate. Usually you book costs in the year they relate to. You can find more topics for entrepreneurs on our entrepreneurs hub.

Should I pay costs this year or next year?

Whether you pay business expenses (zakelijke kosten) this year or next year depends on where you need the deduction most and in which year your profit is higher. In a year with more profit the tax is higher, which makes a deduction worth more then. So first look at your expected profit per year before you deliberately move an invoice earlier or later.

Why is a deduction worth more in one year?

A deduction is worth more in one year because the tax rate rises as your income goes up. If you deduct a cost in a year with a higher rate, you save proportionally more income tax (inkomstenbelasting) than in a year with a low rate. So it is mainly about the rate at which you can deduct the cost, more than about the amount itself.

When do I push costs forward to next year?

Pushing costs forward to next year is mainly attractive if you expect more profit (winst) next year than this year. The deduction then falls in a year with a higher rate and gives more benefit. Note that you can only shift within what is fiscally allowed, so usually you book costs in the year they relate to.

When do I bring costs forward instead?

Bringing costs forward makes sense if you have more profit this year and expect less next year. The deduction then falls in the year with the highest rate, where it yields the most. If you are still considering a purchase before the year ends, check whether you need to buy anything before 31 December.

How do I calculate what is more favourable for me?

To calculate what is more favourable for you, put your expected profit and rate for this year next to those for next year. Run the cost through both rates and compare the difference, so you see in which year the deduction yields the most. If you doubt the figures, talk to your bookkeeper before you deliberately shift an invoice.

Source: Belastingdienst, belastingdienst.nl. Rates and conditions are date-sensitive; check the current scheme before you decide.

Author: Mariusz Mojka.