Year-end tips 2019
Tips for BV/IB entrepreneurs
1. Deduct your business expenses
You can deduct costs that are necessary for running your business from your profit. These costs are deductible from your income tax and corporation tax.
Check your administration to see if you can label your expenses incurred in 2019 as business expenses. Also make sure you keep your receipts for those costs.
You can also deduct the business costs you have incurred in the preliminary phase of your business from your profit. This includes things like the costs you had to incur to explore the market and receive advice. Map these costs as well.
2. Consider deferral of profit for lower tax rate
At the end of the year, you will have more clarity about your profit position. This means you can already see which tax rate might be applicable. Is your profit for corporation tax close to the limit of € 200,000? Or will this be taxed in the highest tax bracket? Then try to reduce your profits by, for instance, incurring certain costs in 2019 instead of 2020, such as maintenance costs.
Next year, you pay 16.5% corporation tax on your profit up to € 200,000 instead of the 19% you pay now. In 2021 this will be further reduced to 15%. For profits above € 200.000, the rate remains at 25%. See if you can respond to that.
3. Create a reinvestment reserve
Check whether you have sold an asset this year and realised a book profit with this. You can then postpone the taxation of the book profit by reserving it in a reinvestment reserve. You do need to have replacement intention for this. The reinvestment period is a maximum of three years after the year in which you sold the asset. Are you investing in another asset within this period? If you meet the conditions, you can deduct the reinvestment reserve from the purchase price of the new asset.
4. Organise your administration
Check your administration and assess whether you comply with the administration rules of the tax office. You are obliged to keep your administration for 7 years. If the declaration is deferred, this period shall be extended by the extension granted. Data on real estate, electronic services, telecommunications services and radio and television broadcasting services must be kept for 10 years. Check if you can get rid of your administration for 2012 and prior years after 31 December 2019.
You can conclude written agreements with the tax office about shorter retention periods. The basic data from your administration, such as the accounts receivable and accounts payable administration, the purchase and sales administration and the general ledger, must always be kept for 7 years. For the other data, you can conclude agreements about shorter retention periods.
You can also make agreements about the form in which you store the data (digital or on paper), as well as the level of detail (e.g. daily statements or checkout slips).
5. Apply the small-scale investment deduction
Have you purchased new assets or are you planning to? Under certain conditions, you may be eligible for an extra deduction, the small-scale investment deduction. In order to qualify for the small-scale investment deduction, you must invest between € 2,301 and € 318,449 in business assets for your company in 2019.
Check whether you still have old investments for which you have not claimed the small-scale investment deduction. You can also request the tax office to apply for the small-scale investment deduction for these old investments within 5 years.
Have you made large investments in 2019 and are you close to exceeding the maximum amount of € 318,449? Then check if you can postpone your investments until 2020. This will prevent your right to investment deduction from expiring.
6. Make use of the investment facilities
If you invest in an environmentally friendly or energy-efficient way, you may be able to make use of fiscal investment facilities such as the energy investment allowance (EIA), the environmental investment allowance (MIA) or depreciation-at-will of environmental assets (Vamil). These facilities reduce your profits. The EIA provides you with a deduction of 45%. The MIA provides a deduction of 13.5%, 27% or 36%. With Vamil, you can write off an investment at any time. For investments from 2011 onwards, depreciation-at-will is limited to 75%. Check whether you meet the conditions and are eligible for the EIA, MIA and Vamil.
If you want to claim EIA, MIA or Vamil, you must report your investment to RVO.nl within 3 months after you have entered into the investment obligation. Entering into an obligation is, for example, the signing of a purchase agreement. If you are late, you will no longer be eligible for the deduction!
In addition to the EIA or the MIA/Vamil, you can still also apply the small-scale investment deduction.
7. Watch out for the divestiture addition
Are you planning to sell an asset? Then check when this asset was purchased. If you have applied the investment deduction for this asset less than five years ago, you may have to repay part of that deduction (divestiture addition).
Assess whether the five-year period has already expired in 2019. If not, postpone the sale of the asset if possible.
8. Apply for WBSO
Is your company involved in research and development? You may be able to apply for WBSO for the development of a product, a production process, software and for conducting technical-scientific research for:
- your own and/or your employees’ R&D activities;
- costs and expenses you incur for carrying out your own R&D project.
If you don’t have any personnel, and you spend at least 500 hours a year on your own development or research (e.g. one-man business), you will receive a fixed deduction. If you do have personnel and you pay payroll tax for your employees who carry out your development or research, part of the (wage) costs and expenses of your R&D project will be reimbursed via your tax return. As a result, your company pays less payroll tax.
Tips for IB entrepreneurs (income tax entrepreneurs)
9. Check your hours
If you want to take advantage of a number of attractive entrepreneurial facilities, such as the self-employment allowance, the start-up allowance for new entrepreneurs and a cooperation allowance for your partner, then you will have to meet the hour criterion. In other words, you have to spend on your business at least 1,225 hours a year. Even if you start your business during the year, you still have to spend at least 1,225 hours on your business in order to be eligible for the tax benefits. Check whether you have spent enough hours on your business.
10. Reduce your profits with the self-employed deduction
Do you meet the hour criterion? Then you may be able to reduce your taxable profit with the self-employed allowance of € 7,280. If your profit in 2019 is too low to use the self-employed allowance in full, the amount of the self-employed allowance that you have not used will be set off against the profits in the next 9 years, provided that the profit in those years is higher than the self-employed allowance in those years.
Please note that as of 1 January 2020, self-employed allowance will be lower and will amount to € 7,030.
11. Create a retirement reserve
You can reduce your profits by adding a portion of your business profits to your retirement reserve within you company. This is under the condition that you meet the hour criterion. The addition to your retirement reserve amounts to 9.44% of the profit, with a maximum of € 8,999 in 2019. By doing this, you postpone the taxation of that part of the profit. This provides you with a short-term tax benefit.
Ultimately, this amount will be taxed in the future. Take this into account.
12. Remunerating your collaborating partner
Does your partner help out in your business? Check the fiscal possibilities for remunerating your collaborating partner.
- You pay your partner less than € 5,000? You may be eligible for cooperation allowance for your partner if you meet the hour criterion. You cannot deduct the amount actually paid to your partner. Your partner does not pay any income tax on this labour remuneration. However, this does require that your partner works at least 525 hours in your business.
- You pay your partner € 5,000 or more? You can deduct this remuneration from your profits. However, your partner now pays income tax and social security contributions on this labour remuneration.
Do you make a lot of profit? Then – under conditions – it can be beneficial to run the business together (male-female partnership). The profit is then shared between you and your partner, allowing you both to take full advantage of the lower tax brackets and the tax credits. How you distribute the profit does need to be properly substantiated in for business reasons.
13. Peaks and troughs in your profits? Averaging offers a solution
Are you faced with peaks and troughs in your profits? Then the so called averaging ruling can offer a solution. Check whether you have had strongly fluctuating income in box 1 of the income tax in recent years. If so, you have probably paid more tax than if the income had been spread more evenly. By using the average income over a period of three consecutive calendar years, averaging can in some cases lead to a refund of overpaid tax due to a recalculation of the amount of taxes due. There is a threshold of € 545. Anything above will be refunded to you.
You must submit a written request for averaging to the Tax office yourself. However, you must submit your request for averaging within 36 months after all assessments for the years belonging to your averaging period have been irrevocably established.
Tips for BV (private limited company)
14. Creating or disbanding a fiscal unit
Check whether it is possible for your BV and its subsidiary/subsidiaries to form a fiscal unity. With a fiscal unity, the results of the subsidiary/subsidiaries are allocated to the BV. The subsidiary does not cease to exist, not even fiscally, but is no longer subject to independent taxation.
One advantage of a fiscal unity is that you can set off the losses of one company against the profits of another company that is part of the same fiscal unity.
Check whether you meet the conditions for a fiscal unit and then submit a written request for the formation of a fiscal unity to the tax office.
The profits of the companies in the fiscal unity are accumulated. Therefore, you should be aware that if you make more than € 200,000 in profits within the fiscal unity, you can only make use of the 16.5% step-up rate (2020) once. (Accumulated) profits in excess of € 200,000 are taxed at 25%.
Therefore, check whether it might be more beneficial for you to disband your fiscal unity at the end of 2019, so that you can make use of the low step-up rate in all BV’s.
However, it must be verified that the disbanding of the fiscal unity does not give rise to tax penalty provisions. Consult your advisor about this.
15. Use the innovation box
Are you engaged in innovative research? Then you might be able to put all the profits you make from innovative activities into the innovation box. The corporation tax rate for these profits is 7%.
Are you incurring losses with your innovative activities? Then these losses are deductible and can be offset against the regular corporation tax rate. These losses are therefore not covered by the lower rate of the innovation box.
Are you expecting growth in the coming years? In that case, you can apply an even more favourable corporation tax rate of 9% as of 2021.
16. Watch out for taxable losses
The loss of your BV will first be off set against the profit of the previous year. Only after that you set off the loss against the profits of future years up to 6 years.
A settlement period of 9 years applies to your old losses from the years before 2019. In order to avoid adverse consequences, the tax office will set off your loss from 2019 (for which a period of only 6 years applies) earlier than losses from 2017 and 2018.
17. Deduct donations
You can deduct donations to (Dutch) charitable institutions (ANBIs) and support foundations (SBBI) from your profits. The deduction amounts to 50% of the profit, with a limit of € 100,000. You must be able to prove the donations in writing.
You are eligible for an extra donation deduction for a donation to an ANBI that has been designated as a cultural institution. You may then increase the deduction from your profit by 50%. However, this increase is limited to € 2,500.
Tips for dga (director and major shareholder, or DMS)
18. Check loan with your BV
Have you borrowed money from your BV? Check this loan, because the conditions of the loan between you and the BV must be business related. These are the same conditions that your BV would impose on a loan between the BV and a third party. If the loan is not business related, you run the risk that the tax office will see this loan as a distribution of the BV to you as DMS.
You can submit your loan agreement to the tax office, who will check if it is business-like and record this in writing.
Already take into account the proposed legislation whereby in 2022, you will be faced with a tax levy in box 2 on debts to your BV that exceed € 500,000. Loans used by the DMS for the purchase of a home are excluded from this levy.
It is therefore wise to take a critical look at the debts to your BV in the coming period to ensure they do not increase unnecessarily and, if possible, to look at whether they can be repaid.
19. Pay dividends
It is fiscally attractive to have your BV pay out a dividend in 2019. You will have to pay income tax on this in box 2 at a rate of 25%. If you postpone the dividend payment, you may be faced with a higher box 2 income tax rate of 26.25% in 2020.
Partners with no income cannot make optimal use of their tax credits. If you pay out a dividend, you can also attribute this to your partner when filing your income tax returns. This allocation may help you make better use of the tax credits and cause you to collectively owe less tax.
20. Voluntary disclosure scheme
Make use of the voluntary disclosure scheme in 2019. You can then still pass on your substantial interest income to the Tax office without penalty. If you wait until 2020, it will unfortunately be too late and you risk a fine.
21. Customary wage high enough?
Check whether you have specified the correct amount for the customary wage. The customary wage must be at least the highest amount of the following amounts:
- 75% of the wage for the most comparable employment;
- The highest wages of the employees employed by the body and associated bodies;
- € 45,000.
If you are unable to obtain the above amounts, you can present your situation to the Tax office. If, for example, you can demonstrate that you only perform very limited activities (only management work, for instance), the customary wage can be set at € 5,000 or lower.
For DMSs of start-ups who perform research and development work and have a WBSO declaration, the customary wage for the first three years is the statutory minimum wage.
Tips for employers/employees
22. Pay attention to the additional taxable benefit for company car
If you make a car available to your employee, you will have to take into account two additional taxable benefit rates for private use in 2019: 4% and 22%. In 2019, only certain zero-emission cars are included in the 4% rate. The reduced rate of 4% applies to hydrogen-powered cars. For zero-emission cars that do not run on hydrogen, the 4% addition only applies up to a list value of € 50,000.
The additional taxable benefit percentage for private use of an electric company car will increase as of 1 January 2020. The addition percentage of 4% will go up to 8%. This 8% applies up to a list value of €45,000. Above this amount, the ‘regular’ rate of 22% applies. Keep this in mind when processing the additional taxable benefit of the company car in your administration next year.
23. Ever thought about a company bicycle?
Discover the possibilities of offering your employees a company bicycle. The company bicycle may become attractive next year, because you no longer need to keep track of private use. You only take into account a standard additional taxable benefit of 7% of the list value.
24. Think about rewards in free space
Have you thought about how you are going to use the free space in the work-related expenses scheme? After all, there will be an increase in free space next year. A percentage of 1.7 is applied to the first € 400,000 of the wage bill. For the excess, there is still a percentage of 1.2. This means that you can provide more compensations and benefits to your employees without being taxed, insofar as these do not exceed the free space. You can already start mapping out how you are going to implement this.
Does the amount of the compensations exceed the limit of the free space? Then you have to pay 80% tax on that extra amount.
25. Take advantage of labour cost benefits
Are you hiring older employees or employees with an occupational disability? Check whether you are eligible for the labour cost benefit. If you meet certain conditions, you can receive an annual compensation.
For older employees (56 years and older) and occupationally disabled employees, the maximum labour cost benefit per employee per calendar year is € 3.05 per hour and € 6,000 per year. For the job agreement (banenafspraak) and training impediment group, the maximum labour cost benefit per employee per calendar year is € 1.01 per hour and € 2,000 per year.
In order to apply for a labour cost benefit, you need a target group statement Wage cost benefit.
26. Finish your 2019 payroll administration
At the end of this year, you will have to finish your payroll administration. You can pay attention to the following:
- Are all employee compensations and benefits correctly included?
- Do you have a copy of each employee’s identification document in your records?
If you do not know how to correctly determine an employee’s identity, apply the anonymous rate. Otherwise, you risk a fine.
Tips for VAT
27. Old or new small business scheme (KOR)?
Check whether the new small business scheme (KOR) is attractive for you. If so, you opt for a VAT exemption if you are established in the Netherlands and do not exceed € 20,000 in turnover in a calendar year. To register for the new KOR, the form should have been submitted to the Tax office by 20 November 2019 at the latest. However, you can still register after 20 November 2019. The starting date will then be postponed to the next period. This means you will participate from 1 April 2020.
Choosing the new KOR means:
- not filing VAT returns;
- not charging VAT or stating it on invoices;
- any VAT paid may not be deducted.
The new scheme will also apply to legal entities such as BVs, foundations and associations.
Do you expect to make large investments in the near future? Then applying for the new small business scheme may not be interesting.
28. Correct your VAT return
With your last VAT return of the year (fourth quarter or the month of December), you have the opportunity to include a number of corrections for the past calendar year. What corrections can be made?
- correction of VAT for private use of passenger cars;
- correction for private use of a home;
- corrections under the company canteen scheme;
- other corrections of the deduction of input tax on employee benefits and business gifts;
- revision of VAT on capital assets deducted in previous years.
Check your administration to see if you need to apply any corrections.
29. Use the supplementary declaration
If you find out that you have declared too much or too little VAT in your VAT return in the past five years, you are obliged to report this to the tax office by means of a supplementary declaration. If you do not correct these inaccuracies, you not only risk tax interest but also a double fine, namely for not filing a tax return on time and for filing an incorrect tax return.
If you find out that you are receiving or have to pay back € 1,000 or less, then you may process this in your next tax return instead.
30. Report disbanding a fiscal unit for VAT as soon as possible
If you no longer meet the conditions for the existence of a fiscal unity for VAT, the joint and several liability for the VAT debts of all businesses within the fiscal unity continues for as long as the fiscal unity exists.
The fiscal unity cannot be terminated retroactively, so it is crucial that you notify the tax office that the fiscal unity must be disbanded in writing as soon as possible.
Even if part of the fiscal unity is disbanded, you must report this to the tax office.
31. Be aware of new VAT number
Do you run a sole proprietorship? Then you will receive a new VAT identification number from the tax office. This new number is no longer linked to your BSN number. As of 1 January 2020, this new number must be stated on things like invoices, stationery and the website. You must also use it for intra-Community transactions (intra-EU trade) and other transactions based on EU regulations.
The old number will only be used for communication with the Tax office. From 2020, this old number will be called the VAT number (omzetbelastingnummer).
32. Recover VAT on uncollectable invoices
Check your administration to see if you have invoices that you can qualify as uncollectable. This is because you can reclaim the VAT on these invoices from the tax office.
Tips for your own home
33. Pay mortgage interest in advance
Since the mortgage interest deduction rate decreases every year, it can be wise to pay mortgage interest in advance. This way, you can still benefit from the higher deduction rate of 49% this year. In 2020, the mortgage interest deduction rate will be gradually decreased further if the income exceeds € 68,507. You can then deduct the mortgage interest at a maximum of 46%.
You can pay for up to 6 months of the following year in advance. Longer than that is not allowed. If you do, the tax office will refuse the interest paid in advance as a deductible item.
34. Lend to your children for their own home
You can give your children a loan that they can use for their own home. This allows you to benefit from the yield and your children can claim mortgage interest deduction under certain conditions.
Your children must submit the details of the loan to the Tax office via their income tax return. Otherwise, they are not entitled to the interest deduction.
35. Donate to your children for their own home
Is your son or daughter planning to buy a house or renovate their house? Then you can give your children a maximum of € 102,010 tax-free for this purpose. Your son or daughter must be between the ages of 18 and 40 at the time of the donation.
36. Wait with the sale of your property
Is your property for sale? Make sure that a possible sale does not take place until after 1 January 2020. This way, you prevent the sale from being taxed in box 3.
In addition to the changes already described in the year-end tips above, you can expect the following tax changes.
Changes in income tax
1. Two-bracket system in 2020
As of 1 January 2020, there will be a basic rate of 37.35% and a top rate of 49.5% in income tax. In 2021, the basic rate will be reduced to 37.10%.
2. Rate for deductions
In 2020, a deduction rate of 46% will apply for the designated deductible costs for income tax.
3. Additional increase of general tax credit
The general tax credit will be increased by an additional € 78 in 2020 and by an additional € 2 in 2021 on top of the increase already planned. This puts the general tax credit at € 2,711 in 2020. In 2021, the general tax credit will amount to € 2,801.
4. Additional increase of labour tax credit
The labour tax credit will be increased by a total of € 285 over a process that is spread into three steps in 2020, 2021 and 2022. In 2020, the maximum discount will increase from € 3,399 to € 3,819. In 2021, the labour discount will increase further to € 4,143.
5. End of educational expenses deduction
The tax deduction of educational expenses for income tax is being abolished. This will be replaced by an individual learning account. This will be included in a statutory regulation, the STAP budget subsidy scheme (Stimulans van de Arbeidsmarktpositie or Stimulating the Labour Market Position) for natural persons with a link to the Dutch labour market.
Since it has already been announced that having the STAP budget subsidy scheme enter into force on 1 January 2020 is not feasible, the taxpayer can still make use of the tax deduction for educational expenses in 2020.
Changes for VAT
6. Simplified VAT rules at EU level
From 1 January 2020, simplified and harmonised VAT rules will apply to stocks on call and to proof of intra-Community transport of goods, the VAT identification number as a material condition for application of the VAT zero rate and a specific scheme for chain transactions. This has consequences for entrepreneurs who supply goods to customers in other EU member states.
7. Reduced VAT rate for electronic publications
The reduced VAT rate will be extended for the supply or lending of electronic publications from 1 January 2020. Therefore, for VAT purposes, it will no longer matter whether, for example, a book is delivered on paper or on a CD (physical carrier) or whether the digitised content of a book is offered by electronic means. This eliminates the current unequal treatment.
8. Reduced VAT rate for news websites
As of 1 January 2020, the reduced VAT rate of 9% will also be applied to the provision of access to news websites such as those of newspapers, weeklies and magazines. However, this is subject to the condition that the electronic publications and the news websites may not consist exclusively or mainly of advertising material or of video content or listenable music.
Changes to the work-related expenses scheme
9. Tax-free reimbursement of VOG application costs
As of 1 January 2020, the costs of applying for a Certificate of Good Behaviour (VOG) will be covered by the specific exemption from the work-related expenses scheme. This means employers may reimburse their employees for the costs of applying for a VOG tax-free without having to utilise their free space for this.
10. Extension of deadline for declaration and payment of final levy
From 2020, employers will be given more time and must declare the final levy due in connection with the exceeding of the free space of a calendar year no later than at the same time as the return for the second return period of the following calendar year.
11. Determining the value of your own company’s products
As of 2020, the value of your company’s own products will be determined on the basis of their fair market value instead of the amount that third parties have to pay for the products.