YEAR-END TIPS 2017
TIPS FOR THE BV / IB ENTREPRENEUR
1. Small scale investment deduction
You are eligible for this small scale investment deduction (KIA) if you have invested in assets for an amount between €2.300,- and €321.176,-. There is no need for a new asset in order to qualify for the small scale investment deduction. You can therefore claim a deduction for investments in, for example, used office chairs.
Have you made major investments in 2017 which might have exceeded the maximum amount of €312.176,-? Then see if you can postpone your investment until 2018. This will prevent your right for investment deduction from expiring.
2. Deduction for environmentally friendly investments
Have you invested in environmentally friendly techniques and do you qualify for the Environmental Investment Tax (MIA) and the Random amortization of environmental investments (Vamil)? If yes, these Tax investments facilities may have the following tax benefits:
• With the MIA you benefit from an investment deduction which can amount to 36% of the investment amount.
• With the Vamil, you can deduct 75% of the investment costs. This can be done at a time to be determined by you and brings liquidity and interest benefits.
3. Deduction for energy-efficient investments
Have you made energy-efficient investments in 2017 and are you qualified to obtain the energy investment allowance (EIA)? You receive not only this tax deduction for clearly defined investments (specifically), but also for tailor-made investments (generic) that result in substantial energy savings.
It is recommended to make your energy-efficient investments this year. You can deduct 55% of the investment costs of the fiscal profit at the moment. However, as per 2018, the percentage of the EIA may possibly be reduced by 0.5%. The deduction percentage will therefore be 54.5% in 2018.
In order to utilize EIA and MIA / Vamil, you are required to report the investment on RVO.nl within three months after you have agreed to the investment obligation. If the investment has not been reported within the given period, you will no longer be eligible for the deduction.
4. Watch out for the divestment charge
Are you planning to sell an asset? Then review the purchasing date. If you have applied for the investment allowance (KIA) for this asset in less than five years ago, it may be that you will have to repay a part of this deduction (desinvesteringsbijtelling).
Assess whether the five-year term has already expired in 2017. If not, postpone the sale of this asset if possible.
5. End of the company? Again the divestment charge
You may also be confronted with the divestment charge if you stop your business. This applies to the assets for which you have applied the investment allowance for the previous five years. These assets alienate or transfers to your private assets when you stop your business. You may want to consider whether it is sensible to stop your company this year or postpone it.
6. Apply the WBSO
You may be eligible for the WBSO if your company engaged in research and development work. The WBSO reduces wage costs and other costs and expenses for your project , for example for prototypes or research equipment.
You can offset the advantage of the WBSO through your tax return. How you manage your business is important. Entrepreneurs with employees contribute less to income tax and self-employed people receive a fixed allowance.
7. Prevent release of reinvestment reserve
It is recommended to check whether you formed a reinvestment reserve in 2014. If you did, then it is advisable to make a reinvestment before the end of this year. If you do not do this, the reserve will in principle be released into profit and taxed.
In case you are not able to make a reinvestment this before the end this year, then consider whether you are eligible for an extension of the term for holding a reinvestment reserve. The Tax and Customs Administration are prepared for this in very exceptional cases.
8. Take advantage of the innovation box
Are you subjected to the corporate income tax and are you active innovatively? You may be able to use the innovation box. All profit you realize with innovative activities fall into an innovation box and are taxed at a reduced corporate income tax rate of 5%. Please be aware of the new conditions for the innovation box which took effect in 2017.
The corporate tax rate of the innovation box will be increased from 5% to 7% on the first of January 2018. It is therefore advisable to assess whether the profits from your innovative activities can be considered in 2017. So you can still benefit from a lower tax rate.
9. Request end of tax group
In order to dispose one or more companies from an existing tax group as of the first of January, you must submit a request for deportation to the Tax and Customs Administration by December the 31th 2017. By ending a tax group for corporation tax, the LLP’s will become taxable independently again. This allows the LLP’s to benefit from the tax rate step of 20% for profits up to €200.000,- separately.
10. Benefit from the entrepreneurial facilities
Is your company subjected to the income tax? You might be qualified for the entrepreneurial facilities such as the self-employed deduction, start-up allowance and the co-working allowance. In order to be eligible for the entrepreneurial facilities, you must meet the hours test. You are required to spend at least 1,225 working hours in 2017 at your company. If you are not only an entrepreneur, but also employee for example, there is a rule. More than half of your working time must be spent on your company.
Do not forget to have an administration for the working hours. By doing so, you can demonstrate that you met the hours test when being questioned by the Tax and Customs Administration.
There are currently already plans to reduce the self-employed deduction in the future. The self-employed deduction will be reduced by 3% points to the basic rate in four annual steps from 2020. This will happen when the self-employed deduction is deducted at the rate of the second bracket.
11. SME profit exemption
In case you do not meet the hours test, you are still eligible for the SME profit exemption. This exemption reduces your taxable profit from business after entrepreneurial deductions (mentioned above) by 14%.
The SME profit exemption on the other hand, works disadvantageously in cases of losses. At a loss, the SME profit exemption reduces this loss.
12. Voluntary disclosure scheme
The Dutch voluntary disclosure scheme offers a limited opportunity to voluntarily correct the tax return related to a previous tax period which were incorrect or incomplete. You can still rectify every tax return without facing penalties when it comes to declarations which were or should have been made before the first of January 2018. This also include information, data or instructions which were or should have been provided before the first of January.
Despite the fact that the voluntary disclosure scheme will be abolished, it is nevertheless advisable to make voluntarily improvements. The Tax and Customs Administration can take this into account and thus slightly moderate the fine.
13. Benefit of the donation allowance
You can appeal the increased donation deduction in the income and corporate tax for donations to a so-called cultural institution (multiplier donation deduction). This increased donation deduction will be abolished in 2018. Deductible donations to cultural institutions are increased by 25% to determine the deduction, but in total no more than €1.250,-
14. Make use of your business loss
Take a look whether you still have company losses from the past which have not yet been settled. The loss can be offset in corporation tax with the taxable profit from previous year or with the profits from the following nine years. It is advisable to take advantage of this opportunity now. The loss carry-over is limited to six years as of the first of January 2019. You can settle your loss of business income tax in box 1 with positive income from the previous three years and the following nine years.
If the nine-year has expired, the loss can not be settled anymore.
15. Entrepreneur or salaried employment
The DBA law has only caused commotion and will therefore be abolished. In which way can you thereafter prove that you are operating as an independent entrepreneur?
• The Tax and Customs Administration will, in principle, start from a labor contract at a low rate in combination with a longer duration or a low rate in combination with the performance of regular business activities.
• For self-employed people above the ‘low’ rate, a ‘client statement’ is introduced, which must provide advance security.
• If your rate is high, an ‘opt out’ for wage tax and employee insurance is introduced.
16. Check your preliminary tax assessment
Have you received preliminary tax assessment for the income tax or corporation tax due payment? Check whether this assessment matches your actual results. The amount of this preliminary assessment is based on your results of previous years. In case the preliminary assessment does not match your results, you must change the preliminary assessment yourself. You can not file an appeal.
If you expect a higher taxable profit than the amount given on your preliminary assessment, change your assessment immediately. You prevent that you have to pay additional tax after the end of the tax year. You may also be faced with tax interest rates. The interest rate for corporation tax is at least 8% and at least 4% for other taxes.
17. Do not allow your tax debts to increase
If you still have outstanding assessments and may not meet them on time? You can request a short-term postponement of payment from the Tax and Customs Administration by phone. The Tax and Customs Administration grants a maximum of four months postponement of payment. Postponement of payment is only granted if:
• your total outstanding tax debt is less than €20.000,-;
• you have not yet received a writ of execution for the outstanding tax debt;
• no unpaid penalty is included in the outstanding tax debt;
• you did not receive a postponement of payment for the outstanding tax debt;
• there is no too late submitted tax return, in other words you have always timely did your tax return.
If you do not expect to be able to pay your outstanding tax debts within a maximum of four months? Request immediately a written postponement of payment for a longer period. The Tax Customs and Authorities do not grant a postponement of payment for assessments for which a short-term postponement of payment has already been granted.
18. Purchase a youngtimer
A company car offers the necessary tax benefits. You are, however, confronted with an addition for private use. In the current regulation, it is most beneficial to purchase to a youngtimer. This is a car which is fifteen years or older. You will pay 35% addition instead of 22%, but it is based on the current value and not the new value. The current value of youngtimers is much lower that with them, you can achieve your tax benefit.
TIPS FOR THE DIRECTOR MAJOR SHAREHOLDER
As a DGA, the law requires you to receive a normal salary. In order to explain what ‘normal salary’ refers to, take into account these three following points:
• The DGA’s salary must be at least 75% of the salary of individuals with similar jobs but who do not have any substantial shares
• The DGA’s salary must be the highest of all workers employed in the entity and/or related parties
• The DGA’s annual salary must be at least €45.000
In some instances, the DGA is also allowed to report a lower salary, but only if he/she is able account for it under strict circumstances.
There are exemptions to the requirement, such as the case of DGAs of innovative start-up where it is allowed to report minimum wages as the normal salary for the first three years of operation.
20. Loan or dividend?
If the DGA withdraws cash from the entity, he/she must clearly specify whether the withdrawal is a loan or dividend. This must be accounted for in your administration and tax return. It must be determined whether the withdrawal is a loan or dividend payment.
21. Ensure a businesslike loan
IF you are going to justify a loan from your BV to you, it is necessary to meet the formal conditions regarding the loan. In order to classify the loan as business-like, the Tax and Customs Administration requires a businesslike interest rate, repayment schedule and securities. It is recommended to record this in an agreement.
22. Dividend payment
If you have withdrawn money from your BV, you can account this as a dividend payment. In this case, the DGA is subject to 25% of income tax and the entity is required to withhold 15% of dividend tax. It is also necessary to file for dividend tax return and the dividend tax must be paid within one month after the dividend has been decided (made available).
23. Consider the distribution test
It should be taken into account that prior to the distribution of dividend, a distribution test must be conducted in which the Management Board assess the liquidity, solvability and profitability of the BV or NV in order to determine that the entity is still able to pay its due after the dividend distribution. No compliance to the distribution test may result in some serious consequences.
24. What will you do with your pension?
Pension in your own management is no longer there. Do you already know what you are going to do with your pension? Have you opted for freezing, tax-friendly redemption or converting it into an old-age obligation? If you have chosen for redemption, you must settle the accrued pension in one go with the Tax and Customs Administration.
As soon as the buyout has taken place, the payroll tax return must be made and this tax is due for payment, even if you agree with your BV that the money will only be paid out later. The fact that you only have the money later does not make any difference for the taxation. This also applies in the situation where you agree with your BV that the net lump sum will remain due to you as a director.
TIPS FOR EMPLOYER / EMPLOYEE
25. Adjust your payroll administration
As of the first January 2018, an entrepreneur will be faced with labor cost benefit (LKV). The LKV replaces the system of premium discounts. The transition to the labor cost benefit requires adjustments to your payroll administration.
Please be aware of that the LKV may not be deducted from the payroll taxes, as you were used to with the premium discounts system. You receive the LKV once a year afterwards. This means that in 2018 you will pay more in the payroll tax return because you are no longer able to deduct premium discounts from the payroll taxes to be paid. You will receive the LKV in 2019. You can, under certain conditions, make use of the transitional law for employees for whom you apply a premium discount in the latest tax return for the year of 2017. You have until 1 May 2018 at the latest to carry out the required actions, eventually by correction messages, in order to be eligible for the transitional law.
You can already see which groups of employees will be eligible for LKV and identify for which employees you need to take action to secure transitional law for the LKV. Also, you can already assess what changes are needed in your administration to implement the LKV.
26. Calculate your free space
You are required to calculate the total taxable wages of your employees for the current year at the end of this year. Based on the taxable wages, you calculate the free space and examine whether you have exceeded the free space. The free space allowance is 1.2% of the total taxable wages of your employees. In case you exceeded this amount, there will be a payable 80% final levy. On the other hand, if there is free space left, it is advisable to use it this year since transferring the surplus of free space to next year is not possible.
27. Transition fee will increase
An increasing transitional compensation on dismissal will soon occur. You will owe a maximum of €79.000 instead of €77.000 on the first of January if you dismiss an employee.
There will be a slightly compensation in the transition payment next year. If it concerns a transitional payment due upon dismissal of a long-term incapacitated employee, this compensation will take place. There is also no transition allowance for dismissal for economic reasons if a collective labor agreement applies. Furthermore, the new cabinet is working on a proposal for compensation of the transition payment if you liquidate your company due to retirement or because of illness.
28. Final VAT tax return
In the last VAT return of the current year you can include numbers of adjustments over the past calendar year. Which adjustments can be discussed?
• Correction of VAT tax for private use of a car;
• Correction of private use of property;
• Correction in the company canteen scheme;
• Other correction to the deduction of input tax on benefits in kind to staff and business gifts;
• Revision of VAT tax on investments deducted in previous years.
29. Use the supplement declaration
Have you found out that in the past five years the VAT in the VAT tax return differs from the current data? Then you are obliged to report this to the Tax and Customs Administration by a supplement declaration. Failure to correct these inaccuracies brings along a of risk tax interest and a double fine namely, a fine for failing to make a timely tax return and for making an incorrect tax return.
If the amount difference does not exceed €1.000, you can process this amount in the next VAT tax return.
30. End of agricultural regulation
The agricultural regulation will be abolished on the first of January 2018. It is recommended to take an administrative changeover into account. If this influences your company, you should examine the consequences and perhaps limit the possible adverse tax consequences by already implementing the normal VAT procedure.
31. Request VAT return of uncollectible receivables
If it happens that you are dealing with defaulters and you are unable to collect your receivables? Then you may claim the paid VAT back. This claim should be uncollectable at least one year after the expiry of final payment date which is agreed between you and your customer. If there is no payment term agreed, then the statutory payment term of thirty days after receipt of the invoice by your customer will apply.
Map the defaulters and keep an eye on the deadlines
32. Report ending of tax group for the VAT as soon as possible
If you no longer fulfill the conditions for the existence of a tax group for VAT, the joint liability for VAT debts of all companies within the tax group will continue for as long as the tax group exist.
The tax group will not be terminated retroactively, so it is essential that you notify the Tax Customs and Authorities as soon as possible in writing that the tax group must be broken.
Even if a part of the tax group is dissolved, you are still required to report this to the Tax Customs and Authorities.
TIPS FOR ALL TAXPAYERS
33. Avoid high tax levy in box 3
Do you expect a high levy in box 3? Try to avoid these high levies by lowering your assets in box 3. The amount of your assets on the first of January is decisive for the taxation. You can, for example, pay your tax assessments before that date, make a donation or place your assets in a B.V..
34. More tax-free allowance in box 3
In 2018, the tax-free allowance will amount to €30.000 per taxpayer (for partners in total €60.000)
35. Pre-pay mortgage interest
It may be advantageous to pre-pay your mortgage interest of 2018 in 2017. This may reduce your potential box 3 tax. In addition, you can still use the high mortgage interest deduction. The mortgage interest deduction will decrease.
36. Donate to your children free of tax
You can donate tax-advantageously to your children between the ages of eighteen and forty and choose tax-exempt from the following donations:
• A donation of €25.526. Your child is free to decide what to do with the money.
• A donation of €53.176. This donation must be used by your child for his or her study.
• A donation of €100.000. This donation must be used by the child for purchasing an owner-occupied home.
Your child can use one of these increased exemptions only once in their lives. So you either opt for €25.526 or €53.176 or €100.000.
UPCOMING TAX CHANGES
37. More favorable income tax rates
The income tax will be a two tax bracket system in 2019 with a basic rate of 36.93% and a top rate of 49.5%. A lower income tax rate does have a downside. The deductible items will be worth less, which means that your possible refund will be lower.
Deductions in income tax may soon only be deducted at the rate in the first bracket.
38. Dividend payment will be taxed higher
If you are considering a dividend payment, it is advisable to do it no later than 2019, as the rate in box 2 is going to increase in steps from 25% to 27.3% in 2020 and to 28.5% in 2021.
39. Mortgage interest deduction decreased
From January the 1st, the rate of the mortgage interest deduction will be reduced annually by 3% to the basic rate. As a compensation for the accelerated reduction of mortgage interest deduction, the notional rental value (in Dutch eigenwoningforfait) is reduced by 0.15%. The ‘no or limited owner-occupied home debt’ scheme will also he phased out over the next twenty years.
40. Favorable rates in corporation tax
In 2019, the corporate tax rates will be reduced by 1%, by another 1.5% in 2020 and additional 1.5% in 2021. In 2021 the rates in corporate tax will be 16% and 21%.
From 2018, the cabinet had announced a step-by-step extension of the first corporate tax bracket of €200.000 to €350.000. This is no longer applicable. Please bear in mind that the bracket limit will also be €200.000 after 2017.
41. Interest deduction will be limited
Does your B.V. have (group) loans? Please note that you may be faced with interest deduction restrictions in corporation tax. As of January the 1st, interest is no longer deductible if the amount of payable and receivable interest exceeds 30% of the gross profit. Also some existing specific interest deduction restrictions are abolished.
Check whether the interest deduction restrictions affect you. You can also check whether it is possible to work with your own capital if borrowed capital proves to be disadvantageous for tax purposes.
42. Loss settlement limited
The forward loss settlement in corporation tax will be limited from nine to six years on the first on January 2019.
43. Change of amortization on property
You can amortize your property. For the amortization, it is important to determine the use of the property. If you use a part of your property for your company, you can only amortize that part. If you use the entire building for your company, you can amortize the entire building.
If your property is in use, you may amortize the property in the corporation tax to 50% of the real-property value, the so-called bottom value. From January the 1st, a bottom value of 100% of the real-property value will apply.
44. End of dividend tax
You do not have to worry about dividend tax as of the first of January 2019, because it will lapse. The dividend payments done by the B.V. are therefore free of dividend tax and the administrative work surrounding them.
45. Withholding tax on royalties and interest
With the end of dividend tax, a withholding tax will be introduced on royalties and interest. From the first of January 2019, this withholding tax on outgoing financial flows to countries with very low taxes. The introduction of this withholding tax is intended to prevent the so-called letterbox companies.
46. Investing in real estate unattractive
Investment institutions may no longer invest directly in real estate which is in connection with the abolition of the dividend tax as of the first of January 2019. Real estate funds and investors should check to what extent these fiscal consequences attach to this matter.
47. Review your prices involving the VAT rate of 6%
The reduced VAT rate of 6% will increase to 9% from the first of January 2019. Due to this increase, the prices of basic necessities and food may rise. Buying groceries may become more expensive. The increase also include sport activities and recreation. As an entrepreneur, you can review your prices to determine the influence of the increase of the VAT rate. If you, as an entrepreneur, can not raise your prices, your profit will be pushed down due to the higher VAT payment.