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Changes in Dutch tax 2024 for companies and individuals

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Comprehensive Introduction to the 2024 Tax Changes – An In-Depth Analysis

Major changes are planned in Dutch tax legislation in 2024. These adjustments are crucial for both private individuals and companies. Below is an even more comprehensive overview of the most significant changes, delving deeper into the background, possible consequences and broader context of these changes.

Increased Rates in Box 2 (substantial interest holding) and Box 3 (equity tax)

Box 2: The increase in the rate in box 2 to 33% for income above € 67,000 is a significant change for shareholders with a substantial interest. This change may lead to a reconsideration of dividend strategies and the timing of distributions. It is crucial for shareholders to review their tax planning in light of this change, especially given the potential impact on the net income and cash flow of their companies. This change may also impact decisions on corporate investment and restructuring.

Box 3: The increase in the rate in box 3 to 36% is a direct response to the long-standing discussion about the fairness of taxation on fictitious returns. This increase could have a significant impact on the net returns of savers and investors. It is advisable for taxpayers to reconsider their investment portfolios, especially in light of the new focus on actual returns. This could lead to a shift in investment strategies, placing more emphasis on wealth preservation and efficient tax planning.

SME profit exemption and IACK: What does this mean for Entrepreneurs and Families?

The adjustment of the SME profit exemption to 13.31% is a welcome relief for small and medium-sized businesses. This change can help reduce the tax burden on smaller businesses and encourage them to continue investing and growing. However, it is important that SMEs are aware of this change and adjust their tax strategies accordingly to take full advantage of the new regulations.

The postponed abolition and phase-out of the IACK until 2027 gives families more time to adapt. It is important for working parents to understand how this phase-out will impact their net income and adjust their financial planning accordingly. These changes could especially impact families with a single income or where one parent works part-time.

The Impact of the Retrenchment of the 30% Scheme and the Lowered Threshold for Excessive Borrowing

The reduction of the 30% ruling may have consequences for the attractiveness of the Netherlands as a work location for international talent. Companies that rely on expats may need to revise their compensation packages to accommodate these changes. This could lead to a reassessment of overall compensation strategies and possibly even a reconsideration of the use of international staff.

At the same time, lowering the threshold for excessive borrowing to €500,000 requires attention from directors and shareholders. It is crucial to reconsider the structure of personal and business finances to avoid unwanted tax consequences. This change could have significant implications for the company’s liquidity planning and overall financial strategy.

Energy Tax and Excise Tax Rebates: Direct Impact on Households

The reduction of energy taxes and the extension of excise duty discounts are measures that provide direct relief to households. These changes can help offset rising costs of living, especially at a time when energy prices are volatile. It is important for consumers to understand how these changes may affect their monthly expenses and to adjust their budgets accordingly.

Conclusion

The tax changes for 2024 are diverse and have a broad impact. They touch on various aspects of tax practice, from personal income tax to corporate taxes. It is essential that both individuals and companies are aware of these changes and prepare for them. A proactive approach and timely planning are crucial to optimally navigate the new tax landscape.

Developments in the Excessive Borrowing from your own BV

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Developments in the Excessive Borrowing from Your Own BV Act: A Comprehensive Guide for Medium and Small Businesses

Introduction

The fiscal world is constantly evolving, and the recent introduction of the Excessive Borrowing from Your Own BV Act is a crucial development that affects directors-major shareholders (DGA’s) and their businesses. This law, intended to counteract tax deferral through borrowing from one’s own BV, has significant implications, especially for medium and small businesses. This article provides an in-depth overview of the law, its impact, and practical solutions to manage the consequences.

The Essence of the Law

From 2023, borrowing more than €700,000 from your own BV will be taxed as income from a substantial interest (box 2), as outlined by the Tax and Customs Administration. This threshold is crucial; loans above this amount are seen as a disguised form of dividend distribution and thus taxable. Importantly, debts for one’s own home are excluded, provided certain conditions are met.

This regulation was introduced in response to the practice where DGA’s borrow significant amounts from their own companies, often without concrete repayment plans. This leads to deferred tax collection, which the government aims to address with this law. The law’s goal is to revise the fiscal treatment of such loans and ensure a fairer and more transparent tax system.

Who Is Affected?

The regulation affects substantial interest holders and their partners. This includes anyone with an interest of 5% or more in a company. It is important to emphasize that not only the loans of the DGA themselves count, but also those of their fiscal partner and connected persons. Connected persons are, for example, children or parents who themselves do not have a substantial interest in the company but do have a substantial debt to the company.

This means that the financial activities of an entire family can be influenced by this legislation. It is therefore crucial for DGA’s and their family members to carefully assess and plan their financial situation in light of these new rules.

Practical Implications

The introduction of this law has direct consequences for the financial planning of DGA’s. It requires a reconsideration of how they and their family members borrow money from their companies. One of the most obvious consequences is the need to review existing loans and, if necessary, reduce them to stay below the €700,000 threshold.

This review can be a challenge, especially for those who have borrowed significant amounts for personal expenses or investments. It may be necessary to find alternative sources of financing or liquidate assets to reduce the debt burden. This process requires careful planning and consultation with tax advisors to ensure compliance with the new requirements without unnecessary financial stress.

Strategies and Solutions

  1. Debt Repayment: The most direct way to comply with the law is by repaying debts. This can be done by using liquid assets privately or by selling assets. Repaying debts not only reduces the tax burden but also improves the financial health of both personal and business finances.
  2. Dividend Distribution: Another strategy is to distribute dividends to reduce the debt. This can offer a dual benefit: it reduces the debt and provides a legitimate way to extract money from the business. However, with the split rates in box 2 from 2024, one must consider the fiscal consequences of this choice.
  3. Refinancing: Debts can also be refinanced with external parties, such as banks. However, this can have implications for taxation in box 3. Refinancing can be a good option for DGA’s who want to restructure their debts under potentially more favorable conditions.
  4. Avoiding Fiscal Partnership: By avoiding fiscal partnership, the threshold can effectively be doubled, which can be an interesting option for some DGA’s. However, this requires careful consideration of the broader fiscal and personal consequences.
  5. Transferring Assets: Transferring assets to the BV can also be a way to reduce the debt. This can be particularly useful for DGA’s who have personal assets that can be converted into business capital.

Future Changes and Points of Attention

An important future change is the planned reduction of the threshold to €500,000 in 2024. This requires extra attention and possible adjustments in the financial planning of DGA’s. It is crucial to keep an eye on these changes and proactively plan for the future.

Additionally, there is criticism of the complexity and potential inaccuracies of the law, suggesting that further adjustments or clarifications may be possible in the future. DGA’s and their advisors must remain alert to any changes in legislation and the associated fiscal guidelines.

The Importance of Expert Advice

Given the complexity of the law and the potential impact on personal and business finances, it is advisable to seek expert fiscal and financial advice. A tax advisor can help navigate the nuances of the law, provide tailored solutions, and plan for future changes.

Conclusion

The Excessive Borrowing from Your Own BV Act requires a careful reconsideration of the financial strategies of DGA’s. By acting proactively and implementing the right strategies, DGA’s and their businesses can adapt to this new fiscal reality. It is essential to collaborate with an expert tax advisor to determine the best approach for your specific situation. Looking to connect with a knowledgeable advisor? Click here.

 

Personal income tax returns can be filed going back five years

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Personal income tax returns can be filed going back five years. Have you received an invitation to file a personal income tax return? In that case you are obligated to timely file such personal income tax return.

If you did not receive such an invitation, but do you have to pay an amount on personal income tax of  € 46 or more (up to and including 2017) or € 47 or more (from 2018)? In that case you are obligated to request the tax office to receive a personal income tax return.

You can also request a personal income tax return in case you are entitled to an amount of € 15 or more on refund. In the table below you can see when your declaration must reach the tax office at the latest.

Year 2018:
Declaration must be received by: December 31, 2023

Year 2017:
Declaration must be received by: December 31, 2022

Year 2016:
Declaration must be received by: December 31, 2021

Year 2015:
Declaration must be received by: December 31, 2020

Year 2014:
Declaration must be received by: December 31, 2019

We can assist with timely filing of your personal income tax return.

Pro rata Dutch tax deduction for foreign tax residents

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Pro rata Dutch tax deduction for foreign tax residents. Due to European case law originating from February 2017, new rules are applicable regarding the entitlement to deductible items, tax credits and tax-free allowance for qualified non-resident taxpayers.

An important condition to be met was the condition to pay tax here in the Netherlands on at least 90% of your worldwide income, otherwise opting for deductible items, tax credits and tax-free allowance was impossible.

From now on the Netherlands must also (pro rata) take into account the above mentioned deductible items for cases in which foreign taxpayers do not earn 90% or more of their income in the Netherlands. The conditions to be met are:

1) The foreign taxpayer is, as a resident of another Member State of the European Union, another State party to the Agreement on the European Economic Area, Switzerland or the BES islands (the circle of countries) involved in the taxation of that other Member State or State, or the BES islands;

2) The (world) income of the taxpayer determined by Dutch standards is fully or almost entirely (for 90% or more) subject to wage tax or income tax in two or more other states (including the Netherlands) than the state of residence.

3) The (world) income of a taxpayer determined by Dutch standards is not fully or almost entirely (for 90% or more) subject to a wage tax or income tax in a state other than the Netherlands.

A further condition is that the taxpayer must provide an income statement from the tax authority of the state of residence.

If the taxpayer meets the above conditions, then the right to deduct is according to the extent to which the income to be taxed in the Netherlands is part of the world income. We can assist with preparing the correct processing in the Dutch personal income tax return.

Agreements Germany and Belgium home work days Covid-19

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Dutch tax agreements with Germany and Belgium for days working from home due to Covid-19

The main rule for salary taxation is that employees are taxed in the county were they work. Because of Covid-19 people are working way more from home and this can bring unwanted double taxation and a higher income tax burden. Think of situations were usually you traveled a lot and worked often in the country were you get your salary from, this income is taxed there.

But now due to Covid-19 you have not travelled that much and most of your income will be taxable in The Netherlands, while the other country may also want to have a claim on part of your income.

To cope with these problems, additional agreements have been made by The Netherlands with Germany (6th April 2020 – at least 31st of March 2021) and Belgium (30th of April 2020 – at least 31st of March 2021)  regarding working from home.

In both cases the countries have agreed that cross-border workers may treat days worked from home as days were they would have normally (pre Covid-19) worked across the border, these days may be taxed by the other country.

If you require assistance with preparing your personal income tax return, please feel free to contact us.

 

Solutions for Dutch import VAT due after Brexit

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Solutions for Dutch import VAT due after Brexit

The United Kingdom has left the European Union on January 1st 2021 (Brexit). This has consequences for, among other things, VAT.

When importing goods from outside the EU to the Netherlands, VAT is due on these goods immediately upon import. Although this VAT may later be reclaimed, this will lead to a cash flow problem for the UK company.

However, there is a possibility to only first report this import VAT when filing a VAT return. This is beneficial, because this import VAT can then be reclaimed as deductible input VAT in the same VAT return. On balance there is no VAT payable over the import.

To be able to make use of the above arrangement, you must be in the possession of what is known as an “Article 23 permit“. As a foreign entrepreneur, you cannot request for an Article 23 permit yourself. For this purpose you must have a tax representative (‘fiscaal vertegenwoordiger’) in the Netherlands or have a Dutch company which is a tax resident of the Netherlands (just setting up a Dutch B.V. is not enough).

The tax representative of the foreign entrepreneur is responsible for meeting the obligations regarding VAT (and therefore also liable for the financial risks). These obligations are the result of performing activities in the Netherlands which are subject to VAT. In practice, the tax representative relieves the entrepreneur of all administrative burdens that arise from these activities. This gives the entrepreneur the freedom of doing business. The conditions for a tax representative to be met are as follows:

  1. This tax representative must be established in the Netherlands;
  2. The tax representative must provide financial security for VAT (bank guarantees, etc.) towards the tax office.

As an alternative a Dutch B.V. can be incorporated which will take over and perform the UK company’s trading activities within the EU. In order to make use of the above mentioned article 23 permit, the factual management (or majority part thereof) of the Dutch B.V. should be located within The Netherlands.

Brexit has other consequences for VAT as well. For example reclaiming local VAT imposed within the EU, as of 2021 a UK company will have to make use of paper forms instead of the EU online refund procedure.

TaxAble is your one stop shop for tax, accountancy and legal when setting up a Dutch company. We have advised and assisted various UK companies with setting up a Dutch B.V. company. We also advised on the related VAT matters.