Paying out a dividend before the end of 2020 may be an attractive option. The tax rate applicable to income from a substantial interest (Box 2) in 2020 is still 26,25%. In 2021, that will be 26,9%. But there are a few things you need to bear in mind!
Discount
The rates stated apply when the dividend is paid to holders of a substantial interest. Dividends paid to other private limited companies are often exempt under the participation exemption.
Of course, the tax saving of 0.65% points isn’t exactly huge either. On a dividend of €100,000, you’ll pay €26,250 in income tax in 2020. That will rise to €26,900 in 2021 – “only” €650 more.
Dividend tax
We are talking about the income tax rate in box 2, not the dividend tax rate. That rate remains unchanged: 15%.
The private limited company must deduct dividend tax from the dividend and pay it to the tax authorities. The dividend tax is set off against income tax.
The BV withholds €15,000 in dividend tax on a dividend of €100,000. On balance, the income tax still due for 2020 is therefore: €26,250 - €15,000 = €11,250.
Watch out!
A dividend may only be paid out if the capital test and the payment test are met. The capital test requires that there must be sufficient freely distributable reserves. The distribution test is met if the private limited company can continue to meet all its payment obligations after the dividend has been paid out.
Given the uncertainty surrounding the financial consequences of the coronavirus crisis, the means test may require extra attention. This, of course, depends very much on the specific facts and circumstances. After all, there are also sectors that are actually thriving during the crisis.
Prohibition on paying dividends
Has the private limited company made use of the support measures introduced by the government (for example, the NOW schemes)? If so, the company may not be permitted to pay out any dividends at all. If it does so anyway, all support received must be repaid.
Excessive borrowing
Significant shareholders also still face the prospect of the proposed legislation on excessive borrowing from their own company. We explain this proposed legislation in a factsheet. This bill is still being considered by the House of Representatives.