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Following rumours that the new government is to abolish dividend tax, the question arose as to whether directors and major shareholders (DGA\u2019s) would be able to have their private limited companies pay out dividends tax-free from 2018 or 2019?<\/p>\n
The answer is, of course: NO<\/strong>. After all, for the director and major shareholder (DGA), dividend tax is a form of withholding tax on income tax. The DGA is the director and major shareholder. In other words, someone who holds 5% or more (often even 100%) of the shares in a private limited company (BV).<\/p>\n The dividend tax, amounting to 15% of the dividend paid out, must be withheld by the private limited company from the gross dividend and paid to the tax authorities.<\/p>\n A holding of 5% or more qualifies as a substantial interest. Income tax is payable on the regular income and capital gains from shares that form part of a substantial interest. This income is taxed in box 2. The tax amounts to 25% of the benefit derived from the substantial interest.<\/p>\n Suppose your private limited company pays out a dividend of \u20ac100,000 in 2017. The company will then withhold dividend tax as follows: 15% * \u20ac100,000 = \u20ac 15.000<\/strong>. The private limited company pays this tax to the tax authorities. The net dividend paid by the private limited company to the shareholder(s) is: \u20ac100,000 - \u20ac15,000 = \u20ac 85.000<\/strong>.<\/em><\/p>\n In their 2017 income tax return, the shareholder(s) must declare this regular benefit from the private limited company (the dividend) in box 2. The income tax due amounts to: 25% * \u20ac100,000 = \u20ac25,000. Dividend tax is deducted from the income tax, so the net amount of income tax to be paid is: \u20ac25,000 -\/- \u20ac15,000 = \u20ac 10.000<\/strong>.<\/em><\/p>\n The final net dividend received amounts to: \u20ac100,000 - \u20ac15,000 - \u20ac10,000 = \u20ac 75.000<\/strong>.<\/em><\/p>\n Following the abolition of dividend tax, the BV no longer withholds dividend tax. However, the significant shareholder must still pay income tax under Box 2: 25% * \u20ac100,000 = \u20ac25,000. The final net dividend received amounts to: \u20ac100,000 -\/- \u20ac25,000 = \u20ac 75.000<\/strong>.<\/em><\/p>\n The investments of a person who holds a stake of less than 5% in a BV (or NV) are taxed as income from savings and investments (Box 3). The dividend tax withheld on the dividends received is then also set off against income tax.<\/p>\n Please note: only Dutch dividend tax may be offset. In the case of foreign withholding tax, the Dutch Tax and Customs Administration may grant relief to prevent double taxation. This depends on the provisions of the tax treaty with the country where the dividend is sourced, or on the Dutch unilateral scheme.<\/p>\n You must claim this exemption on your Dutch income tax return. In some cases, it is also possible to apply for a refund of any excess tax withheld in the country where the dividend was paid.<\/p>\n Following the abolition of dividend tax, if you receive dividends, you will pay more income tax. However, you will also receive a higher net dividend.<\/p>\n You can ask the Tax and Customs Administration to issue a provisional assessment for the higher income tax. This is particularly important if you wish to avoid the Tax and Customs Administration charging you tax interest. After all, the exorbitant interest rate of 4% is applied in such cases (for corporation tax, the interest rate is as high as 8%).<\/p>\n Whether the dividend tax will actually be abolished will become clear once the new coalition agreement has been presented. This is expected to take place shortly.<\/p>\nSignificant interest<\/h4>\n
Example<\/em><\/h4>\n
No material interest<\/h4>\n
Provisional assessment<\/h4>\n
Coalition agreement<\/h4>\n
Hooks and eyes<\/h4>\n