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TARIFF TAX ADVANTAGE MULTIPLE BVíS Ė HOLDING STRUCTURE
Do you have more than one BV? In that case, you can enjoy a tariff tax advantage, according to the corporate tax plans for 2021, as announced by the Cabinet on Prinsjesdag. Basically, it comes down to setting up a holding structure in which the risks are spread and tax benefits can be claimed.
According to the documents, the rate of the first tax bracket will be reduced from 16.5% to 15%. This low rate will apply in 2021 to profits up to € 245,000. In 2022 this limit will be raised to € 395,000.
If your BV makes more than € 200.000 profit, your BV pays 25% tax in the second tax bracket. This difference of 10% (25% Ė 15% = 10%) can be quite substantial if you donít spread these profits over several BVís.
How can you ensure that an advantage is created with multiple BVís?
This can be realized by setting up a holding structure in which the holding is held by a sole shareholder (DGA). The holding BV then holds an interest in an operating company that is to be established.
Major advantages are:
- This operating company will send invoices to customers. In this way the company will be driven and the revenue and profit that will be distributed to the holding company will be achieved.
- In the operating company there will not be a lot of excess cash, so there is not much to recover for creditors and assets are placed in the holding company.
- Distributions from the operating company to the holding company BV will be tax free and will fall under the participation exemption. In addition, no dividend tax will have to be withheld by the operating company.
- By means of management payments it is possible to divide the profits between operating company and holding company BV optimal and to realize distribution of profits.
- Personnel will be on the payroll of the operating company, so that personnel cannot eat up excess cash.
- Sale of the company (here operating company) in which the shares are transferred under general title to the buyer, will not immediately lead to a settlement moment at the seller (here holding company). As a result, the capital gain profit will end up in the holding company and can be reinvested from the holding company BV in possible other BVís that are under the holding BV.
Management agreement with several BVís (holding structure)
It is important that both BVís (holding company and operating company) draw up a management agreement that shows what the management fee will be for the DGA. It is important that no employment contract applies, but that the sole shareholder (DGA) is hired. This is the key of a good holding structure. If this is not properly arranged, the Dutch tax authorities will state that there is an employment relationship, in which case more tax may have to be paid. Another important point of attention is the VAT tax in connection with the management fee.
Conclusion for the practice of several BVís (holding structure)
The tax benefit and limitation of liability are the main reasons for setting up a holding structure. Apart from the possibility of a flexible tax rate advantage, also the fact that no dividend tax and income tax have to be paid is very pleasant.
If you currently have a sole proprietorship, we advise you to decide approximately in July of a current year whether you want to enter a BV with retroactive effect. This can result in a timing advantage (choice to stay in the sole proprietorship or to convert to a holding structure). It is important that you inform the tax authorities before October 1st (in case of silent conversion).
Do you need support with setting up multiple BVís? (holding structure)
Wilt u graag weten of het verstandig is om meerdere BVís op Would you like to know whether it is wise to set up several BVís through a holding structure or to realize a tariff tax advantage through? Please feel free to contact us. Our tax specialists will be happy to assist you in drawing up management agreements, setting up BVís through our notary, and contact the tax authorities to make a request for silent conversion.