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Deadline personal income tax return 2018 & be aware of interest

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Now that the year 2018 has ended, it’s time to prepare for the Dutch personal income tax return (“aangifte inkomstenbelasting”) 2018! The Dutch tax year is similar to the calender year.

The Dutch tax office (“Belastingdienst”) has set the filing deadline of the personal income tax return 2018 on May 1st 2019. To this purpose you may receive a so called aangiftebrief 2018 from the Dutch tax office. Our tax advisors can assist with the full process to file your personal income tax return 2018.

In case you have to pay additional personal income tax on your personal income tax return 2018 be aware of the accruing interest (“belastingrente”) on the amount on tax due following the 2018 personal income tax return. In case you file your personal income tax return 2018 after May 1st 2019, the tax office will start calculating interest.

The tax authorities have three months to impose a personal income tax assessment 2018 after having taken receipt of a personal income tax return 2018. During this 3 months period they retain the right, if filed after May 1st 2019, to charge interest on the tax amount due following the 2018 personal income tax return.

Since the interest rate is fixed at 4% on annual basis, this interest rate is well above any interest percentage you may expect to receive on a Dutch bank current account / savings account.

Personal income tax may be due e.g. in case of savings held above the applicable thresholds or other taxable income which was not yet taxed, e.g. by means of wage tax and/or a preliminary tax assessment.

Filing your personal income tax return 2018 can be especially interesting in case of an expected tax refund, e.g. in the year of migration (immigration or emigration).

The Dutch personal income tax rates for tax year 2018 (in Dutch) can be found here. The Dutch personal income tax rates for tax year 2019 (in English) can be found here

We can assist with the full process to file your personal income tax return. If needed we can arrange for a lengthy filing extension of your personal income tax return 2018, however be aware that the possible interest calculation will not be extended by the tax authorities.


Application term 30%-ruling reduced to five years as of 2019

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Both the Dutch House of Representatives and Senate have now approved the Tax Plan 2019 which includes the transitional rules for expats with a 30% ruling issued in 2018 or earlier. Therefore this new legislation will become effective as of January 1st 2019.

In short: As of the year 2019 the maximum application period for the 30% ruling will become five years. The application period of the existing rulings under the new legislation will depend on their current end date.

If the end date of an existing ruling is in 2019 or 2020, this end date will remain unchanged, if it falls in 2021, 2022 or 2023, then the new end date will be 31 December 2020. All later end dates will be shortened by three years. For a full up to date explanation of the 30% ruling, an overview of the current conditions and our related services, please click here!

For more background on the changes per January 1st 2019, please scroll down:

On September 18th (2018) the official tax plans for 2019 have been offered to Dutch Parliament (“Tweede Kamer”). Cabinet has now filed their official legislation proposal to change the application term of the 30% ruling to a five year application period also for existing pre-2019 rulings. This despite the advisory board of State advising against the reduction of the application term for existing cases.

As expected further discussion was caused by the final proposal. With the Cabinet currently re-evaluating the announced abolishment of Dutch Dividend Withholding Tax (DDWT), already plans evolve as to where the budget on not abolishing the DDWT can be spend on.

Since the abolishment of the DDWT was originally aimed at keeping the business climate of the Netherlands interesting for foreign companies, it seems only logical that in case the DDWT is not abolished, to keep the funds available for the original goal: Investing in the Dutch business climate. Cabinet is currently discussing these subjects, possibly the reduction of the application term of the 30% ruling will be less strict. We expect to have more clarity soon.

Till the year 2012 the maximum application term was still 10 years, as of 2012 this was reduced till 8 years and as of 2019 the application term is shortened till 5 years. Scroll down for a link to the official document.

The filed legislation proposal does contain a transitional arrangement for international schooling fees, which can remain to be reimbursed for the full eight year period for existing rulings.

However still Dutch Parliament (as well as Dutch Senate) has to decide on the proposed legislation changes. Based upon the changes of the year 2012, in which prior application terms were retained, the applicable terms valid before the year 2019 will hopefully still be respected. However this would have to follow from a Political amendment, so let yourself be heard in The Hague!

Because of this proposed reduction of the 30% ruling term, you may wish to consider to try and receive your possible bonus and/or exercise stock options rights before the new proposed end date of your 30% ruling so the ruling may still be applied.

Please contact us for further information on the 30%-ruling. We advise and prepare requests for application of the 30% ruling and we are also specialised in complex cases which HR departments or even big four firms are not equipped to handle.

Please be sure to also read the following related articles which may well lead to a tax benefit:

In addition we prepare income tax returns and can serve as a one-stop-shop for all your company’s tax / accountancy / legal requirements.

The new 30%-ruling plans, the above mentioned comments & full evaluation document (in Dutch): inetsreactie_op_de_evaluatie_van_de_30%-regeling_voor_ingekomen_werknemers_(Kamerstuk_34785-83)  kabinetsreactie-evaluatie-30-regeling

Tax deduction of costs related to the purchase or sale of a participation

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The Supreme Court recently ruled that costs related to the purchase or sale of a participation are tax deductible in case the transaction is not finalised.

Purchase costs or selling expenses incurred to acquire or sell a participation are excluded from tax deduction by means of the participation exemption (applicable when holding 5% or more of the shares in a company). The Supreme Court has defined purchase costs or sales costs as costs that would not have been incurred without that acquisition or disposal.

With external selling or purchasing costs, a clearer distinction can usually be made in this context than in the case of internal costs, the question of internal costs (for example, salaries of employees assisting with the purchase or sale in question) is to what extent these costs have been incurred solely for the purchase or sale.

Purchase costs or selling expenses only fall under the participation exemption insofar as the relevant purchase or sale has actually taken place.

The Supreme Court ruled on a situation in which a purchase or sale initially fell through, but then succeeded in a subsequent phase with another party. In such a case, it must be assessed to what extent the sales costs incurred in that first phase would also have been incurred if that phase had not taken place. Only those costs are not deductible.

It is not always possible to estimate in advance whether a purchase or sale will take place, therefore (tax) accountancy rules imply that the costs related to the planned purchase or transfer of a participation will be activated on the company’s balance sheet until it is clear whether or not the purchase or disposal goes forward.

Subsequently, it is determined to what extent the activated amounts are subject to the participation exemption (to be activated upon purchase), the remaining initially activated amount is tax deductible.

Green investments: exemption from equity tax and tax credit

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Green investments: exemption from equity tax (box 3) and additional tax credit.
In these times of low interest rates on savings deposits, green investments can tax wise be a favorable alternative to low-yielding assets.

Exemption box 3
€ 57,845 (2018), up to this amount of green investments no box 3 is payable. This can give tax savings of around 0.6% – 1.61% tax on an annual basis (depending on the amount of the total assets), or € 347 – € 931.

Tax credit
A tax credit is deducted from the tax due.
The tax credit for green investments is 0.7% of the exempted green investments box 3.

Example
Suppose you invest € 50,000 in green investments, then the saving is:
€ 300 – € 805 in saving box 3
€ 350 in tax credit
So total savings in this example are between € 650 and € 1,155.

The disadvantage is that probably no interest is paid on green investments. But with ordinary savings you must achieve at least 1.3% p / year (but probably more) in order to arrive at the same or better overall outcome than with green investments.

Above the amount of the exemption, there are no tax benefits to the green investments. The exemption does not count for the calculation of allowances (“toeslagen”).

Attached the list of qualifying green funds for which the following income tax benefits apply (current as at 23/11/2018): overzicht_fonds_belegging_belastingvoordeel_ib2001z2pl

Tax rules full electric cars will change as of the year 2019

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The tax rules for full electric cars will change as of the year 2019. It can still be very interesting to get a full electric company car before the end of 2018 in order to avoid the “Tesla tax”. In the below we give an overview of the current company car tax system as well as the changes for the coming years.

Bijtelling / adding benefit company car to salary
Having the benefit of a company car is seen as an income (“bijteling”), unless you drive it less than 500 kilometers per year for private use and you keep an administration of these kilometers.

When you buy a full electric car (only applicable when zero emission) car in 2018, you will fall under the 4% “bijtelling” (added taxable salary because of the benefit of driving a company car). This bijtelling is calculated over the gross catalogue value of the car, so when the catalogue value is EUR 40,000, the bijtelling is 4% x EUR 40,000 = EUR 1,600 which amount is added to your salary and taxed at the applicable progressive rate. So if the top of your salary falls in the 42% rate, the payable wage tax on the company car is EUR 1,600 x 42% = EUR 672.

This 4% bijtelling will remain applicable for 5 years as of the moment the car is first registered. Also when the car is sold so someone else this five year period (as started as of registration first owner) will remain. After those five years (so at the latest at the end of 2023) the bijtelling rate will go to 22%.

If you buy a full electric car in 2019 or 2020 the rules are different, still 4% bijtelling applies as long as the catalogue value of the car is below EUR 50,000. When the catalogue is higher than EUR 50,000, the excess will get a bijtelling of 22% (unless the fuel is water based). Also referred to as the Tesla-tax. So if the catalogue value is EUR 70,000, the first EUR 50,000 will have a bijtelling of 4% the remainder (EUR 20,000) will have a bijtelling of 22%. So it will be a mix of rates. As of 2021 the bijtelling rate will be 22% on all electric cars.

Corporate income tax
There is also a tax incentive for full electric cars for corporate income tax purposes. In 2018 there is an (environmental) deduction of 36% over the catalogue value till EUR 50,000 (only when the car is bought new), if the car is more expensive than on the excess the 36% deduction does not apply. It is obigatory to request this incentive by registering at the “RVO” agency within three months (after signing the purchase agreement with the car dealer) in order to obtain this incentive.

VAT
As far as the VAT refund, this is also applicable for non-electric cars, you can get a full refund of VAT when the car is bought (or financial lease) by the company. Also VAT on running costs can be deducted, however VAT has to be paid on private use, if no records of the private use is kept, you should pay a deemed VAT amount on annual basis, being 2,7% over the catalogue value.

Road tax
Till 2021 no road tax for full electric cars, as of 2021 the normal road tax applies also on full electric cars.

Company owner with company car
In general company cars will become less attractive for tax purposes after 5 years, because there will be no more depreciation and the bijtelling in this case will increase considerably. So best to take it out of your company after five years. If the car has been fully depreciated in those five years, the gain on the sale is profit for your company. But you can take the market value which after five years may be limited at that time especially given the uncertain market for electric cars.

Please note that this is the (suggested) legislation as per 2018, rules may well change the coming years since as it stands now in a few years time the electrical will have the same tax treatment as regular fuelled cars, which may lead to electrical cars becoming far less interesting whilst the environmental rules the Netherlands has to meet are strict and becoming stricter for the coming years. So there may well be further more interesting change of the above legislation the coming years.

If you have any questions, or a concrete vehicle you wish to purchase, please contact us and we can advise further on the above.

Qualification individual objections to income equity tax 2017

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Individual objections to income equity tax assessments 2017 will be treated as one ‘mass’ objection. As of the tax year 2017 the calculation method of the deemed interest has changed. This new method has lead to criticism.

This new deemed interest method is a fiction based upon a fiction. Deemed are both the sort of investments made as well as the interest made on these investments.

If you have objected, or if you are planning to object to the personal income tax assessment 2017,  the following will be of importance. The State Secretary of Finance has decided that all individual objections to income equity tax assessments 2017 will be treated as one ‘mass’ objection. This will save individual tax payers from a lot of work and court / advisory fees.

Already objections against the 2017 equity tax deemed interest method have been processed by the tax office and will come before tax court. the final outcome of these procedures will be leading for the outcome of all individual objections against the 2017 income tax assessments.

However there are some conditions for your objection to fall under this ‘mass’ objection procedure. Your objection should contain the following legal question:
In the fiscal year 2017, are the flat-rate elements of the system, in conjunction with the tax exempted threshold and the tax rate of 30%, in violation of:
1. Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms (hereinafter: ECHR), without assessing the violation of the “fair balance” at the level of the individual taxpayer; or
2. the prohibition of discrimination under Article 14 ECHR?

The Dutch legal language version you can find in the link below to the actual Decision of the State Secretary of Finance.

If in the end of the test procedures, the deemed interest system is indeed in breach with EU law, it is expected that counterproof is most likely allowed on individual basis.

If following this counterproof that deemed interest is e.g. at least 10% higher than the actual realised result in 2017, this lower actual interest will be the taxable value. Tax court will develop such a method in case there is a breach with EU law.

Please be aware that despite this ‘mass’ objection procedure, individual tax payers are still held to object on time (within six weeks after the date of the final personal income tax assessment 2017).

Till date, although many procedures have been before tax court, still the deemed interest method (applicable till 2017) active since the year 2001 is not in breach with the legal freedom the Dutch legislator has to impose tax law.

It is difficult to predict the outcome of these test procedures although regarding another valuation method (value of rented out real estate) containing fiction upon fiction, counterproof was allowed by tax court.

In case the test case leads to the conclusion that there is no breach with EU law, you could still consider the following solution: Hold your equity through your own personal limited liability company!

Decision State Secretary of Finance: Mass objection equity tax 2017