The Financieel Dagblad recently reported that savings interest rates are approaching 0%. This followed ABN Amro’s announcement that it would reduce the interest rate on its instantly accessible savings account to 0.1% (“That’s ten more seconds until zero“). At most other banks, interest rates are not significantly different from those at ABN Amro.
Savings subject to a flat-rate tax
The balance in your savings account is subject to income tax. Your income from savings and investments (Box 3) is determined on a flat-rate basis. This means that you do not pay tax on the interest you actually receive. The tax authorities treat it as if you have achieved a (much) higher return. At least, if you compare the return calculated by the tax authorities with the interest you receive on a bank account.
The balance of your bank accounts on 1 January of each year (the reference date) is decisive for the return subject to tax. Changes to the composition of your assets during the year do not have a direct impact on the tax liability in box 3.
Incidentally, the basis for your income from savings and investments is not limited to funds held in bank accounts. Your securities, your holiday home and other property, for example, are also taxed under Box 3.
Cabinet formation talks
The way in which returns on investments are taxed is likely to be one of the issues under discussion in the coalition talks currently being held by the VVD, CDA, D66 and ChristenUnie. In recent rulings, tax courts have approved the flat-rate method of taxation in box 3. However, it is highly doubtful whether future rulings will also favour the tax authorities. Partly for this reason, it seems likely that tax legislation will be amended in due course. It seems likely that the system will be brought more into line with the returns actually achieved.
Should I put my savings into the private limited company after all?
The coalition talks are not progressing quickly enough to suggest that any changes to the tax regime will come into force before 1 January 2018. This once again raises the question for savers and investors as to whether it makes sense to transfer savings (and, where applicable, other assets taxed under Box 3) into a private limited company.
Incidentally, it is advisable to postpone the final decision on transferring your savings into a private limited company until the end of 2017. You must, of course, have completed this before the reference date (1 January 2018). However, setting up a private limited company does not take long. By the end of the year, it will be clear how income tax for 2018 will be levied. The tax plans for 2018 will be finalised by Parliament in the first half of December 2017.
Of course, the reverse is also possible. As soon as it becomes worthwhile, the savings held in your private limited company can be transferred back to your private assets.
Opinion
What would be best for you? A private limited company or perhaps a (open-ended) mutual fund.
Please contact the advisers to VWGNijhof. We’ll provide you with suitable advice.