Separate VAT immediately
VAT received from a client is not income. Transfer it to a separate account when the invoice is paid, then account for deductible input VAT later.
Base the reserve on profit
One percentage does not fit everyone. Recalculate revenue, expenses and expected annual profit each quarter, then compare estimated income tax and Zvw with revenue excluding VAT.
- separate VAT account
- second reserve for income tax and Zvw
- allow for provisional assessments
- recalculate quarterly
Keep a buffer
Add a modest margin while the year is uncertain. If income changes materially, consider updating the provisional assessment to avoid a large balance due.
A simple two-reserve system
Move VAT received to a VAT account immediately. From revenue excluding VAT, place a second amount into an income-tax and Zvw reserve based on the current annual forecast.
Holiday, illness, equipment replacement and late customer payments belong in a separate business buffer. One large bank balance does not show which money is already committed.
- VAT reserve
- income-tax and Zvw reserve
- business buffer
- monthly reconciliation
Handling uneven months
For seasonal work, one percentage of every invoice is less accurate than a full-year forecast. Compare the actual reserve with the expected liability each month.
If forecast profit falls, do not release the entire reserve immediately. First check open expenses, VAT, provisional assessments and the remaining work for the year.
Official sources
Rules were checked in Dutch Tax Administration publications. The official pages are in Dutch.