In 2023, we were faced with the rules on excessive borrowing from one’s own private limited company for the first time. It is advisable to check the (expected) level of your debts to your private limited company before the end of 2024 and, if necessary, take steps to prevent an unexpected tax claim.
Lowering the threshold
For 2024, a lower threshold applies under the rules on excessive borrowing from one’s own private limited company. In 2023, the threshold was €700,000 (increased by the tax-deductible mortgage debt on one’s own home). For 2024, a lower threshold of €500,000 applies. Insofar as debts have been reduced to €700,000 as at 31 December 2023, action must be taken again in 2024. The same applies if new debts have been incurred (and/or the current account debt has increased), causing the threshold to be exceeded.
The reduced threshold of €500,000 will also apply in 2024 to debts owed by children (and other close relatives) to the private limited company.
Another point to note is that, under the rules on excessive borrowing, tax-deductible home loan debts incurred with one’s own private limited company after 31 December 2022 will only raise the threshold if a notarial mortgage has been granted to the company.
Rate
If, as a result of the threshold being exceeded, a notional regular benefit in Box 2 is to be assessed, 33% income tax is payable on this amount, provided that only 24.5% is payable on the first €67,000 of the total Box 2 benefit (this €67,000 applies per tax partner).
From 2025, the Box 2 rate will most likely be reduced from 33% to 31% (with the tax bracket threshold remaining unchanged). This will form part of the Government’s tax plans for 2025.
Further information
You can find more information about the rules on excessive borrowing from your own private limited company in our factsheet.