From side earnings to a business: when do you have to register?

Hobby, source of income or business

For tax purposes, everything starts with the question of whether your activity is a source of income. Three conditions apply: you participate in economic life, you aim for gain and that gain can also reasonably be expected. A hobby that structurally costs money, such as model building where you occasionally sell something below cost, is not a source of income: the proceeds are untaxed, but the costs are not deductible either. As soon as you structurally earn from it, or can realistically expect to, there is a source and you must declare the income.

Source of income: other activities or business profit

If there is a source of income, there are two flavours. Small-scale, incidental earnings are declared as results from other activities: you pay tax on the proceeds minus your costs, but have no right to entrepreneur deductions. If it becomes more structural, with multiple customers, your own investments, entrepreneurial risk and serious time and turnover, you move up to business profit. Then the entrepreneur facilities apply, such as the 12.70% SME profit exemption and, if you meet the hours criterion, the self-employed deduction. The boundary is not a hard number but a weighing of your whole situation.

When do you need to register with the Chamber of Commerce?

Registration with the Chamber of Commerce is mandatory as soon as you have a business: you structurally supply goods or services, charge a realistic fee for them and thereby compete with other providers. Regularity is the key word: anyone who does paid jobs every week, advertises or runs a webshop should be registered, even if the amounts are still modest. Selling your old belongings once on a marketplace is not a business. The registration itself is quickly arranged and the Chamber passes your details to the tax authorities, who then assess whether you also receive a VAT number.

Note: for VAT you can already be an entrepreneur before you are one for income tax. Structural selling usually means VAT liability, although below 20,000 euros of turnover per year you can use the small business scheme so you do not have to charge VAT or file returns.

Selling via platforms: the tax authorities are watching

Sales and gig platforms are required to report seller data to the tax authorities once you make thirty or more transactions in a year or reach roughly 2,000 euros in sales. That threshold does not automatically make you an entrepreneur or taxable, but it does mean your platform revenue is visible to the tax office. Anyone who sells structurally and declares nothing is caught out faster than in the past. So assess your situation honestly and arrange things on time; that is always cheaper than a retrospective assessment with interest and a penalty.

A practical roadmap

Are you now earning regularly from your activity? Then start keeping records like an entrepreneur: save receipts and invoices, track your hours and open a separate account if needed. Register with the Chamber of Commerce once the regularity is there, usually as a sole proprietorship, and make a conscious decision about the KOR. Declare your income in your tax return from the start, even while it is still classed as other activities. That way your side earnings grow into a fully-fledged business without skeletons in the tax closet.

The tipping point and what to arrange then

There is no fixed amount at which a side income becomes a business. The tax authorities look at the whole: structural profit, several clients, investments, time and business risk. When several factors tip at once, it is time to act.

1. Register with the Chamber of Commerce once you supply structurally and want to invoice; see registering.
2. Assess VAT: below 20,000 euros of turnover the small business scheme often makes sense, above it you charge VAT.
3. Open a separate account and keep records from day one; reconstructing retroactively is the costliest scenario.
4. Approaching 1,225 hours, log them: the hours criterion unlocks the self-employed deduction.
5. Check your insurance and benefits: more income affects your assessment income. See benefits and your profit.

Frequently asked questions