The coronavirus crisis is no reason to postpone the bill on excessive borrowing by managing directors who are major shareholders (DGAs). This is what State Secretary for Finance Vijlbrief writes in a letter to the Chamber.
The House has now, however, been asked to defer the bill. The Rutte IV Government’s Coalition Agreement states that the scheme will be introduced, on the understanding that the threshold amount of €500,000 will be raised to €700,000.
Concerns
The House is concerned as to whether the directors and major shareholders affected by the new legislation have sufficient private funds to safeguard the liquidity position of their private limited company(ies).
Vijlbrief states that no tax return data is yet available on the basis of which it is possible to estimate how the number of directors and major shareholders (DGA’s) with debts to their own private limited company(ies) has developed.
It is possible that some of these debts were already repaid in 2019. After all, it was clear at that time that the substantial interest rate would rise from 25% to 26.9%. Directors and major shareholders (DGA’s) anticipated this rate increase by distributing dividends, which were used to repay debts.
During the coronavirus crisis, the Government introduced various support measures aimed at maintaining companies‘ liquidity positions. If directors and major shareholders (DGA’s) lent money to their private limited companies (BV’s) during the coronavirus crisis, this does not mean that more DGA’s will be affected by the bill.
Preparation
Directors and major shareholders still have sufficient time to take the necessary measures in view of the introduction of the new rules. Partly due to the coronavirus crisis, the start date has been postponed by one year. The intention is for the new law to come into force on 1 January 2023. The first reference date will then be 31 December 2023.
The bill affects directors and major shareholders who (whether or not together with related parties) have debts to their private limited company(ies) totalling more than €500,000. Tax-deductible mortgage debt on a principal residence is not taken into account. The amount of debt exceeding €500,000 is deemed excessive and is taxed as a notional benefit arising from a substantial interest in Box 2 under income tax.
See also our article Bill on excessive borrowing from one’s own company tabled.