Convert loss from substantial interest into tax credit

If you have incurred a loss in box 2 in previous years due to the liquidation of your BV (private limited company), there are still some benefits you can claim. This loss from substantial interest can be offset in future years:

1. Profits from substantial interest in the previous year (referred to as “carry-back”); and
2. Profits from substantial interest in the following six calendar years (referred to as “carry-forward”).

Therefore, the period for offsetting a loss in box 2 is different compared to box 1. In box 1, you can offset a loss in the three preceding years or in nine following fiscal years. If your box 2 losses incurred before 2019 , you will still have to the possibility to carry forward your loss up to nine years.

Losses from substantial interest can only be offset against profits from substantial interest. If it is not possible to offset the incurred loss against profits as you no longer have any box 2 income, you can partially offset the loss in the future by requesting a conversion of the outstanding loss into a tax credit. This credit is equal to the tax rate applicable in box 2, which is 26.9% in 2023. To do this, you need to send a request to the tax authorities. The tax authorities will only approve the request if you did not have any substantial interest in the current calendar year as well as the previous calendar year. The tax inspector determines the amount of the tax credit through a decision. You can then offset the tax credit against the tax payable in box 1 in the year of the request, and potentially in the subsequent years if it cannot be fully offset at once.

More from the HBK Update June 2023

• New (temporary) legislation regarding box 3
• Holding on to definitive assessments and objections with income in box 3
• Restructuring box 3 assets before October 1st (valuation date arbitrage)
• Excessively lending act
• Limitations/Abolition of Business Succession Facilities
• Tax authorities will start checking for pseudo self-employment from 2025
• Convert loss from substantial interest into tax credit
• No tax-free allowance for each day working from home
• Repaying Deferred Tax Payments
• MIA and Vamil
• Reimbursement of costs for assistance with filing income tax return for foreign employees
• Co-operating spouses: Co-operating remuneration or co-operating tax deduction?