The 2024 tax rate for dividend changes, you need to act now to make use of current lower tax rates. This article is only applicable to persons or companies holding at least 5% of the share capital.
2024 tax rate for dividends changes
In the year 2024 the tax rates in Box 2 of the income tax return currently proposed 24,5% over dividend up to EUR 67.000. Over EUR 67.000 the rate is 31% applies. Proposed is to increase the 31% rate to 33% or even 35% as some political parties would like.
Right now the tax rate in Box 2 is one tax rate of 26,9%. Hence up to about EUR 100.000 the year 2023 tax equals 2024. From that amount the new tax rate becomes more expensive.
What is a dividend?
Dividend is the payment of a profit reserve that is held by a limited liability company (BV company). A BV makes a result and if that is positive, it stays in the BV company. To secure that profit, a dividend decision is made to pay out the profit to the shareholder. The shareholder is you in person or the holding BV.
Important to realize is that if dividend is paid out and shortly or a couple of years later the company has liquidity problems, the shareholder is held liable for an impropriate dividend payment. In other words, the company could not survive as a result of that dividend payment.
Obviously you cannot pay more dividend than the general reserve shows being present as profit reserve.
Low salary high dividend
We are often approached by companies arriving from abroad. Especially the United Kingdom, where a low salary high dividend culture exists. In the Netherlands this is not possible. The obligatory minimum salary demand of the shareholder director makes that the result of the company is lower. Hence dividend possibilities are lower.
How to create a dividend payment?
A dividend is a decision made by the shareholders meeting. That implies minutes are drawn in which a dividend is suggested and that dividend is then approved. A dividend is paid to all shareholders, you cannot exempt a shareholder.
The moment you are aware that you would like to pay out different amounts of dividend to different shareholders, then you need to start with issuing different types of shares. The example is that you would like to get the investor onboard, but you do not need that investor in the boardroom. Then you ask the notary to issue shares B, that do give right to dividend and liquidation result, but have no voting rights.
When to file the dividend tax return?
Within one month from the moment the decision has been made to pay out a dividend, a dividend tax return needs to be made AND paid. Very important to realize.
In the event you would like to take up money, but cannot afford the dividend tax yet, you could decide to wait with the dividend decision and till that time the amount taken up is a loan. That implies you are to pay interest to your company for the money.
Should money be an issue regardless, then you can tick the box in the dividend tax return that the company pays the dividend. This is not free money, that simply implies the dividend amount has increased with the tax paid by the company. Keep an eye on the profit reserve, as this increased dividend amount cannot exceed the profit reserve in the company.
The moment the shares of the BV are held by another BV, often referred to as holding BV, then no dividend withhold tax is to be paid. Regardless, a decision by the shareholders meeting is to be made. The dividend cannot result in future liquidity issues, and a tax return needs to be filed within one months time.
Maybe you find it strange to file a tax return for the dividend, if no dividend tax is to be paid. The tax office does not know that no dividend tax is to paid, till you tick the box in the form that the participation exemption applies.
Income tax return
The dividend tax is a two step taxation. The first step is the company withholding 15% on the dividend payment. In the income tax return, under Box 2, the dividend is reported again. In 2023 26,9% tax is to be paid, and the 15% already paid when the dividend return was made, is compensated with this 26,9%.
Tax is exciting
We think tax is exciting. Updating your bookkeeping with allocating a dividend from the working company to the holding company. Or compensating a current account debt the shareholder has with the company by a dividend payment can indeed excite us.