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 (%)
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.
Expat tax matters mortgagePosted by Mike de Gruijl Tue, September 19, 2017 11:17:39
Living outside the Netherlands and mortgage interest deduction
If you live outside the Netherlands, have Dutch income and own a property with a mortgage, you may be eligible for mortgage interest deduction in the Netherlands. You will need to meet some tax conditions.
Qualify as a foreign taxpayer
You must qualify as a non-resident taxpayer. If a taxpayer living outside the Netherlands pays Dutch tax, he/she has the same benefits as a resident of the Netherlands. The main advantage is that he/she can then deduct the mortgage interest on the loan that he/she has on a property outside the Netherlands.
You are a qualifying foreign taxpayer if you live in an EU country, Liechtenstein, Norway, Iceland, Switzerland, Bonaire, Sint Eustatius or Saba; and:
* You pay tax in the Netherlands on more than 90% of your worldwide income
* You can submit a personal income statement from the tax authorities in your country of residence
Tax partners can either meet the conditions individually or together.
Personal income statement:
It can be difficult to obtain a personal income statement from the tax authorities in your country of residence. Particularly in countries such as Spain or Italy where the form is not recognised, and the authorities will not process it, or will process it late.
We have also found that the income statement leads to practical problems. The 90% claim is complicated, especially for foreign tax authorities. It is a Dutch tax statement and to understand it the foreign tax department also needs to understand Dutch tax legislation.
For example, the amount of box 3 income must be determined. Do you have savings in the Netherlands of ?ˇ100,000? A fictitious 4% (?ˇ4000) of this is considered as foreign income, which makes it harder for you to meet the 90% condition. However, if you have a Dutch holiday home with a value of ?ˇ100,000 rather than the money in savings, then the ?ˇ4,000 is seen as Dutch income. This is because the double tax treaty gives the country of residence the right to charge tax on savings and the country where a property is situated the right to charge tax on the property.
Term of the loan
As of 2013, interest deduction is still possible, provided you pay at least the annuity or linear payments and that the loan is repaid within 30 years. For loans taken out before January 1, 2013, transitional law is provided and this requirement does not apply. For a loan existing before 2013, the above-mentioned requirement of qualifying foreign tax liability will only apply from 2015.
If you have a loan in a foreign country, you must inform the Dutch tax authorities. This is because foreign banks do not have to share the information with the Dutch Tax Authorities like Dutch banks do. If you do not mention that you have a loan, you will not entitled to deduct the mortgage interest.
A foreign mortgage with Dutch conditions
If you are living abroad, it is very important to choose a mortgage that meets the Dutch conditions if you want to deduct the mortgage interest rate in the Netherlands. As of January 1, 2013, a repayment-free (interest only) mortgage does not qualify.
If you live outside the Netherlands and qualify as a foreign taxpayer, it is possible to deduct the mortgage interest you have paid in your Dutch tax return under the terms of your tax return. This can, depending on your personal situation, lead to saving many thousands of euros in tax. However, if the mortgage started after 2013 it needs to meet certain specific conditions.
Looking for more information please visit our website www.tssolutions.nl
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
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
Expat tax matters mortgagePosted by Mike de Gruijl Tue, December 13, 2016 10:16:55
Tax & Service Solutions offers you a unique service in a close cooperation with De Boer Financial Consultants
Did you ever wonder who knows more about your financial situation than your tax advisor? Right!
In FVB de Boer we found a business partner with the highest level of knowledge and service when it comes to expat mortgages in The Netherlands.
This is why Tax & Service Solutions and FVB de Boer cooperate together and you will benefit all the knowledge of 2 different worlds combined in one unique service!
If you ever applied for a mortgage it is likely you experienced a lot of stress collecting all the required documents and information your mortgage advisor asked you to. Not to speak about the long processing time and the additional documents you needed to collect.
When finally having a mortgage your tax advisor started asking information about your mortgage which sometimes wasn't even provided to you by your mortgage advisor..... Applying for the monthly tax return and filing your annual tax return wasn't as easy as your mortgage advisor told it to be.
Searching for the best advice and mortgage offers often turns out in meeting up with multiple mortgage advisors and explaining your financial/personal situation over and over. Sometimes you even discover that the advice given to you wasn't that complete or good as you hoped for!
Both Tax & Service Solutions and FVB de Boer were convinced that this had to change in your benefit as our client. During 2016 they started a cooperation in which they combined the best of both worlds (taxes and mortgage) in a one stop service. The results were above all expectations:
- Easy final approval for most mortgage applications
- Quick turnaround of the mortgage application (on average 3 weeks)
- More accurate and easier tax filings
- LESS STRESS for our clients
We believe you should always ask yourself the question "Why all the stress when there is a high level service out there which provides me all the benefits I need without the stress?"
This is why Tax & Service Solutions and FVB de Boer will continue this high level service for you as a client so the only things you will have to be concerned about are the nice things when buying a house!
Want to learn more about the tax-mortgage service? click here for more information
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.
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 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!
Expat tax matters mortgagePosted by Mike de Gruijl Sun, November 20, 2016 15:23:10
More and more expats are seeking for a home which they own themselves. Financing a property with a mortgage can be very different compared to your home country.
A lot of expats know that the rules in The Netherlands give more possibilities to finance a property compared to other countries but Dutch banks are not endless when it comes to the maximum mortgage they are willing to lend you.
European Bank & IMF
Because of the fact the European Bank and IMF still think that our property market is way over-financed the Dutch government decided a few year ago that the maximum mortgage which people could apply for had to be reduced to a maximum of 100% of the market value. The effect is that you only have until December 2016 to apply for a mortgage of 102% of the market value of your new home. Next year the maximum mortgage will be reduced to 101% and in 2018 the maximum will be 100%.
Because of this change in rules not everybody is able to finance a house with a mortgage. Simply because they don't have enough cash or savings to make a deposit on transfer date to cover all the costs involving the purchase of a house and the finance costs.
A big misunderstanding is that borrowing more than the maximum mortgage will resolve in losing your tax deduction on the additional loan you will need to cover the costs for buying a house.
Fortunately this is not the case. As long as you make sure your loan has a repayment schedule it is still possible to borrow money, for example in a personal loan, to cover the costs and which exceeds the maximum mortgage the bank are able to lend you. The Dutch tax authorities don't look at the loan compared to value and stick to different rules when it comes to determine wether or not the interest paid on the mortgage is tax deductible.
However you always must keep in mind that a personal loan will effect your maximum mortgage in a negative way (the maximum possible mortgage based on your income and financial situation will decrease when taking in account your personal loan) and the monthly obligation is usually set at 2% of the credit limit or total of the personal loan.
A possibility could be to apply for a bridging loan at a family member and after transfer date apply for a personal loan at a different creditor. Just as long as you keep in mind that from day one you must have a repayment schedule agreed with your creditor to be able to deduct the interest of the additional loan.
It is always recommended to check your possibilities with an independent financial advisor to see if your dream house is still possible for you to finance with the scenario mentioned above.
Want to learn more about your possibilities? Tax & Service Solutions are here to give you the best advice on all your financial matters. We work together with the best business partners.
Check our website https://www.tssolutions.nl
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
General Dutch (Tax) NewsPosted by Mike de Gruijl Tue, November 08, 2016 11:54:58
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.
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