A retainer is revenue in the months in which you do the work, not in the month in which you invoice. For work without a fixed number of tasks over a fixed period, you spread the revenue evenly over that period. What you invoice in advance for later months sits on the balance sheet at 31 December as invoiced in advance.
VAT follows a different rule. You pay VAT on the invoice you issue, or at the latest when the client pays. You book extra work as a separate assignment if it is a separate service with a price that matches its value.
In short
- Revenue follows the work. Guideline 270 spreads an assignment with an open number of tasks over a fixed period evenly over that period. According to the guideline, an advance payment usually says little about the work already done.
- VAT follows the invoice. If you invoice a quarter in advance on 1 December, all the VAT belongs in the return for the fourth quarter, even though two thirds of the revenue is for the new year.
- Agree what happens to hours the client does not use and what extra work costs. Extra work that is a separate service at a fitting price is booked as a separate assignment.
In this article
- What do you agree in a retainer?
- When is a retainer revenue?
- When do you pay VAT on a retainer?
- What do you do with hours the client does not use?
- How do you book extra work alongside a retainer?
- What counts for profit if the work runs over the year end?
- Fixed price or cost-plus: what does research say about extra work?
What do you agree in a retainer?
A retainer is a fixed price per month or quarter for ongoing work, or for capacity the client may use. Legally it is usually a contract for services. That is work that does not produce a physical work, such as advice, design or campaign management (Civil Code Book 7, article 400).
If you have not agreed a price, the client owes the usual fee, or otherwise a reasonable fee (Civil Code Book 7, article 405(2)). What is reasonable often leads to discussion when extra work comes up. A clear agreement in advance prevents that.
For the bookkeeping, four agreements matter. They decide when something is revenue and how you recognise extra work.
- What the client gets: a number of hours, fixed tasks or availability.
- The period and when you invoice: monthly in advance, quarterly in advance or in arrears.
- What happens to hours the client does not use: they lapse, roll over or are settled.
- What counts as extra work, at which rate, and that the client approves it in writing in advance.
When is a retainer revenue?
A retainer is revenue as you do the work. Guideline 270 of the Dutch Accounting Standards Board says: if the service consists of a number of acts not fixed in advance over a fixed period, you recognise the income evenly over that period. That differs if another split better shows how much work you have done (Guideline 270, paragraph 120).
The moment of invoicing or payment does not count here. The guideline says that instalments and advance payments usually do not show how much of the service has been performed (Guideline 270, paragraph 119). A retainer of € 6,000 per quarter is therefore € 2,000 of revenue per month, even if the client pays everything in the first month.
If within the retainer you mainly deliver one large piece of work, such as a new corporate identity, an even split does not fit. If one act is much more important than the rest, the revenue is deferred until that act has been performed (Guideline 270, paragraph 120).
What you have already invoiced for work still to come is not profit. The law says that profit only goes into the annual accounts to the extent it has been realised at the balance sheet date (Civil Code Book 2, article 384(2)). The amount sits on the balance sheet under liabilities or accruals, as an advance payment received (Civil Code Book 2, article 375(1)). The same idea appears in the article on deposits (is a deposit already revenue).
When do you pay VAT on a retainer?
You pay VAT on the invoice you issue, in the period of the invoice. If the amount is paid earlier, VAT is due at the latest on that payment (VAT Act 1968, article 13(1) and (2)). So VAT follows the invoice, not the work.
For work you have already done, you issue the invoice no later than the fifteenth day of the month after the month of the work. If you ask a business client for advance payment, the invoice must exist before the amount falls due (VAT Act 1968, articles 34c and 34g).
A periodic invoice for several separate services is allowed, as long as it covers no more than one calendar month (VAT Act 1968, article 35(1)). So you put separate jobs alongside the retainer on an invoice at least monthly.
An example around the year end. On 1 December 2026 you invoice a retainer of € 6,000 for December, January and February. The VAT of € 1,260 belongs in the return for the fourth quarter of 2026. In the 2026 annual accounts, € 2,000 is revenue and € 4,000 sits on the balance sheet as invoiced in advance.
What do you do with hours the client does not use?
That depends on your agreement. If unused hours lapse at the end of the month, the monthly price is simply revenue of that month. If the client may carry them forward, you still owe work, and part of the revenue moves along with them.
Guideline 270 covers the case where clients do not use all the rights they have already paid for. If you expect part not to be used, you take that part as revenue at the pace at which the client uses the rest. If you expect everything to be used, the unused part only becomes revenue once it is very unlikely that the client will still claim it (Guideline 270, paragraph 128).
In practice that means: keep track per client of how many hours are outstanding. State in the retainer how long carried-forward hours stay valid, for example until the end of the quarter. Then on 31 December you know which part is still work and which part is revenue.
How do you book extra work alongside a retainer?
Extra work that is a separate service, at a price that matches its value, is booked as a separate assignment. Guideline 270 treats a change to a contract as a separate contract if distinct services are added and the price rises by the value of those services (Guideline 270, paragraph 130). Think of an extra campaign or a separately delivered video.
If the extra work cannot be separated from the ongoing work, it is a change to the existing assignment. You then adjust the price and the progress at the time of the change (Guideline 270, paragraph 130). A change does not have to be on paper: a verbal agreement or the usual practice between you and the client also counts (Guideline 270, paragraph 129).
In the records, extra work works best with its own project code or item. Then you see per client what the retainer earned and what the extra work earned, and you invoice the extra work in the month after the work. Hours you book on extra work without the client's approval are a risk: you may not be able to invoice them.
What counts for profit if the work runs over the year end?
For tax, profit is determined according to sound business practice, with a consistent approach you follow every year (Income Tax Act 2001, article 3.25). For work that is half done on 31 December, a fixed rule applies. It counts for the part of the agreed price that belongs to the work already done, also for assignments such as advice and design (Income Tax Act 2001, article 3.29b).
That works both ways. If you did work in December that you only invoice in January, the part of the price for that work is already profit of the old year. A detailed explanation with an example is in the article on work in progress (work in progress in the annual accounts).
A small private limited company may prepare its annual accounts using the rules for taxable profit, if it applies all the tax rules that apply to it and states this in the notes (Civil Code Book 2, article 396(6)). Then the annual accounts and the tax return run in step, also for retainers.
Fixed price or cost-plus: what does research say about extra work?
The more can change during the work, the better a price based on actual hours fits. Research on construction contracts shows that a fixed price is a strong incentive to work efficiently, but becomes expensive when much has to be renegotiated along the way. For more complex projects a contract based on actual costs is preferred (Bajari & Tadelis, 2001).
That research is about construction, not agencies. The idea does fit a retainer. A fixed monthly price works well for predictable work. For work that changes often, such as a campaign still taking shape, an hourly rate with a clear rule for extra work prevents much discussion afterwards.
Sources
- Dutch Accounting Standards Board, Guideline 270 The income statement (amended 2021), RJ-Uiting 2020-15 annex 2, paragraphs 119, 120, 128, 129 and 130 (in Dutch). rjnet.nl
- Turnover Tax Act 1968 (Wet op de omzetbelasting 1968), articles 13, 34c, 34g and 35, in force from 1 January 2026. wetten.overheid.nl
- Dutch Civil Code Book 2, articles 375, 384 and 396, in force from 1 July 2026. wetten.overheid.nl
- Dutch Civil Code Book 7, articles 400 and 405. wetten.overheid.nl
- Income Tax Act 2001 (Wet inkomstenbelasting 2001), articles 3.25 and 3.29b, in force from 21 February 2026. wetten.overheid.nl
- Bajari, P. & Tadelis, S. (2001). Incentives versus transaction costs: a theory of procurement contracts. RAND Journal of Economics, 32(3), 387-407. doi.org