The BV company and current account are always a topic of interest of the Dutch tax office. During an audit this is certainly going to be addressed. What could be the problem?
BV Company and current account
The BV company is a limited liability company and the shareholder can take out money from the BV in three manners. It is either a salary, a dividend or a loan. For a salary you need a payroll. For a dividend you need to have the BV make a profit. Only if the dividend payment will not make the company have liquid issues in the near future, it is a valid dividend. The loan is a loan and needs to be paid back.
The loan is also referred to as a current account, like you have with your bank. The value fluctuates.
The current account – minimum salary requirements
The BV company shareholder his or her salary is subject to the minimum salary requirements. That is either EUR 46.000 bottom-line or 75% of the salary of a person in a similar situation who has no shares in the company. As nobody shares his or her salary details often 75% of the profit is used.
If you have the 30% ruling, we even recommend to use 100% of the profit as a salary, that is cheapest tax wise.
If you state the EUR 46.000 is your salary, and clearly the company is making more profit than EUR 46.000. At the same time you take out money from the BV and you address that as a loan in the current account, the Dutch tax office can take the standpoint that this money is actually net salary.
You need to avoid taking a too low salary and take out regularly money from the BV via current account.
The current account – interest percentage
The current account is a loan between the shareholder and the BV company. Often it is regarded silly. Silly it is not, as director of the BV company you need to act as guardian of that BV company. Hence you as director, need to charge you as shareholder interest over the current account.
I am certain with the current interest rates of which some are negative that you could respond that the interest is not a big deal. Here you are wrong. The low interest rates can be so low as the risk ran by the bank is low due to collateral being issued. Often that is the house. If you cannot pay the loan, the bank can sell the house. However, this is never the case in a current account situation.
What is the correct interest percentage? The correct interest percentage is not a science. That said, you need to compare the current account with your bank account. The moment your bank balance becomes negative, the bank can charge interest. Ever investigated what that percentage is? Well is use to be roughly 24%, then the Dutch Government limited it to 18% and that has now been reduced to 14% and there are suggestions to reduce the max amount to 10%.
14% interest is alarmingly high, then again it is also a risk for the BV to be paid back. So please avoid the current account.
The current account – no conditions, no interest
In the event that you simply take up money from the bank of the BV not being salary or dividend, then we book that in your current account. If you then are also not willing to pay interest or make an current account agreement with conditions, then for the Dutch tax system it is a simple case. This money it not a loan, but dividend payment. A net dividend payment for which you still need to pay the dividend withholding tax. Obviously you had in mind the BV would pay this tax for you, so it is grossed up to the dividend withholding tax amount. As you have not behaved as you should have done, on top of that you receive a 25% penalty if you were unaware. Or a 50% penalty when you were deliberately doing this, which percentage could also go to 100%.
In other words, the current account situation needs your attention and action.
We think tax-is-exciting. The current account issue we do not have a lot among our clients as most have the 30% ruling, so the profit is already for 100% consumed. Nothing left over to pay alternatively. The day the ruling is over is the day we suggest the terminate the BV, if that is possible. Other clients we push to meet the minimum income requirements, which is often well over the EUR 46.000. By processing this at the end of the year, often the current account is nearly nullified.
Sorry for the dashes in the middle of the word tax-is-exciting. Apparently Google has a dirty mind and sees only a three letter word that we refer to when we practice to reproduce ourselves. Anything related to that word is spam, hence this devout solution.