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Dividend withholding tax is reduced in 2014

The tax office presented the new tax rates for 2014 recently and the 2014 tax rate on dividend is reduced from 25% to 22%. Is it interesting to pay yourself a dividend? Can you pay yourself a dividend?

If you own shares in a limited liability company that is a tax resident in the Netherlands, then you can take out money of the bank account either as salary, loan or dividend. The loan you need to repay. There are a number of criteria that make it a loan. If those criteria are not met, the loan is regarded a deemed dividend.

When you know the maximum tax rate on salary income is 52% and the 2014 rate on dividend withholdings is 22%, the calculation is easily made, or is it?

The salary of the managing director earning at least 90% of the turnover himself or if he is the only person employed within the company, then 70% of the profit needs to be taken out as a salary. This is an obligation. But is it wise to try to minimize your salary? That depends. For instance, if you would like to take out a mortgage loan, then your salary might be too low. Of course you can state to the mortgage bank that you could have had a higher salary in the past three years, but the response would then be that you in that case could have had the mortgage.

But if you decide that you would like to maximize your dividend payment, some aspects needs to be taken into account. For instance if you have a pension obligation in your limited liability company or in an affiliated company, then you cannot take up an amount of dividend that creates problems for the pension contribution or executing the pension. You can be held personally liable if the dividend policy resulted in insolvency of the company. The purpose of having a limited liability company has then become obsolete.

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