Dutch Tax Blog

Dutch Tax Blog

Box 3 savings

General Dutch (Tax) NewsPosted by Mike de Gruijl Wed, October 17, 2018 15:25:21


There is a way of avoiding taxation of investment and saving assets in box 3: Set up a Fonds voor Gemene Rekening, a joint fund account.

The Dutch tax system is a so-called box-system with three different boxes for the taxation of different sources of income each with their own set of rules and tax rates: box I income from employment, box II income from substantial interest and box III income from savings and investments.

In the Netherlands not the actual interest, dividend or rent from your savings and investments is taxed in box III, but the taxation is based on the value of these assets as per 1st January of each year.

This value is taxed against a fixed rate which is calculated by the tax office based on average interest rate/stock market rate of return of prior years. There are three tax brackets and there is a tax-free threshold amount of € 30,360 (2019) per tax payer.

Income from savings and investments tax rate 2019

Taxable income more than (€)

but not more than (€)

Effective tax Rate 2019 (%)

1stbracket

0

71,650

0.58

2ndbracket

71,650

989,736

1.34

3rdbracket

989,736

Unlimited

1.68

At this moment the actual interest rates a bank calculates are very low. Due to the fixed and fictitious tax rate the Dutch tax office uses for the calculation of the amount of taxes due on your savings and investments it is even possible that you pay more taxes than the actual interest, dividend you receive.

Therefore, it can be more beneficial for you to transfer assets like saving and investments to box II income from substantial interest (in case you have more than 5% of the shares in a company) and as a result avoiding a high fictitious taxation of your income from your assets in box III compared to the actual rate of return you have.

In this box II the actual dividend you receive (and the profit made by selling of your shares) is taxed against 25% (2018/2019).

To transfer assets from box III income from savings and investment to box II income from substantial interest it is required that you are the owner of at least 5% of the shares in a company or certificates in a fund.

To transfer (a part of) your assets to box II there are several options such as:

1. Setting up a company: for example, a Dutch BV or a UK Limited

2. Setting up a so-called Fonds voor Gemene Rekening (a joint fund account)

In this whitepaper the setting up of a Fonds voor Gemene rekening (FGR) and its pros and cons will be further explained.

Setting up a so-called open Fonds voor Gemene Rekening (FGR).

One of solutions to avoid taxation of savings and investments as a box III asset based on a fictitious and fixed income is to set up a so called “Fonds voor Gemene rekening” (a joint fund account).

In a joint fund account (FGR) participants will contribute a certain amount of money and/or share portfolio and he or she will get certificates of participation in the FGR in return. The FGR will use the equity to invest in deposits, shares and/or bonds etc.

The participants will agree in an FGR agreement on how much each of the participants will contribute and how the entitlements regarding the future profits of the FGR will be split based on their participation ratio.

You and the other participants can set up an open FGR by drawing up an FGR agreement and it is not obliged to use the services of a notary.

Very important is that a FGR requires at least two participants and one of the participants can only have a maximum of 90% of the certificates of participation.

Besides yourself the other participant can be your partner or your adult child(ren).

In case you are married in community of property then your partner will not qualify as your second participant and you need at least a third participant.

One of the participants will be the caretaker (“beheerder”) of the fund and the bank account of the FGR will be in his or her name.

After setting up the FGR the FGR needs to be registered at the Dutch tax office. The tax office will check if the fund qualifies as an open FGR or not.

If the fund qualifies as an open FGR the fund will get its own fiscal number and the fund will qualify as a box II fund.

If the Dutch tax office decides that the fund does not qualify as an open FGR the fund will be regarded as a so called closed FGR (“gesloten FGR”) and as a box III asset. In case of a closed FGR this fund has no corporation tax obligations.

After the agreement has been settled the money and/or shares belong to the FGR and if the tax office qualifies the fund as an open FGR then as a result this asset will no longer be regarded as your box III asset.

Advantages of an FGR

· Certificates of participation are free tradable;

· A notary is not required;

· An FGR is comparable to a Dutch B.V. (a Dutch private limited company) or N.V. (a Dutch public limited company), but more flexible;

· An open FGR is not regarded as a box III asset and therefore no fictitious box III taxation;

· No registration at Trade Register of the Dutch Chamber of Commerce is required (compared to a BV or NV);

· No public annual report is required (compared to a BV or NV)

· Lower costs compared to a BV or NV; 3

· Only the actual interest and/or dividend will be taxed;

· In general a FGR is more beneficial with a savings and investment amount of € 200,000;

· the FGR can be easily liquidated.

Disadvantages of an open FGR

· You need at least 2 participants and one of the participants may hold a maximum of 90% of the certificates of participation;

· The certificates of participation need to be free tradable. Therefore, it is not possible to state in the FGR agreement the obligation to first offer the certificate of participations to the remaining participant(s) or the permission of the remaining participants is required in case one of the participants decides to sell his or her certificates of participation.

· In case this condition is stated then the FGR will be regarded as a so called closed FGR and the FGR will be regarded as a box III asset;

· A profit of the FGR will be taxed with Dutch corporation taxes (the same as in a BV or NV);

· Payment to the participants will be regarded as dividend income and taxed with 25% dividend tax (the same as a BV or NV);

Is an FGR more beneficial then investments in box III?

The question if an FGR is more beneficial than taxation as box III income from savings and investments depends on the amount of equity that will be contributed to the FGR and the actual rate of return.

In case the actual rate of return is less than 3.25% in general setting up of a FGR for your investments is more beneficial than investments in box III.

The rate of return/profit with an FGR will be taxed with 20% corporation taxes (up till the amount of € 200,000) and above with 25% corporation taxes.

Any income a participant receives will be taxed with 25% dividend tax. Therefore, the total tax obligations in the FGR 40% (20% + 20% (80%*25%)).

A calculation as example:

Michael sets up an open FGR.. Michael deposits €1.000.000 into the opened bank account. The interest on this account is 1% per year (€ 10,000).

The calculation. There is an open FGR, so the FGR is liable for corporation tax and 20% corporation tax is payable on the interest, € 2,000 (20% x € 10,000). After this charge, an amount of € 8,000 to be paid will remain (€ 10,000 - / - € 2,000). This amount is taxed at 25% income tax, being € 2,000. In total, a levy of € 2,000 corporate income tax + € 2,000 income tax = € 4,000.

In comparison with box 3. If the money had been in a regular savings account in box 3, the tax was as follows: € 1,000,000 x 4% x 30% = € 12,000.

A tax saving of € 8,000 (per year)!

If you would like to avoid taxation of a certain amount of your assets as box III income from savings and investment, then the open FGR needs to be set up before the 1st January and each participant needs to have made his or her contribution before this date.

We note that it can take some time before the tax office has checked if the fund qualifies as an open FGR or not.



  • Comments(0)//blog.tssolutions.nl/#post27

Your salary and purchase power

General Dutch (Tax) NewsPosted by Mike de Gruijl Thu, January 19, 2017 14:42:59


The buying power of Dutch households will drop behind at the beginning of 2017 after the gross wage.
Inflation and increased health insurance premiums are to blame.

This is evident from the last Tuesday purchasing power calculations of the National Institute for Budget Information (Nibud).
The first paychecks of the year show an average increase of 1.7 percent, but the purchasing power increases, at best, by 1.3 percent.

Differences by income group

The purchasing power is mainly for the middle and higher incomes lower than their gross wage. The difference with last year ranges from 18 euros per month less to spend up to 14 euros more to spend. That's a decline of 0.6 percent to an increase of 0.3 percent.

Salaries up to 35,000 euros a year will have a little more to spend per month: between 4 and 27 euros. That represents an increase of between 0.2 and 1.3 percent. This income group will be offset by increased care and housing benefits, increased child allowance and higher general tax.

Most people see a slight improvement in 2017


retirees

For older people with a higher supplementary pension declining purchasing power. Also, early retirees have less to spend. They do not benefit from higher tax where old age pensioners with a state pension do benefit and they are likely to fall back on an average of 20 euros per month.


This blog is part of Tax & Service Solutions



  • Comments(0)//blog.tssolutions.nl/#post25

Property tax increase in 2017

General Dutch (Tax) NewsPosted by Mike de Gruijl Tue, December 06, 2016 16:35:09



Homeowners will again pay more in 2017 for the property tax (OZB). However, the increase of the tax remains for the first time in five years under the agreed maximum increase.

That concludes the Vereniging Eigen Huis (VEH) after a sample survey among 109 of the 390 municipalities.


Average
The property tax, to be paid by each homeowner, will increase on average next year by 1.3 percent. This is considerably less than the agreed maximum of nearly 2 percent.

However, there are still major differences between the various municipalities. In 32 of the surveyed municipalities, the tax on home ownership increased at least 2 percent, while residents of 29 municipalities will benefit a reduction in property tax.


Biggest climber
Biggest climber in the survey, the municipality of Haren, where the average property tax-assessment increases by 12 percent to 423 euros. Nationally, homeowners on are facing a tax of average 276 euros next year.

Presented to you by Tax & Service Solutions. Discover our Triple-A services!



  • Comments(0)//blog.tssolutions.nl/#post23

Starting your own business

General Dutch (Tax) NewsPosted by Mike de Gruijl Fri, November 18, 2016 13:03:07

Starting your own business,


Is something a lot of people/expats dream about. So many people so many reasons they have for starting their own business.
What is the best way to start your won business? In this article I will not bother you with all the preparations like a good business plan, containing at least a SWOT analysis, or telling you that you must have your financial situation all planned well and a good knowledge of your financial situation. These matters don't need any additional explanations because without taking care of this you will be certainly facing a hard time starting.

Dutch BV

Having done all the calculations and finished your business plan it is time to make a decision on which legal form you should choose.
Strangely enough a lot of people dream about opening a Dutch BV (a company with a limited liability) and again for may different reasons. For example:

- Status (a BV is usually an established company)
- Liability reasons (with a BV your private assets are protected against creditors in case of issues)
- Retaining the 30% ruling (only when you incorporate a BV you can retain your 30% ruling)
- Because they were told it was the best option
- They are thinking about hiring employees

All different reasons of which some are legitimate and others only are based on ideas or thoughts.

Eenmanszaak

What many people don't realize is the fact that there are much better and cheaper ways in starting your own business. Most expats have heard about the ZZP'er but don't really know that a ZZP'er is not a legal status and in fact only a popular way of saying someone has a business with the legal status of "eenmanszaak" (one-mans business) and does not have any employees working for him/her.

For Dutch people a one-mans business is the most common way of starting your own business. Why?

- Easy to start (going to a local chamber of commerce with your id is sufficient)
- Cheaper administration services (your profit is your taxable income)
- Tax purposes (there are several tax advantages when being a one-mans business)
- They don't have the intension of taking high risks in doing business (liability issues)

Facts

A fact is that starting a business as a one-mans business doesn't mean you can't have any employees working for you. You can have as many employees working for you as you like.
Another fact is that you can profit lots of tax credits as a one-mans business which are not available for a BV and his/her shareholder(s) The thumb rule is that you must make more than € 150.000,- profit to start thinking about changing the legal status into a BV to have more profit of being a BV instead of being a one-mans business.

Aren't there any disadvantages you might think?

Yes of course, the biggest disadvantage of being a one-mans business is the liability matter. When being a one-mans business you can be held fully liable for all your private assets when doing business. This means, in a worst case scenario, that creditors can claim all your private assets (like your house etc) when there are major financial issues with your business. Therefore you must always consider the risks you are willing to take when doing business. If the risk is part of your business it can be a smart idea to see if there are insurances who cover liability issues involving your regular work to prevent getting into trouble in private when doing business.


Future

If your business grows in the future or changes, it is always good to know that changing your legal status into a BV.

Tax & Service Solutions is your partner in making the right choices in business matters not only for starting but also for the future. More information can be found at https://www.tssolutions.nl

  • Comments(0)//blog.tssolutions.nl/#post20

Adjusting your monthly tax return

General Dutch (Tax) NewsPosted by Mike de Gruijl Tue, November 08, 2016 11:54:58


TAX TIME

Just 2 months to go and we will be in 2017. Time for taxes! Not the annual but the monthly tax return. This is what a lot people don't realize because the tax authorities will send a notification of their own estimated calculation to all the people who received a monthly tax return in 2016.

Automatic adjustments

Although the Dutch tax authorities do a lot of things automatically, they have a bad habit of adjusting your provisional (monthly) tax return in the wrong way.

Sometimes you will receive a provisional tax statement mentioning a higher amount to be received every month compared to the year before, but mostly they will send a provisional tax statement mentioning a (significant) lower amount which will be received every month. Rarely they will send you a statement which is 100% accurate.

What causes these wrong provisional statements? Is it a kind of caution? Just to make sure you will not end up paying money back after a year? No one really knows.

To keep in mind

What is certain that it is always smart to check these provisional tax statements to make sure you don't leave money at the tax authorities unnecessary and claim the amount which you are entitled of.

There are a few points te keep in mind when receiving a monthly tax return:

- Did you made extra repayments or are you planning to make extra repayments in the upcoming year? Extra payments effect your tax return immediately!
- What kind of mortgage do you have? A linear and/or annuity mortgage requires every year adjustments of the receivable taxes. Because you pay back your mortgage every month the interest payments will decrease every month and therefore your tax return as well.
Adjusting your monthly tax return every year is highly recommended in the above situations


We at Tax & Services Solutions are happy to assist you with filing your provisional tax declaration 2017. These services start at € 25,- For this fee you don't have to keep your money in "deposit" at the tax tax authorities



  • Comments(0)//blog.tssolutions.nl/#post19

ZZP'er no more tax deduction on workspace

General Dutch (Tax) NewsPosted by Mike de Gruijl Tue, November 01, 2016 10:55:49


Secretary of Finance Wiebes will soon release a letter of amendment which states that freelancers may not deduct their rent if they use as workspace for at least 10% of their rented house. The Supreme Court judgment's is set aside with this decission.

In August this year, the Supreme Court indicated that entrepreneurs could deduct the rent paid by them from income taxes as long as they use 10% of their rental house as a workshop. The Secretary of State has now put an end to this scheme. Because of all the attention drawn by the judgment, he expects it will costs the Treasury too much.

Inequality between entrepreneurs with owner-occupied house and rented house.

In addition the judgment was a disparity between the treatment of a non-independent workspace for entrepreneurs with a rented house and those who are homeowners. This disparity is corrected again by the letter of amendment. Costs for an independent workspace in both owner-occupied houses as a rental house will remain income tax deductible.

Want to learn more about tax deduction for your personal and business situation? Contact us at https://www.tssolutions.nl







  • Comments(0)//blog.tssolutions.nl/#post18

Gifts and Dutch taxes

General Dutch (Tax) NewsPosted by Mike de Gruijl Fri, October 14, 2016 17:12:43


As known, gifts that you as an individual, donate to a charity or institution are deductible for income tax purposes. However, there is a threshold and a maximum. There is a way to bypassing this.

Gifts Deduction for individuals

Threshold. Donations to an ANBI (the charity institution) or a support foundation SBBI (Social interests looking after setting) are deductible from the income tax, provided the donations exceed a certain amount. The threshold at a rate of at least 1% of your threshold income, with a minimum of € 60, -. Pay attention. Other gifts are not deductible.

Maximum. In addition, a maximum of 10% of your threshold income. That threshold income is the total of all your income and deductions in Boxes 1, 2 and 3. The personal allowance (medical expenses, and the like) thereby remains disregarded. Pay attention. Do you have a fiscal partner, you must add up the threshold income of your partner with your own threshold income. You understand that you therefore it is not easy to the deduct small gifts in the income tax.

Suppose your threshold income is € 30,000, -. The threshold then will be already € 300, -. Only what is donated above this amount to the charity, is deductible.

regular donation

At least five years. Consider a periodic donation. With a regular donation you will agreed a fixed amount to the charity or institution (such a regular donation may also be an association with at least 25 members) that you annually donate (minimum five years), for example, € 75, -, providing that you are still alive during this period.

Deed. Where you used to consult a notary for such an agreement, it is now no longer necessary. You can arrange it in a private act.

No threshold. The advantage of such a periodic donation is that there is no more threshold in that case. So every euro donated is a tax credit! And if you already annually bestows such a relatively small amount of one or more charities, why then let slip that tax?

At a tax rate of 42% a donation of € 75, - will still give you an annual benefit of € 32,-.And perhaps you want to take this benefit in account with a the regular donation?

And gifts to the children?

Annual exemption. Annually, you may over € 5000, - pay tax on your children (2016: € 5304, -). This donation is not deductible for income tax purposes.

Repetitive donation. What if you make this donation in a way of such a regular gift? According to the Tax Administration it will be a recurring donation. The tax authorities will calculate the cash value of all agreed donations. The present value is so much higher than the exempt amount, making the multiple still owed gift tax. Be aware. Such a predetermined periodic donation is not suitable for gifts to children.





  • Comments(0)//blog.tssolutions.nl/#post17

Leasing your company car during holidays

General Dutch (Tax) NewsPosted by Mike de Gruijl Tue, October 04, 2016 13:52:54


A lease agreement between an employer and employee for the use of the company car during holidays does not prevent the addition on your salary for this car. This is what a Dutch court recently ruled.


Lease agreement holiday
In this case, it concerned a worker who had been given a company car to use during his holidays. The Tax Administration had provided that employee a "Declaration of non private kilometers" The employee then went in 2011, 2012 and 2013 with that same car on holiday. Before that he had signed a lease agreement with his employer. This agreement stated that the employee's rented the company car for a fee from the employer during the holiday season. The Tax authorities checked the logbook and claimed additional assessments. They believe that the 500 private kilometergrens was exceeded by the driven holidays kilometers. But they did settled the lease payments with the additional assessments.


Holiday Kilometers are private kilometers

The employee did not agree with this assessment and went to court. The judge stated that an addition to the company car can only be omitted if an employee uses a car for less than 500 kilometers for private purposes. The mileage of the employee on a holiday, according to the court, are to be regarded as private. That the employer and employee had signed a lease agreement makes no different thus the judgement of the court. So the Tax authorities had rightly imposed the additional tax assessments and taking into account the personal contribution.


More Dutch tax information can be found at Tax & Service Solutions



  • Comments(0)//blog.tssolutions.nl/#post16
Next »