What is income from other activities?
Income from other activities means that you earn money from activities that are not classified as main income by Tax. For example, you do a job for a friend, rent a place to sleep through Airbnb, have a small webshop or you cut hair for the family as a hairdresser. This is income that is not salary or profit
There are plenty of people making some extra money. It is sometimes difficult to determine whether you should report that income on your tax return.
To declare income from other activities or not?
Whether you have to declare this additional income from other activities in your tax return depends on two things.
First: are you making a profit and is this profit part of financial transactions? Economic traffic means that you are intentionally doing business to make money. In other words, ask yourself if you are profiting from the work and if it was really your goal? If the answer to these 2 questions is yes, then you must state the income.
Do you only get reimbursed, such as travel expenses? Then you do not have to report the income to the tax authorities.
Examples of whether income from other work must be stated
What income do you not have to declare?
- You do a small job together with family or friends
- You earn some extra money with your hobby
What income should you report?
- Income from online shopping (e.g. via webshop)
- Income as a daycare worker
- Revenue from a newspaper route
- Income as a weekend package broker
- You have earned income by doing household work for others
- Income from tutoring, lectures or when you give a guest lecture.
- Income received from participation in medical research
- Income obtained from voluntary work (note: voluntary work is tax-free up to an amount of €150 per month with a maximum of €1,500 per year)
Expense reimbursement or additional income from other work
If you give your sister a haircut and paint and receive a small compensation for it, you do not have to self-declare this.
But if all your sister’s friends want to dye their hair with you, the tax authorities will see this income from other work as a taxable result.
The same applies to online sales. If you occasionally sell something online via Marktplaats, the result is not a profit according to Tax, and you do not have to declare the income.
But if you buy clothes and then sell them online for a profit, this is seen as income from other activities. And then you have to give up. After all, you have income from the work you do for profit.
Report taxable income
In addition to tax, you pay contributions to the Swedish Health Insurance Act (Zvw) from income from other work. In addition, there are deductible costs that you can deduct from the result from other activities.
Negative result from work
Do you have a negative result of your work? In that case, Tax does not regard this work as a source of income, but as activities in the hobby or family sphere. You do not have to declare this income and associated costs in the tax return.
Freelancers with income from other work
Do you get fewer tasks as a freelancer or self-employed person and therefore want to work part-time? Then it is definitely possible. There are more and more part-time entrepreneurs. For Taxation, however, there is a difference between a self-employed person and an entrepreneur.
When are you an entrepreneur?
According to the Tax Agency, an entrepreneur is a person who works at least 1,225 hours as a self-employed person, when sick days and vacation days are not included. We call this the hour criterion.
If you work 49 weeks a year, you must work an average of 25 hours per week as a freelancer (1,225 hours/49 weeks). If Tax sees you as an entrepreneur, you also get the corresponding deductions.
But beware: If we assume a 40-hour work week, there are 15 hours left for other income from other work. If, as a self-employed person, you do not reach 1,225 hours, you are not an entrepreneur and you must report the income as other activities.
The business is not the main income. Tax sees the result as income from other work.
Entrepreneur limit of 1,225 hours
The 1,225 hours on an annual basis do not all have to be billable hours. But you must be able to prove that you have actually worked these hours.
Working hours that you spend on administration, for example, also count as work if they are real. If you do a little work on an annual basis as self-employed, but enter hundreds of hours as administration, the tax authorities will obviously not agree.
It is important to distinguish between profits from the business and the result from other activities. This determines how the income is taxed. It also provides a definitive answer to the question of whether you are eligible for certain tax benefits and deductions, such as business allowances.
Calculate taxable profit
The taxable profit is calculated by deducting the tax incentives for entrepreneurs from the profit. If you are an entrepreneur and therefore meet the aforementioned hours criterion, you enjoy a number of tax benefits:
- Self-employed deduction (€6,310 in 2022)
- Start deduction (€2,123)
- Investment deduction
- Exemption from profits for SMEs (14%)
If your income is considered income from other work, you cannot benefit from the above tax benefits.
Do you want to make use of independent deduction? Then you must meet the hour criterion of 1,225 hours that you spend on your business. And that you invest more time in doing business than in other activities.
Were you not an entrepreneur in 1 of the previous 5 years? Then you do not have to fulfill these two conditions.
The starter’s deduction
The starter allowance is an increase in the self-employed person’s allowance. You are entitled to this if you meet the following conditions:
- You are entitled to an independent deduction in the tax return year.
- You were not a trader for tax purposes for at least 1 year in the previous 5 years.
- You have not used the self-employed deduction more than twice in the previous 5 years.
- There was no question of a so-called ‘silent return’ from a BV in the calendar year or in 1 of the 5 previous years.
Smaller investment deduction
To be eligible for the investment deduction, you must invest more than €2,300 in a year. This €2,300 is a threshold amount. If you stay below this amount, it may be advisable not to invest now and wait until next year.
Investing €2,300 two years in a row does not entail a deduction. An investment amount of €4,600 will give you a deduction of 28% this year. So a deductible item of € 1,288.
There are a number of exceptions that are not covered by the investment deduction. More on that in this article.
SME profit exemption
The SME profit exemption is an additional deductible item that applies to entrepreneurs for income tax purposes.
The SME profit exemption amounts to 14 per cent of the profit achieved from business, after this has been reduced by self-employed deductions, start-up deductions and investment deductions.
What costs can I deduct?
It is good to know that you can also deduct business expenses from income from other activities. Do you get a refund for business expenses incurred? Then you add this to your income.
You can also deduct 100 percent of the business expenses, but they must fall within reasonable limits and have a significant interest in the business. These expenses are necessary for the performance of your work. For example, printing business cards, travel expenses and depreciation on the company’s assets.
Do you incur costs that are both business and private? Then you can partially deduct this when you fill in the tax return.
Business cost threshold
For some costs you have, a threshold amount in 2022 of €4,800 applies. This means that only the amount you spend above the limit is deductible in income tax.
Which costs fall below the threshold amount? These are, for example, costs such as food, drink and stimulants. As well as meetings, conferences, seminars and study tours.
But you can also choose an alternative that also applies to costs incurred with income from other work. The limit does not apply here, but in that case you must deduct 80 percent from the tax return.
Expenses that are partially deductible
There are also costs that you can partially deduct. These are:
- Moving costs
- Expenses for housing outside the home for a maximum of two years
- Use fee for private property that has been used for business. Please note that this does not include means of transport
- User payment for privately rented goods. You can only deduct the part that you have used for business purposes
There are also costs that are not deductible. These are costs of a very personal nature, such as clothing (with the exception of work clothes) and personal care costs (hairdresser, beautician).
Do I need to keep records of income from other work?
It is not mandatory to keep accounts for income from other work. Tax may, however, ask you for more detailed information about the stated income from other work and its business costs.
Therefore, it is always wise to keep this information up to date. This includes the storage of receipts, invoices and bank statements.
What if I don’t declare my income from other activities?
As an individual, you are always responsible for filling in the tax return correctly. So also when there is income from other activities. If the tax authorities suspect that you do not or do not fully give up this income from other work, you can be fined for this.
This fine depends on various factors. Such as the degree of guilt and the amount of undisclosed income. The fines can amount to up to half of the corrected tax amount. Therefore, make sure that you have your accounts in order and that you fill in everything correctly with the annual tax return.