Social employee premiums and sector code, what is that?

Social employee premiums and sector code, you might have come across that if you employ a staff. What is a sector code?

Social employee premiumes and sector code

The moment a company informs the Dutch tax office that they employ an employee, the Dutch tax office issues a wage tax number. At the same time the Dutch tax office indicates in what type of sector code the company is in. In the event it is not clear by the tax office what are the company activities. The tax office will contact the employer to get more information.

The sector code

The employer runs a payroll for the employee. The employee is than in normal situations also socially insured in the Netherlands. You might agree that a desk job is less hazardous than working on a construction site.

The level of job hazard determines the percentage the employer need to contribute to the social premiums. The saver the job, the lower the percentage.

Indefinite period of time employment contract

The sector code set the base percentage applicable as social employee premiums. The type of employment contract also influences the premiums. As the Dutch Government is supporting employers to provide security to employees in the sense of an employment contract for an indefinite period of time. These contracts result in lower social premiums as well. Under condition the indefinite period is mentioned in a signed contract.

Increase of employee social premiums

The moment an employer terminates the employment of an ill employee, this has an impact. As the Dutch Government is keen on healthy working environments, an employment terminated while the employee was ill, will result in higher employee social premiums for the employer two years later.

In such a situation it is very important to have both an Arbo service at your side that can navigate the employer through the obligations. Plus a labour lawyer to avoid more employers costs than is justified. Both can help preventing an employment being terminated while the employee is ill.

Social employee premiums

The social employee premiums vary every year, hence the January payroll is always slightly later than normal months. These social employee premiums are not shown on the salary specification, it is part of the employer costs. Paid towards the Dutch tax office. The Dutch tax office is in this case also social premium collector.

A1 statement

In the event the employee is socially insured in another country, the other country can provide an A1 or E101 statement. That is an EU form.

Regardless if the form is true or false, the employer can apply the provided A1 form. If it turns out to be false, the employer will not receive a penalty.

How can an A1 form be false? That can be caused in the application of the A1 statement. If an employee is an entrepreneur in his home country and based on that an A1 statement is issued. If that same person is employed in the Netherlands, the issued entrepreneur A1 statement cannot be applied for employment.

As we have experienced a lot of non-useable A1 statements are in circulation, we recommend the employers to connect to the SVB. SVB stands for Sociale Verzekeringsbank. Not to be mistaken with the Silicon Valley Bank. That is the social security Government organization. To verdict if the A1 statement is usable or not.

Tax is exciting

We think tax is exciting. So far we have not met one employer that is excited about paying social premiums for the employee. Still, the social system is one of the backbones of the Dutch system. Very important and you will notice the moment a benefit needs to be called in, like unemployment, disability, health care, it is very much appreciated.

Payroll in the Netherlands and labor law

Payroll in the Netherlands and labor law

Payroll in the Netherlands and labor law are going hand in hand. How does that work out, which law is applicable?

Payroll in the Netherlands and labor law

Payroll in the Netherlands can be part of your service needs, if you are an employer situated abroad. You do understand tax treaties dictate to tax income from employment in the country where the employment is done. The exception to this rule is the position of the director of the company. For that person most tax treaties have a separate article.

183-day-rule

The famous 183 day rule makes Dutch labor law is not applicable, if the 183 day rule is correctly executed. The latter is often the problem. Counting the days is the easy part. But this rule has three conditions to be met. And if all are met, indeed the income earned in the Netherlands for a period less than 183 days is not taxed in the Netherlands.

A result of that is, that the labor law of the home country rules, as the period worked in the Netherlands is disregarded as such.

Labor law and labor lawyers

We always recommend to connect to a labor lawyer, being the employer. Working with Boontje Labour lawyers, highly recommended.

We are tax advisors, so we know about tax. Labour law is a subject we come across, and within limits we can explain the rules. The moment it becomes specific or challenging, we are the first to refer you to a labor lawyer.

Working with Wouter Hes of Boontje Labour Lawyers learned me a lot over the years. The most recent fact is that you can employ an employee working for you in the Netherlands under your home country labor rules. The condition is that should the Dutch rules offer the employee an advantage over the home country rules, Dutch rules win.

Payroll in the Netherlands and labor law

Setting up Dutch payroll and labor law

You might have learned that the rules in the Netherlands are in favor of the employee. This should not stop you, the employer, from getting involved in a Dutch payroll. It does imply, as good behavior of a company, to learn more about the Dutch rules. To have someone at your side assist you with the Dutch rules and regulations.

Many companies in the Netherlands employee a staff, why would you not?

That said, most companies also take out an insurance. This insurance covers a period during which you are to continue the payment of salaries, while concerning employees are ill. That makes the risk smaller.

Most employers also take up a subscription with what we call Arbo related companies. Those companies can monitor for the employer how the well-being is of the employees in case of illness. And these companies can help the employer with complying of the formalities to the Dutch Government in case of illness.

Tax is exciting

We think tax is exciting. Runnig a payroll for you in the Netherlands gets us excited indeed. We will be pleased to introduce you to Boontje labour lawyers. Feel free to connect to our payroll team at payroll@orangetax.nl

Working remote in the Netherlands – running a payroll

Working remote in the Netherlands for a foreign employer is common. How this is to be set up from a Dutch wage tax point needs attention.

Working remote in the Netherlands

We get a lot of zoom requests to discuss working remote in the Netherlands and tax. These zoom meetings are free of charge, as we think they are awesomely exciting.

We update the person about the aspects of Dutch payroll and the wage tax rates. Seldom we see excitement in the face on the other end of the zoom with respect to our tax rates. Hence we wonder why the decision was made to move to the Netherlands. It turns out that having a Dutch partner is often the base of the decision to live in the Netherlands.

Running a payroll

The rule is that wage tax is to  be paid in the country where the work is actually been done. This implies Dutch tax rules apply to working remote in the Netherlands for a foreign company.

We are quick to update the candidate about the existence of the so called 30% ruling. This implies 30% of the gross salary is not taxed. That makes an enormous difference.

The foreign employer is not keen on running a Dutch payroll. It is assumed that a Dutch entity is required and everything that comes with running an entity. We have a solution for this:

The non-resident employment payroll

This payroll is for an employer that has no presence in the Netherlands. No presence implies no office or desk rented for the Dutch employee, the Dutch employee does also not have a director title of the foreign company. In that case there is no Dutch permanent establishment.

Without such an establishment we are able to set up the non-resident employment payroll. This payroll is identical to a similar domestic situation. The difference for the foreign employer is that there are no other obligations, than the obligations related to the employment.

OrangeTax payroll team

The OrangeTax payroll team is a very experienced team setting up non-residents and resident payroll administrations. The experience shows in predictions whether a 30% ruling would be granted or not. Or experience in Collective Labour Agreements being applicable or not. And if applicable, how to comply with them. Making international payments less complex as well. The team is also very active in responding to questions and committed to a minimal number of work days for the turnaround.

Tax is Exciting

We think tax is exciting. If you are now exciting about setting up a payroll with us, please connect to payroll@orangetax.nl and we are eager to assist you. Our fees you find already on our website www.orangetax.com

Laura – OrangeTax payroll manager

Get married!

Get married!

Get married! You might think what this has to do with tax. A lot, but marriage goes beyond taxation. Hence we encourage the marriage.

Get married! Why would you get  married and to whom?

We are compliance tax advisors, that implies we process the tax returns. The income tax return is one of them. We process a lot of income tax returns during the year. In those returns we see young people purchasing a house together.

The action of purchasing a house together to make that your main residence has a tax consequence. The tax consequence is that you have become tax partners. The tax partners is an important aspect of the income tax return. That said, this status does not only apply in the income tax return, but also in the inheritance return and other tax aspects.

Becoming tax partners – not actually aware of

The young couples that become tax partners due to the purchase of the house are not really aware of that fact. It is something to read up about, we would like to suggest. Not too much, we think tax is exciting, you might think it is confusing. And you are right.

Get married!

Why get married?

The only person that does not die among us is Sinterklaas, everybody else one day die. That is a fact, the unknown is when. If you they purchased with your partner a house together, it is possible one of you dies.

The family who inherits 50% of the house is aware of the booming housing market. And they did not like the friend of their family member with whom the house was purchased anyway. So the family might start actions to kick the other person out, as they want to sell their inherited part of the property.

To prevent this, or to legally get everything into line, the partnership should be made more legal. For that we have two options. One is the registered partnership via the notary. The other one is the old fashioned marriage. Both solutions have the same result. If the one person dies, the other person inherits. You do not need to rule over your death, but you can arrange to leaving others behind with less issues.

Marriage over registered partnership?

Everybody can do as they like, but being married has advantages over registered partnership. Especially international. As this article is addressed to internationals. Even though the Netherlands is a beautiful place to stay, you might not stay here forever. Then exporting your legal commitment in a marriage is more easy than a registered partnership.

The notary

We are not a marriage consultants, nor a notary. So to get the best advice in this field is to contact a notary. The best notary we know in this field is Bert Buma of the Buma Algera notary office.

Tax is exciting

We think tax is exciting. You might not look forward to a marriage and the obligatory party where your in-laws are also invited. That is not the point of this article. The point is to give the legal commitment between you two a thought and maybe formalize it better than it is now.

What does owning a BV company imply?

What does owning a BV company imply?

What does owning a BV company imply is a question you should ask yourself, or us, before you are involved. It is more than the fancy director title.

What does owning a BV company imply

I would like to go through the steps of setting up a BV company up to and including the annual obligations.

Set up of BV company – the notary

A BV company is an official public company with limited liability. Such a company can only be incorporated by a notary, a Dutch notary.

The notary will ask you about the name of the company. Important to do some research. Even if your name is Albert Heijn and you sell groceries, you cannot register a company with such a name. There was an Albert Heijn, not family of the large supermarket store, who tried and lost. Or if you think you are clever and you call your store Loods 6 based on the success of Loods 5, you will be asked to change the name. Mind the name.

What will the company be doing? What is the service you provide or the goods you sell. How much share capital will you issue. Will you have an extended first financial bookyear. Who are the directors, are they fully authorized? These questions and more are to be addressed with the notary.

We work with Buma Algera notaries, very experienced notaries, fully equipped for internationals.

What does owning a BV company imply?

BV has been incorporated

The BV has been  incorporated, the notary updates the Chamber of Commerce. The Chamber of Commerce updates the Dutch tax office. The Dutch tax office will issue a corporate income tax number and often also a value added tax number (VAT). Sometimes you provide a service that is not subject to VAT, then no VAT number is issued. For instance when you set up a holding company that is a pure holding company.

The wage tax number can be applied on request.

Obligations of the BV company

We have a number of obligations the BV company needs to meet. That makes the BV stand out from the much more simple one man company.

Filing the VAT return and wage tax return is not different from the one man company. Also the bookkeeping merits are the same with the one man company. The limited liability aspect of the BV makes that the content of the annual report is different. You will see share capital and general reserve on the balance of the BV. This is not shown on the one man company balance.

That said, if the share capital of the BV company has not actually been paid by the shareholder, you also do not see this amount on the balance with the BV. Neither has the limited liability started then. Limited liability only applies when the share capital was actually paid.

The bookkeeping will result in an annual report and the shareholders meeting needs to approve this annual report. In the same shareholder minutes the board can be granted discharge for the concerning period. That implies the persons of the board cannot be held liable themselves for that period, should anything occur later. However, if the annual report is reported too late with the Chambers of Commerce, the persons of the board are always held personally liable in case of bankruptcy or things like that.

The deadline of publication of the annual report is within one year after the calendar year has finished.

Corporate income tax return

The BV company is to file a corporate income tax return within 5 months after the book year has finished. The Dutch tax office has yielded experience in this field, hence the fine for filing too late is set at EUR 5.514. The first time 50% discount is granted, as if it is a bargain, but still a lot of money for nothing.

Dividend paid out

The moment the BV has made a profit and the director was paid at least the required minimum salary, the profit is taxed with corporate income tax. The net result (after tax) is allocated to the general reserve in the shareholders meeting.

The shareholder can decide to issue him or herself a dividend. In order to do so, the shareholders meeting needs to decide on the dividend. A dividend note is to be created. Then the dividend withholding tax return is to be filed.

Very important to realize is that when a dividend paid out in the one year creates later in time insolvency issues, there is problem. That implies, the company has not enough funds to pay for the costs or tax. Too much dividend was apparently paid out. That is an economic crime with consequences. Mind the accounts!

Income tax return

In the income tax return you report the salary you earned with the BV company. If you loaned money to the BV company, the interest is taxed as income in Box 1. Dividend you received from the BV are taxed in Box 2. Via the dividend withholding tax return 15% tax was withheld, in the income tax return you pay the remainder up to 26,9% (2022). Loaned money taken from the BV are reported in Box 3.

Now your obligations have been met.

Tax is exciting

We think tax is exciting. We are excited to assist you with the setup and or running of your BV company. However, we will ask the question if a sole proprietorship would be sufficient as well. We have to ask, as the administrative costs and formalities with the sole proprietorship are much less.

The moment we learn the BV is commercially, logically or strategically the best, we are happy to serve. Our fees you find on the website, we will be glad to email them to you as well.

Minimum salary of a BV shareholder director

A company is a source of income

The minimum salary of a BV shareholder director is a topic that needs to be address constantly. Either by the director or the Dutch tax office.

Minimum salary of a BV shareholder director

The Dutch BV company or any foreign legal entity that operates in the Netherlands, has a minimum salary obligation for the shareholder director.

The thought behind this minimum salary is to prevent the director using financial facilities in the Netherlands intended for the poor. In the past a shareholder could waive his salary, as paying dividend is tax wise cheaper. The result is that the shareholder had no salary. If you have no income, you are poor. For the poor we have healthcare credit, rental credit , daycare credit. But this shareholder is far from poor, a huge dividend was paid out. Hence to avoid the social system being misused, a minimum salary was made obligatory.

The rules with respect to the salary

The salary is set at EUR 48.000 (2022) full time work. If the director is not working at all for the BV, the minimum salary is EUR 5.000 per year.

However, the salary cannot be less than 75% of the profit. If the profit is EUR 60.000, 75% amounts to EUR 45.000. Then the other minimum overrules the 75%, being the EUR 48.000 salary.

If the profit is EUR 140.000, the salary needs to be EUR 105.000. If the profit is EUR 1 mln the salary is EUR 750.000. Which is a bit much, unless it is actually spend.

What to do to avoid the EUR 750.000 salary as mentioned above?

In order to avoid needing to pay EUR 750.000 you are going to look for a person that does more or less the same job as you do. The difference is, this person has no shares in the company. Then you ask this persons salary and you use that for your own company.

Two problems with this philosophy. The first problem is that a director shareholder often has either a unique position or in his or her trade a position that is always taken by the shareholder director. In other words, finding a comparable person is not really possible.

The second problem is that in the Netherlands you do not display to anybody your salary. You do your best to have the neighbors think you earn much more than they do. Talking about actual numbers is not done.

Who knows about all the salary amounts earned in the Netherlands?

Indeed, the Dutch tax office. The Dutch tax office counters your salary in a court case. That does not sound like a fair fight.

To make the fight more fair, the courts rule that when you state you should earn less than EUR 48.000, the director shareholder needs to proof that. If the director share holder takes out a salary exceeding the EUR 48.000 but not reaching the 75% of the profit. Then the Dutch tax office needs to substantiate that another person in the same position not being a shareholder earns more.

Current account shareholder

A side aspect of the minimum salary is the current account of the shareholder. The shareholder cannot set his salary at the bare minimum of EUR 48.000 and at the same time takes money from the business bank account via a loan. That is the current account with the shareholder. If that is the case, the Dutch tax office will address that during an audit. Possibility is there that this could be regarded as net salary payments.

Minimum salary of a BV shareholder director
Minimum salary of a BV shareholder director

Minimum salary court case

A holding company earned EUR 80.000 management fee. The director shareholder did not take any salary. The Dutch tax office made in his income tax return an adjustment. EUR 44.000 (2014 minimum salary, the year under discussion) was added to his Box 1 employment income.

The director shareholder appealed this adjustment in court and stated that the salary should be substantially lower. The tax office argued that a person in his position (logistic manager) should earn much more than the EUR 44.000. The court agreed with the Dutch tax office. The tax office won as the director was not able to present proof of other persons in more or less the same position earning less.

Tax is exciting

We think tax is exciting. The salary discussion we do not always understand. The one moment the director shareholder asks us to keep the salary at the bare minimum. The next moment, often after a call of the wife, the salary needs to be sky high. Why sky high? The higher the income, the more mortgage loan can be obtained to purchase a bigger house.

In other words, the salary impacts more than only the tax rates. It helps you pay your bills, it offers you opportunities to indeed purchase a house. We prefer to set your salary based on your needs. The higher the salary is above the EUR 48.000, or the more close to the 75% moment, the less hassle is to be expected with the tax office about this topic. Tax is exciting, hassle with the tax office is not.

Rental property in Box 3: reduced valuation

Rental property in Box 3: reduced valuation

Rental property in Box 3 implies you pay Dutch wealth tax over the property you own in the Netherlands. The value is based on the WOZ value, how to reduce that?

Rental property in Box 3

Property and the place of taxation is determined in the tax treaties. If there is no tax treaty between certain countries, in this case the general accepted rule is not much different than the treaty.

The rule is that property is taxed in the country where the property is located. For us that is a logical rule. The property is a burden on the soil of a country. That country makes costs of facilities like electricity, water etc. In return the same country should be able to tax that property.

In your own country, if that is different from where the property is located, you can claim a double taxation relief.

What value is taxed?

To avoid all kind of creative calculations, assumptions and reports, the Dutch tax office sets as value the so called WOZ value. The WOZ value is a value determined by the city in which the property is situated. It is based on recent transactions in the neighborhood.

Via the website www.wozwaardeloket.nl you can look up your WOZ value, or that of your neighbors if you think that is interesting. In the tax return the value is taken of a year before. Example. In the 2021 income tax return the January 1, 2020 WOZ value is taken into account.

Rental property in Box 3: reduced valuation

What reduces the property in Box 3 taxation?

A debt taken out to purchase the property or to refurbish the property. That debt is a debt actually taken into account for your Box 3 property. This value reduces the WOZ value.

As per which date is the debt taken into account? It is always the January 1 value. Example. In the 2021 income tax return the January 1, 2021 or December 31, 2020 debt value is taken into account.

How to reduce the Box 3 WOZ value?

The moment the property is rented out for a period exceeding two years, the tenant receives rental protection. Rental protection implies you cannot terminate the rental agreement, unless very specific occasions occur. Not paying the rent, arguing the rent are not clear reasons to terminate the rental agreement. A procedure is involved.

There are examples that a tenant argues the rent based on the point system some counties have. They are entitle to pay a much lower rent to you, lower than agreed upon….for the rest of their lives!

You could state that the rental protection reduces the value of your property. And that fact we use. If the two year rental agreement condition is met. Based on the actual rental income a complex calculation can be made. This will then be the new value for the income tax return. A substantial lower value than the WOZ value.

The tax office will contact you after the tax return was filed to check if in fact the conditions of the reduced value were met.

Tax is exciting

We think tax is exciting. Paying too much tax is never exciting. Helping you to file the property you hold in the Netherlands in Box 3 is exciting. Our fee to assist you is EUR 390. After July 1, 2022 our fee goes up to EUR 410 instead.

Difference employment versus self-employed: disability insurance

Difference employment versus self-employed: disability insurance

The question difference employment versus self-employed is often asked. The tax rates are compared, but not the disability insurance. Compare apples with apples, not with pears.

Difference employment versus self-employed

We have the opinion that this question does not really exist. Either you are an employee or you are a self-employed entrepreneur. It is not a choice.

Having said that, internationals do arrive from abroad. The employer abroad is aware of the Dutch tax rules, very protective for the employees. The employer is a bit hesitant. The international eager to move to the Netherlands does some research and finds that he can also invoice the current employer. The tax is much less, a no brainer you would think.

An employee is not an entrepreneur

The moment the assumed lower taxation is discovered, we are asked about the employment versus self-employed. We are happy to assist, but an employee is not an entrepreneur.

An entrepreneur creates his or her income source, is aware of current clients maybe leaving. The invoice might not get paid. Things like that.

The employee entrepreneur does not have this worry. He or she will have this income, unaware that the income can suddenly stop and no debtor risk. That is not an entrepreneur.

We are proven right the moment the Value Added Tax return had to be done, but was never done, as the employee was not use to file tax returns. In addition the entrepreneurs income tax return is be filed. That is a more complex income tax return, hence more expensive to process income tax return, than the regular one.

Difference employment versus self-employed: disability insurance

The true problem is with the disability insurance

The person making the comparison between being employed in the Netherlands for the foreign employer and being self-employed invoicing this foreign company, only looks at the amount of tax involved.

Indeed, the self-employed person can deduct company costs. This person can claim entrepreneurs deductions such as the entrepreneurs discount, starting entrepreneurs discount and the small business discount. That makes much less income tax is paid being self-employed.

Believe it or not, but even we know life is not only about taxation. If you are employed, the employer pays for the disability insurance and the unemployment insurance. Two insurances you do not have being self-employed. The disability insurance pays for the lack of income you have, when you are for instance hit by a tram. Every day a tourist is hit by a tram in the Netherlands. If you wake up three months later in hospital, who paid for your rent or mortgage?

Disability insurance

The disability insurance provides you with an income during a period you are not able to generate one due to health issues. For instance you have Covid issues, or taken into hospital.

The employer continues your salary payments at least for the first two years. Being self-employed, the client cannot continue to pay you. That would imply is was an employment all along.

Yes, you can take out a disability insurance and here comes the apples and pears correction. To compare being employed versus self-employed, you need to take the costs of a disability insurance into account. An insurance based on EUR 50.000 income per year can easily cost you EUR 10.000 premium per year. That is a tax deductible premium, but still a large amount.

Moreover, an insurance company is an insurance company. The moment the chance arises that a claim can be denied, this will be used. That problem does not arise with employment.

Tax is exciting

We think tax is exciting. Choosing between employment or being self-employed is strange to us. Either you are an employee or you are not. Same for the entrepreneur. The lower amount of tax is often the trigger to the self-employment option.

As much as we think less tax is exciting, there is more to the picture than tax alone. Rights employees have under Dutch rules. The disability insurance the unemployment benefit. All aspects you need to take into account, next to the entrepreneurs obligations. A true comparison will make you choose to be an employee any day.

Entrepreneurs health care insurance – what is that?

The entrepreneur health care insurance, collected by the Dutch tax office. Does that imply I no longer need to take out one myself?

Entrepreneurs health care insurance

In the Netherlands all residents need to have a health care insurance. Often this is a Dutch health care insurance. However, if you are for some reason socially insured in another EU country. You show the so called A1 statement to the Dutch SVB. The SVB is this institute that is in charge of the collection of the social premiums. Then you do not need to have a Dutch health care insurance.

If you lack to take out a health care insurance, then the CAK will send you a letter. The CAK is the administrative office of the SVB. This letter demands you to take out a health care insurance within three months of the date of that letter.

Health care insurance fine

The moment you do not obey the demand of the CAK, the justice department via their administrative office the CJIB will send you a EUR 437,25 penalty. And another one the next month.

The third month you will not get a penalty, but the CAK then assigned a health care insurance to you.

Dentist could be coverted by the health care insurance

How is the health care premium paid?

The health care premium is in fact charged to you two times per month. One you are in charge of, the other one you are not aware of.

The one you are in charge of is the one you took out yourself. For instance if you are a single man or an older couple we can only assume you do not need the services related to pregnancy. So you chose an insurance without these facilities. In other words, this health care insurance you can customize.

The unaware premium is paid by your employer or your pension organization. Your employer pays directly to the Dutch tax office the monthly amount related to your salary. In the old days this was shown on the salary specification. The amounts are now so high, to keep the peasants unaware, it is no longer shown.

Entrepreneurs health care insurance

The entrepreneur has no employer. Still the entrepreneur also needs to pay for the health care insurance two times.

The one time is identical to the situation of an employee, the entrepreneur takes out a health care insurance him or herself.

The second payment is made via the income tax return. The entrepreneurs income tax return always show two amounts to be paid. One amount is the income tax, the other amount is the obligatory health care insurance.

The most common response we receive from entrepreneurs is surprise. Instantly the idea grows that if the tax office charges them already with health care insurance, they can cancel their own paid health care insurance. Then we need to explain that this is not possible. Confusion all over the place.

Tax is exciting

We think tax is exciting. Paying for the health care insurance is an obligation. We understand that entrepreneurs are confused that their tax bill also includes health care premium to be paid to the Dutch tax office.

Entrepreneurs preliminary assessment: in general very much disliked

Can you help me with my BV company?

The entrepreneurs preliminary assessment is in general the most disliked document the tax office can send. What is that about?

Entrepreneurs preliminary assessment

The calendar year has just started, it is now January 2022, and you already receive a blue envelop. The blue envelop is a message from the tax office. Like the very purple envelop is from the CJIB, the bureau of speeding tickets (I have been told of course). Now the Chambers of Commerce also uses purple, so I hardly dear to pick up the mail these days.

You open the blue envelop and you see you need to pay an amount in tax. That can spoil an entire day is my experience. It is the upfront 2022 tax assessment. You have not earned a dime yet and you are to pay the tax already.

Entrepreneurs preliminary assessment

A side note – mind scams

The fact that the CJIB, chambers of commerce and the Dutch tax office send message via regular mail using these colors, implies no email messages are send. If you receive an email message, or silly computerized phone message that you have outstanding debts with either of these organizations. This is a scam, not true, do not ever pay. If you are in doubt, contact us or the origination it concerns. Never use the contact details presented by you by this scamming organization

Instant response to tax assessment

The instant response to the above tax assessment is to ask your tax advisor, that will be us, to nullify this assessment. As this behavior was anticipated by the Dutch tax office, some measures have been taken by te Government to prevent that.

First you cannot appeal such an assessment, you can only file another preliminary assessment request. Neither can you call the tax office to have it changed. So obstacles have been put in place to stop you from paying.

Second, the law has changed on a minor details, with huge consequences. If you, for the purpose of ease, nullify this assessment. The moment the year ends and it turns out you should have paid more or less the amount of the preliminary assessment, you committed a crime. A crime for which you can be penalized obviously.

Why is this assessment send now already?

If you would have been an employee, you are paid a salary. You are not paid the gross salary, but you are paid the net salary. Why are you not paid the gross salary? The Dutch tax office recognize you as a human being, a human being will spend the full amount of the gross salary. Then the end of the year is there, and you are to pay the tax over your salary and there is nothing left to do so. Hence you are paid the net salary.

This principle the Dutch tax office also would like to put on the entrepreneur. Pay as you go. If the assessment is settled by you in 12 months period, it could work out like the situation of the employee.

What if your result for the coming year is very much different?

You are the entrepreneur, nothing is a given in your world. Suddenly a pandemic happens and there is not more business. Then you can send in the request to nullify the result. A very understandable situation.

However, during the year it turns out the pandemic did not hit you at all. Even better, your result is higher than previous years. Then you cannot sit on your hands, but you need to send in the same form, but now with the predicted result.

Tax is exciting

We think tax is exciting. This preliminary assessment is an event. Some entrepreneur accept, some do not. We are asked to reduce the amount and at the end of the year the same entrepreneur has to pay a substantial amount of tax, but has no money. That is exactly what the tax office would like to prevent. The preliminary assessment tries to moderate the liquid position of the entrepreneur, which is a good thing.

Company investment tax credit

The company investment tax credit is a teaser for companies to make investments. Investments are good for our economy, hence the tax credit

Company investment tax credit

An investment equals a cost made by the company exceeding the amount of EUR 450 excluding VAT. The cost is related to material, like computer, desk, chair and what have you. Other costs, like those of subcontractors, rent etc. is not regarded an investment.

Software is out of the ordinary. Most companies pay for a software license or subscription. That does not make them owner of the software, only user. That is not an investment.

How does the company investment tax credit work?

The company makes the investment and keeps track of that. If you invest less than EUR 2.400 you have no deduction. Investing more than EUR 2400 but less than EUR 59.939 (2022) you get 28% over the total investment value as deduction.

When you invest over EUR 59.939 but less than EUR 110.998 your deduction is EUR 16.784 instead. That implies you invest EUR 59.940 you get EUR 16.784 deduction or if you invest EUR 110.900 you get EUR 16.784 deduction.

Between EUR 110.999 and EUR 332.994 the EUR 16.784 gradually reduces. Above EUR 332.994 no investment credit is paid.

Company investment tax credit

Example

The company invests in EUR 3.000 excluding VAT. That is more than EUR 2.400 which implies over the full EUR 3.000 28% investment credit is allocated in the corporate/personal income tax return.

However, the investment itself is subject to regular accounting rules. That implies the EUR 3.000 is to be depreciated over a 5 year period.

Which investments are excluded from this discount?

The company car, with the exception of the full electric or liquid hydrogen car. This type of car has more tax facilities, such as the MIA and the random depreciation possibility. Mind the conditions that need to be met.

No investment credit for housing, ground costs, animals, ships, representative made costs, shares/bonds, receivables, goodwill or federal permits.

No investment credit for investments that will be rented for more than 70%, or personal goods transferred to the company. Nor investments made with family.

Company terminats/stops. What happens then?

The company invested in a EUR 3000 laptop in November and in February you decide to close the company. What happens with the investment?

In the year purchasing the laptop, the laptop is processed as normal. However, in February the company is closed and that implies the laptop is to be sold to yourself against  the economic value. Moreover, the investment tax credit will be made undone partly via the income or corporate income tax return. The value of this laptop is to be determined within reason. Reasonable is probably not EUR 100 for the laptop. The tax office does make inquiries especially about these aspects during an audit.

Tax is exciting

We think tax is exciting. Assisting you with optimizing your income tax return is our standard. This implies the investments of your company are taken into account. Please connect to us if you like assistance with your 2021 entrepreneurs income tax return or your 2021 corporate income tax return.

Dentist costs are not company costs

Dentist costs are not company costs

The dentist costs are not company costs. Obviously you would imagine, but not for this tax advisor who claimed dentists costs as a company costs. Was he right?

Dentist costs are not company costs

Company costs are costs made to run a company. Office rent, stationary, a desk, computer are costs aspects not under debate by the Dutch tax office. Other aspects such as a ships/boats, guns, animals and fines are excluded as costs for a company.

Then we have the freedom of the entrepreneur to allocate as costs what the entrepreneur thinks is necessary to run the company. For instance, if the entrepreneur prefers to drive a Rolls Royce in his 5 kilometer commute every day, the Dutch tax office cannot deny these costs based on the fact a bicycle is cheaper.

However, this is up to a certain line. The line is gray, but a dentist pushed the limits in the past. This dentist purchased an airplane to visit his clients within the Dutch borders. That was for the Dutch tax office a line being crossed and these excessive airplane costs were not accepted.

Company airplane used by dentist to visit clients in the Netherlands.

I have to look good

Our clients often provide receipts of a suit, shoes, hairdresser. All these costs are not business costs. We are countered by the client that these costs were specifically made to look good for the client. They would not wear the suit at home, or would have visited the hair salon weekly if it was not for the clients.

For these costs there is article 3.14 in the income tax act that states costs made to support a certain flair in life as a result of which more business is done, are not accepted as such.

Dentist costs are not company costs – court case

The tax advisor claimed in the 2016 income tax return EUR 2.308 dental costs as company costs. The Dutch tax office denied the costs and the tax advisor went to court. In court the tax advisor could not substantiate what the dental costs could weigh more as business costs then personal costs. As the personal use of the teeth was out used by far over for business purposes, the deduction was denied.

These costs can be denied based on article 3.14 of the income tax act.

Tax is exciting

We think tax is exciting. A business relation that takes care of his or her teeth is also very much appreciated by us during a conversation. A conversation with your tax advisor does not make the tooth brush tax deductible.