Year-End Tips 2021: 11 Tips for Directors/Major Shareholders (DGAs)
1. Limit tax interest with a provisional assessment for corporation tax in 2021
Do you expect that your B.V. (private limited company under Dutch law) will have to pay additional corporation tax over 2021? You can limit the tax interest by requesting an additional provisional assessment for corporation tax in 2021 as soon as possible. If necessary, you can also request a payment scheme. Incidentally, until 31 December 2021 the interest on overdue tax is only 0.01% per year further to the consequences of the coronavirus. After 1 January 2022 the interest payable on overdue tax will rise again.
2. Delay B.V. profit to 2022
The high rate for corporation tax will increase to 25.8%, while the low rate will remain 15%. The low rate threshold is to rise and will apply to profits up to €395,000 (€245,000 in 2021). If the taxable profit from your B.V. in 2021 amounts to more than €245,000 then you can gain a tax benefit of 10% by delaying part of the profit to 2022. But how do you do that? We would be happy to advise you.
3. Wait until after 1 January 2022 to recover a debt from your B.V.
Wait to recover a debt from your B.V. until after 1 January 2022. That way you prevent it from being included right away in the box 3 levy on the reference date of 1 January 2022.
4. Loss relief and losses no longer available for setoff dating from 2012
Loss carry forward without a time limitation will apply to losses incurred from 1 January 2022 or which could still be setoff at 31 December 2021. This new regulation also provides transition arrangements for losses incurred in financial years commencing on or after 1 January 2013. This means that losses available for setoff dating from 2012 can be settled for the last time this year. If the taxable profit from your B.V. in 2021 is too low, avoid losing the possibility to setoff losses by making a tax reserve or provision. Or sell business assets with hidden reserves to affiliated bodies. Here a sale & leaseback construction may offer a solution.
5. Consider refinancing B.V. loan
The Excessive Borrowing from Own Company (Wet excessief lenen bij de eigen B.V.) legislation is rapidly approaching. From 1 January 2023 a fictitious profit distribution must be taken into account if your debts and possibly those of your partner to your B.V. together, amount to more than €500,000 (with the exception of borrowing for your own home). The same applies to the debts of your blood relatives and those related by marriage, as well as the partners of those relatives. This fictitious profit distribution is taxable in box 2 of the income tax. In view of this measure, it would be advisable to consider refinancing the debt with a bank loan or selling the property to your B.V. In the event of such a sale, however, it should be noted that 8% stamp duty (transfer tax) will be payable.
6. Put your business successor/child on the payroll of the B.V.
Are you planning to give your shares in your B.V. to your children or business successor on 1 January 2025? Then you need to take into account that the substantial interest levy will only be left aside if the recipient was employed by your B.V. or one of its operating companies for at least 3 years (36 months) prior to receiving the gift. In addition, your B.V. must run an actual business and hold at least 90% of its business assets. So consider employing any potential recipients in your B.V. by 31 December 2021 at the latest.
7. Request termination of tax entity (FE) before 2022
Given that the lower tax band will be raised in 2022 from €245,000 to €395,000, it may be worthwhile to break up an existing tax entity for corporation tax purposes. The request must be submitted by 31 December 2021 at the latest. Note that there is no tax settlement involved.
8. Have B.V. repay loans to avoid interest deduction limitation
For financial years starting on or after 1 January 2022, the deductibility of the balance of interest costs (interest expenses minus interest income) will be reduced from 30% to 20%. This will make it less interesting to finance B.V.s with borrowed capital. The current threshold of €1 million remains unchanged for the time being. Our advice therefore is to pay off your B.V.’s loans as much as possible.
9. Postpone Environmental Investment Tax Scheme (MIA) deduction until 2022
The deduction percentages for the MIA tax scheme will be increased for 2022 from 36%, 27% and 13.5%, to 45%, 36% and 27%, for categories I, II and III, respectively. The maximum nett benefit as a result will amount to about 14%. The highest percentage will apply to investments in assets which make the greatest contribution to the policy’s priorities, e.g. the circular economy and electrification. Therefore delay any investment in an asset that would qualify (or would qualify in 2022 as an environmental business asset) until after 31 December 2021 to be able to benefit from this scheme.
10. Deductibility of homeworking allowance as a specific exemption
From 1 January 2022 employers can grant their employees an allowance of up to €2 per day worked from home provided that this allowance is designated as final levy salary for the work-related costs scheme. This matches the standard amount proposed by the National Institute for Family Finance Information (NIBUD). In granting a homeworking allowance designated as a specific exemption those parts of the homeworking allowance which cover ‘food, drink and refreshments’ fall within the scope of the limited deductibility of mixed expenses.
11. Pay customary bonus in 2021
If you still have WKR budget room left over at the end of 2021, you can use this tax-free budget to give one or more employees a bonus, provided that you actually pay the bonus in 2021. Another important requirement is that the customary criterion must be met. This means that the bonus may not deviate by more than 30% from what is customary among similar employers in the same sector. It is not necessary to provide proof or justification for a bonus of up to €2,400 per employee per year. If you are a DGA and there is enough WKR budget room left over in 2021, you may also award yourself a bonus of €2,400. If you wish to award a bigger bonus, you will have to be able to demonstrate that such a bonus is customary in your sector.