Excessively lending act

On 1 January 2023, the law “Excessive loans from own company” came into effect. The purpose of this law is to discourage excessively borrowing money by the director-majority shareholder from one’s own company.

Under this law, the debt amount with the own company that exceeds the threshold amount of € 700,000 will be considered as deemed regular income in box 2. The only exception to this rule are existing mortgage debts with the own company on December 31st 2022. Newly agreed mortgage debts are also exempted if they are secured by a mortgage on a property with a notary.

The first reference date for this law is December 31^st 2023. If the debts to your own company exceed the threshold amount of € 700,000 on this date, it may be beneficial to fully or partially repay these debts to the company.

It is also important to note that excessive debts owed to your company by your partner, parents, grandparents, children, or grandchildren will be included in your debt threshold amount. Parents, grandparents, and children are considered related persons and each have a separate threshold amount of € 700,000. Only the portion of their debt that exceeds this threshold will be attributed to the substantial shareholder (as long as it is not a qualifying box 1 debt for the primary residence).

To avoid taxation, it is important to repay the excessive amount of the debts before the reference date of December 31st. This can be done, for example, by reducing the debts to the own company through dividend payments, transferring personal assets to the company, or refinancing the debts externally. It is not mandatory to repay the excessive debt to the company, and in certain situations, it may even be advantageous to maintain the excessive debt amount and accept the deemed regular income.

For personalized advice, we recommend contacting us directly.

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?