The end of 2020 is drawing near. So it’s time for our traditional end-of-year tips. We’ve listed a few of them below.
In our tips for 2019, we discussed matters that were still in the pipeline. Those matters have not yet been finalised. A bill concerning excessive borrowing by directors and major shareholders is now before Parliament. The amendment to Box 3 (income from savings and investments) has been put on the back burner.
Topics
We will now discuss the following topics.
- Adjust your (financial) plans
- Donate
- Business succession facility
- Working expenses scheme
- Fixed (travel) expense allowances
- Higher stamp duty rate
- Corporation tax rate
- Coronavirus reserve
- Fiscal unit
- Income tax rate
- End of the life-course savings scheme
- Employment-related investment allowance (BIK)
- Car
Keep track of your (financial) plans
Due to the coronavirus crisis, it is now more important than ever that (financial) plans are up to date. However difficult it may be to draw up these plans, particularly at this time. To what extent have plans made in the past come to fruition? What is your financial forecast for the coming years?
Business owners who have made use of the COVID-19 support schemes (NOW, TVL) need to assess how the final settlement under those schemes will pan out.
If you are granted a special deferral of tax payments, please bear in mind that you will need to start making repayments from 1 July 2021 (see also our note (on this subject).
Donate
The end of the year is always a good time to consider whether it would be wise to make another donation. You can find the rates and allowances in this overview. The figures for 2021 are not yet known. Due to inflation, they will be slightly higher than those for 2020.
Business succession facility
There has been a bit (more) of a stir recently regarding the largest exemption under inheritance and gift tax. This is the business succession scheme (BOF). When business assets are acquired, the first €1,102,209 (2020) is fully exempt. Of the amount exceeding this, 83% is exempt.
This exemption is, however, subject to certain conditions. Inheritance or gift tax must still be paid if the business is not continued during the five years following the takeover.
Years ago, the court ruled that this exemption disproportionately favours business assets over investment assets. However, the legislature has still not amended the scheme. Nor is this amendment included in the tax plans for 2021. But it is once again being discussed in political circles in The Hague.
KPMG Meijburg concludes in a recent research that the Dutch business succession scheme is broad in scope, but that the strict conditions attached to its application are too restrictive. To this end, the Dutch scheme is compared with schemes in other European countries.
Working expenses scheme
We have already drawn employers’ attention to this ruled: optimise the work-related expenses scheme. For 2020, however, the tax-free allowance has been increased as a result of the coronavirus crisis (3% on the first €400,000 of the wage bill and, above that, 1.2% of the wage bill). However, the coronavirus crisis may also have led to other and/or additional allowances and benefits in kind being provided to employees.
Fixed (travel) expense allowances
Due to the coronavirus crisis, many employees are working from home. Tax-free fixed (travel) expense allowances are often still paid on the basis of an approval. This means that the coronavirus crisis (working from home, different spending patterns) may be disregarded when justifying the expense allowance.
This approval expires on 1 January 2021. Employers would therefore be well advised to check whether these allowances can still be paid tax-free in 2021. See also our article on this subject.
Higher stamp duty rate
The rate of transfer tax will be increased from 6% to 8% with effect from 1 January 2021. It goes without saying that it may be worthwhile to ensure that any planned property transactions take place before the end of 2020.
The rate for residential properties remains at 2%. However, the application of this rate is restricted to the acquisition of residential properties by natural persons who make the property their main residence. From 2021, transfer tax at the rate of 8% will be payable on the acquisition of a second home, holiday home or investment property. Here too, it may be worth carrying out a planned transaction before the end of 2020.
A first-time buyer exemption is to be introduced for those entering the property market for the first time. If market conditions allow, it would be better for them to wait until 2021 to purchase their home.
We have summarised the changes in a note.
Corporation tax rate
The reduction in the corporation tax rate (to 21.7%) will not go ahead. This rate will remain 25%. Nevertheless, there has been a reduction in rates.
The rate in this tax bracket is set to fall from 16.5% in 2020 to 15% from 2021 onwards. And this tax bracket is being significantly increased. In 2020, the lower rate will still be calculated on the first €200,000 of the taxable amount. In 20201, this will rise to €245,000 and, from 2022, to €395,000.
This makes it worthwhile, as far as possible, to bring forward costs and defer revenue.
Coronavirus reserve
The COVID-19 reserve has been introduced as part of the measures to combat the financial impact of the COVID-19 crisis. This reserve allows losses incurred in 2020 as a result of the COVID-19 crisis to be set off against the 2019 corporation tax assessment.
Fiscal unit
The lower tax rate and the higher tax bracket threshold may make it more advantageous to dissolve a fiscal unity. If you wish to do so with effect from 1 January 2021, the Tax and Customs Administration must have received your application before that date.
REMEMBER: Dissolving a fiscal unit may have tax implications.
Income tax rate
Following the switch to the two-bracket system in 2020, the income tax rate in Box 1 (income from employment and property) will not change significantly. In 2021, various allowances will be taken into account at a rate that is once again slightly lower.
The rate in Box 2 (income from a substantial interest) will rise from 26.25% in 2020 to 26,9% with effect from 2021. It may therefore be worth having your private limited company pay out a dividend before the end of 2020.
In box 3 (income from savings and investments) too, the rate will be increased, from 30% to 31%. This increase will fund the rise in the tax-free allowance from €30,846 to €50,000 (per tax partner). Anyone wishing to avoid the extremely high tax in box 3 – which relates to returns on savings accounts – is still advised to use the Savings-BV.
End of the life-course savings scheme
2021 is the final year of the life-course savings scheme. The 2021 tax plans propose bringing the end date forward by two months, from 31 December 2021 to 1 November 2021.
To the extent that the life-course savings balance has not been paid out or converted by 1 November 2021, it will be taxed at that time. That payroll tax is paid by the institution administering the scheme and may be set off against the life-course savings balance.
Naturally, the balance released from the life-course savings scheme must also be included in the 2021 income tax return, and the higher income may have implications for various income-related schemes.
Employment-related investment allowance (BIK)
The government is introducing this scheme to stimulate economic recovery through investment. If the scheme is implemented, the tax relief can be claimed for investments made from 1 October 2020 onwards.
We describe the scheme in our article BIK proposal submitted. However, we suspect that the bill’s passage through Parliament is still going to be a bit of a struggle.
Car
The only change to the additional tax liability rules for company cars concerns fully electric vehicles fitted with integrated solar panels (with a capacity of at least 1 kilowatt-peak and a qualifying battery). For such a car, the additional tax liability amounts to 12% of the full list price (just as for hydrogen-powered electric cars).
If you’re planning to drive a fully electric car, it’s worth doing so before the end of 2020. For electric cars first registered in 2020, the additional tax liability is 8% of the list price up to €45,000. From 2021, this will be: 12% over a maximum of € 40.000 of the catalogue value. The additional tax percentage remains unchanged for the 60 months following the car’s registration.
For cars that are not fully electric, the additional tax liability remains at 22%. PLEASE NOTE: for cars purchased before 2017, the additional tax liability does not change to 22% after 60 months, but to 25%.
A subsidy scheme was introduced in 2020 for private individuals purchasing an electric car. The budget for this subsidy scheme for new cars has already been fully allocated (although there is still funding available in the subsidy budget for the purchase of a second-hand electric car). After 31 October 2020, applications will no longer be carried over to the 2021 budget (see our article Amendments to the subsidy scheme for electric passenger cars). It would be wise to postpone the purchase until 2021.
VAT
The changes to the VAT rules for e-commerce (which are relevant to online shops, amongst others) announced for 1 January 2021 have been postponed until 1 July 2021. And it is likely that their introduction in the Netherlands will take a little longer still. See also our memo VAT on the supply of goods to consumers abroad.
Brexit is also of significance to businesses that import goods from or export goods to the United Kingdom. The consequences of this will take effect from 1 January 2021.