Although St Nicholas has been away from the country for a while now, the hearts of many tax specialists were still beating with anticipation. After all, the Treasury had promised to publish the “Excessive Borrowing” bill (also known as the “current account measure”) in the fourth quarter of 2019.
Planning Letter
On 12 December 2019, Mr Hoekstra, the Minister for Finance, stated in a planning letter informed the House of Representatives about which documents the House can expect and when. This letter indicates that the Bill on excessive borrowing will not be considered until March 2020.
For the time being, therefore, we will have to make do with the draft bill as it was put out for public consultation online. We describe the draft bill in our article Combating excessive borrowing from own BV.
Notional substantial benefit
The key point is that a holder of a substantial interest who, on 31 December 2022, owes the private limited company more than €500,000 in debts, will be deemed to have received a notional regular substantial interest benefit in respect of the excess amount. Income tax must be paid on this notional benefit in 2022.
It is irrelevant what the debts were used to finance, with the exception of the tax-deductible mortgage on one’s own home. The €500,000 threshold mentioned above may be increased by the amount of the tax-deductible mortgage on one’s own home.
Anticipate
The bill is currently scheduled to come into force on 1 January 2022. At that point, the status of the loans as at 31 December 2022 will need to be assessed (for the first time). There is therefore still time to prepare for the new rules.
Only if the solution involves repaying the loan using an actual dividend might it be advantageous to do so as early as 2019. After all, the substantial interest rate is still 25% in 2019. This rate will be increased to 26.25% in 2020 and to 26.9% in 2021. The uncertainty, of course, lies in whether the bill will pass through parliament.
Please note that the payment of the 2019 dividend will not result in a higher tax liability under Box 3 in the years 2020 to 2022 inclusive.
Box 3
Another bill that is eagerly awaited concerns the announced change to the income tax levied on income from savings and investments (Box 3). According to the schedule, this bill is not due to be tabled in the House of Representatives until June 2020.
We describe the proposed changes to Box 3 in our articles Investors will pay significantly more under the new Box 3 regime and Savings of up to €440,000 are tax-free.