For many, the approaching New Year is a reason to take another look at some tax tips and tricks. We keep you up to date with our “end-of-year tips” throughout the year. For those who want to start 2018 with peace of mind regarding their tax affairs, below is a selection of articles, with links to them. Not all of these articles are from 2017. Many of the tips from 2016 are still valid (although the dates will, of course, have shifted by a year).
This year or next year?
Which is more tax-efficient: realising a gain in 2017 or deferring it until 2018? Or should you bring forward an expense (set aside a provision) and recognise it in 2017? Should you enter into an investment commitment in 2017 or just after the turn of the year?
That depends very much on your personal circumstances. By now, it should be fairly easy to predict your income, or your private limited company’s profit, for 2017. For 2018, you’ll need to make an estimate. VWGNijhof will be happy to help you with that.
Predicting what will be beneficial is a bit like reading tea leaves. The recently formed Rutte III Cabinet has outlined the broad outlines of its plans for its term of office in its coalition agreement. These include changes to tax rates. Exactly what these will be will become clear in the coming period.
Brushing losses under the carpet
Losses may be offset against profits within a certain time limit. For losses incurred during the crisis years, this year is likely to be the last opportunity to do so.
If your business’s losses are in danger of vanishing into thin air, there’s often a way round it. We’ll then pull out all the stops with our tax tricks for you.
High profits? Set up a private limited company
If your business is doing really well, it may be financially advantageous to set up a private limited company (BV). You can transfer your entire business into the BV. Alternatively, you could opt for a hybrid structure. VWGNijhof would be happy to help you work out which BV structure suits you best.
Fiscal unit corporation tax shapes or disconnect
Depending on the level of taxable profits of your private limited companies, it may be advantageous to have them taxed separately or, conversely, as a single tax unit. If you wish to dissolve an existing fiscal unity with effect from 1 January 2018, you must submit the relevant application (or have it submitted) before 1 January 2018. If you wish to join a tax group with effect from 1 January 2018, the application must be submitted by 31 March 2018 at the latest.
PLEASE NOTE: There are various complications involved in both dissolving and forming a fiscal unit for corporation tax purposes.
The Rutte III Government has announced that the increase in the corporate tax threshold will not go ahead. It will therefore remain at €200,000. However, the tax rates will be reduced. The lower rate will be reduced from 20% to 16%. The higher rate will be reduced from 25% to 21%.
Apply for a provisional tax assessment in good time
The rules on tax interest are still ridiculous. If you’re owed money by the government, you almost never receive any interest. If you have to pay, the rates applied are 4% and even 8% (in the context of corporation tax). Here too, the same principle applies: the good have to suffer for the bad!
You can avoid paying tax on interest. After all, you do not receive 4% or 8% interest on your savings account.
In that case, you must apply to the tax authorities for a provisional assessment in good time. The consequence, of course, is that you will actually have to pay the tax.
For income tax and corporation tax, the assessment must be issued within 6 months of the end of the financial year. For inheritance tax, it must be issued within 8 months of the date of death.
You may not deduct tax debts in Box 3 (with the exception of inheritance tax). If you wish to avoid paying income tax on a tax debt in box 3, you must actually pay the tax before 1 January. In that case, you must apply for a provisional assessment well before the turn of the year.
Avoiding Box 3: the BV or OFRG in / Why not put your savings into the private limited company after all?
Box 3 has long since ceased to be the ‘fun box’. The Rutte III Government has promised to move away from taxing a (high) flat-rate return. However, the details of how taxation on the actual return will work out have yet to be worked out. For 2018, the flat-rate return will be reduced slightly, but it is still worthwhile to transfer savings (and other low-yield investments) into a private limited company. Or into a Open Fund for General Account (OFGR).
Your assets in Box 3 are not only relevant for income tax purposes. It is also used to assess whether you are entitled to healthcare and/or housing benefit, and to determine the amount of your personal contribution under the Long-Term Care Act (Wlz) and the Social Support Act (Wmo).
Looking for a tax deduction
For private individuals, the options are limited, but they do exist. You can pay your mortgage interest in advance, group your charitable donations together, or pay into an annuity scheme.
Financial planning
Your financial planning is all about your annual income and expenditure. Can you build up your savings? Or do you actually have to dip into them to maintain your standard of living? Can you give the children a bit of extra money? They’re financial support is always welcome, whether or not in a form that fits in with your tax and financial planning home in the town where they are studying.
This plan should be reviewed regularly. After all, you’d prefer not to be caught out by any surprises. Are your personal and financial circumstances still the same? Have the laws and regulations changed? Are your ideas about your (financial) future still up to date?
Part of your financial planning involves the pension provisions you are building up. However, due to all the government measures, we can no longer avoid net pension provisions.
Estate planning
Estate planning focuses on how to pass on your assets to the next generation whilst minimising tax liability. The earlier you start, the more options you have. However, the earlier you start, the more uncertain it is exactly how much of your estate will pass to the next generation upon your death.
Paying interest on acknowledgements of debt
One aspect of your estate planning could be making a gift by way of an acknowledgement of debt. In that case, you must actually pay the interest on the documented debt to your children every year. After your death, your heirs must be able to prove this to the tax authorities. If they are unable to do so, the amounts acknowledged as debt may not be deducted from your estate for the purposes of calculating inheritance tax.
Self-administered pension: last chance to claim a discount of 34.5%
The option to accrue a pension under self-administration was abolished on 1 April 2017. You may surrender your pension accrued under self-administration at a discount of 34.5%. The surrender must then be arranged before the end of 2017. If you surrender your pension in 2018 or 2019, a lower discount will apply.
Optimise the allowances and benefits in kind provided to your employees
Naturally, the first thing that springs to mind is making the most of the ‘free space’ under the work-related expenses scheme (1.2% of your taxable wage bill). However, by restructuring allowances and/or benefits in kind, you may be able to remove certain items from the discretionary allowance. This would give you greater flexibility.
For employers, there will be a number of changes in 2018, some of which you need to take into account now.
The Low-Income Benefit (LIV) will be paid out automatically if you are entitled to it (the LIV also applies to 2017!). However, you must ensure that the hourly wage of the employees in question is not too high. Delaying a pay rise or bonus, or reducing the employee’s working hours, could cost you the full LIV payment.
With effect from 2018, the following applies: minimum wage and the minimum holiday allowance including for overtime. And the minimum wage applies not only to employees, but in all cases where work is carried out in return for remuneration. Check any current agreements with self-employed people.
As far as self-employed workers are concerned, it is clear that the DBA Act will die a quiet death. Following the DBA Act We will be dealing with three categories of self-employed workers. Until this is introduced, the DBA Act will not be enforced by the tax authorities.
Have a quick look at the contract with your occupational health and safety service. The Health and Safety at Work Act The regulations in this area have, in fact, been tightened up. Everything must be brought into line by 1 July 2018 at the latest.
Volunteer scheme expanded
The Rutte III Government is increasing the maximum amount covered by the volunteer scheme from €1,500 to €1,700. A small but certainly welcome change.
The volunteer scheme is one of the many schemes that directors of foundations and associations may have to deal with. What others are there? Please refer to our comprehensive guide on the Tax liability of foundation and association.
It is likely that, with effect from 2019, the VAT exemption for sport expanded. A expansion, which sounds favourable at first glance. However, broadening the scope of an exemption means that VAT will be deductible in far fewer cases.
Various arrangements designed to allow VAT to be deducted on sports facilities will therefore no longer be possible. A substantial sum has been set aside in the coalition agreement to cover the transition. Existing VAT arrangements in the sports sector are therefore unlikely to be significantly affected by the extension of the exemption.
However, there are still ways to structure investments in sport (facilities) in a VAT-efficient manner. This does, however, require existing structures to be reorganised.
Amounts paid to third parties
The Tax and Customs Administration is asking businesses, foundations and associations to declare any sums paid to third parties. If the third party receives these sums in their capacity as a business owner or an employee, the declaration does not, of course, need to be made.
Factsheets
If you’re looking for more information on a specific topic, please have a look at our factsheets.
- Preparing for the increase in the reduced VAT rate
- Company bike
- Dividends from your limited company
- Tax-free allowance for expatriates
- Deduction of VAT
- Private use of cars in VAT
- Bad debts and unpaid creditors