2021 in sight - Current tax tips for you and your organization
18/11/20
This article was last updated on 18 December 2020.
2021 is approaching. What actions should you take before the end of this year or postpone until next year to take advantage of tax facilities?
We have made a selection of the most important tax tips and points of attention for you and your organization. Our selection is based on the 2121 Tax Plan package up to and including the voting in the House of Representatives (‘Tweede Kamer’) on 12 November 2020.
Tips based on previous legislative proposals are also discussed, and tips related to (temporary) approvals in the framework of the corona crisis. At the end of December 2020, after the voting in the Senate (‘Eerste Kamer’), it will be clear if all measures from the 2021 Tax Plan package will actually apply.
Special deferral of payment of tax
Apply for special deferral of payment to the tax authorities before the end of the year
In order to alleviate the impact of the corona crisis on entrepreneurs, there is the possibility of applying for special deferral of payment (BUVB). The BUVB applies, amongst others, to all income tax, corporation tax, turnover tax (VAT) and wage tax assessments. You can apply for this postponement online if, as an entrepreneur, you have encountered payment problems due to the corona crisis. You do not have to pay the taxes for which the special deferral applies until 1 July 2021. After that, you can pay your tax debt in 36 monthly instalments until 1 July 2024. You have until 1 January 2021 to apply for the special deferral.
Personal income tax
Caution when borrowing from your BV
Debts of a managing director-major shareholder (in Dutch: “dga”) and his partner to his own BV - to the extent that these debts exceed EUR 500,000 - will be taxed in box 2 as from 2023 as a dividend payment at the then applicable rate of 26.9 percent. The same applies to debts of direct family members. Existing and new debts relating to one's own home are exempt from this measure. It may be wise for you as a dga to phase out any excessive loans now. You have until 31 December 2023 to do so, this is the first application date for this rule.
Benefit from optimal distribution of box 3 assets between tax partners
Tax partners can freely allocate joint box 3 assets (after deduction of the joint tax-free allowance of EUR 100,000) to each other. By making use of this possibility, you can gain a benefit in box 3. However, you must take into account other (tax) regulations, including the consequences for the tax credits. The tax rate will be 31 percent. As of 1 January 2021, the tax-free capital per person amounts to EUR 50,000 (in 2020: EUR 30,846).
| Tariff structure box 3 with percentages for 2020 and 2021 | ||||
|---|---|---|---|---|
| Tax base | Notional yield | |||
| Bracket | 2020 | 2021 | 2020 | 2021 |
Tax-free |
€ 0 |
€ 0 |
Exempt |
Exempt |
1 |
€ 30.846 |
€ 50.000 |
1,80% |
1,90% |
2 |
€ 103.643 |
€ 100.000 |
4,22% |
4,50% |
3
|
Starting from
|
Starting from
|
5,28%
|
5,69%
|
Opting between box 1 and box 3
Due to the current relatively low mortgage interest rate and the relatively high notional yields in box 3, it may be fiscally attractive not to have your own home debt allocated in box 1 but in box 3. Depending on the situation, this can be done, for example, by adjusting the terms and conditions of the loan in a certain way or by temporarily repaying the loan and then taking out a new loan. Due to the reduction in the rate at which you can deduct the mortgage interest in box 1 - gradually from 46 percent (2020) to 43 percent (2021) and ultimately 37.03 percent (2024) - the benefit of this refinancing will increase in the future. The phasing out of the 'deduction for no or little own home debt' (the so-called “Hillen Act”) also contributes to the increase of benefit in the future. If your mortgage interest deduction is lower than your own home mortgage, the amount payable on balance will be reduced by 90 percent (in 2021; in 2020 it is 93⅓ percent).
Refinancing of your own home debt (via your own BV)
This also applies when you refinance your own home loan, especially if it is done via your own BV because then you have more possibilities in the design of the loan.
Example
The premise in this example is that, in 2021, your box 3 capital will be subject to the highest notional yield (5.69 percent) and you can deduct your mortgage interest at the maximum rate in box 1 (43 percent). This example does not take the home ownership fee into account.
Suppose the own home debt amounts to EUR 500,000 and the annual mortgage interest rate is EUR 15,000 (3 percent). In 2021, mortgage interest deduction will be effected at a rate of 43 percent, giving you an effective benefit of EUR 6,450 in box 1 (€15,000 * 43%). If the debt falls under box 3, it will reduce the asset base, giving you an effective benefit of EUR 8,820 (EUR 500,000 * 5.69% * 31%). In this example, the effective benefit in box 3 is therefore higher than the effective benefit in box 1.
Take a course or study this year and next year
If you are planning to follow a course or study, the costs of this are still deductible for your personal income tax in 2020 and 2021. The personal deduction for training expenses will lapse on 1 January 2022 and will then be replaced by a subsidy scheme STAP-budget (in Dutch: Stimulans van de Arbeidsmarktpositie) for natural persons with a link to the Dutch labour market.
Cash donations no longer deductible
Cash donations are no longer eligible for the gift deduction. If you are used to financially supporting charities with an anbi status by means of cash donations (e.g. collections at the door or in church), please keep in mind that as of next year these payments will no longer qualify for deduction. From now on, it is better to make your donations through the bank and plan your donations accordingly, for example.
Check tax and social security position of international employees
If you are a Belgian resident, German resident or resident in another country but normally work in the Netherlands, working from home as a result of the corona crisis may affect your tax position. Due to the corona measures, many employees work from home as much as possible. When their usual workplace is in another country, working from home may affect their tax and social security position and the employer's obligations for these employees. Based on mutual agreements with Belgium and Germany, employees have, under certain conditions, the right to opt to be taxed for their income relating to the working days from home, in their country of residence or their usual work country. You are free to make this choice when filing the 2020 personal income tax returns.
Check foreign remuneration board members
Earlier this year, the Dutch government announced that the tax treatment of foreign executive and non-executive directors' fees for residents of the Netherlands will change. Currently, it is possible to request relief for double taxation for these remunerations on the basis of the exemption method. This policy will be revoked, which means that the relief for double taxation will be applying the credit method. The announced amendment will lead to a higher tax burden on the income of many Dutch resident directors of foreign companies. The date on which the approval to apply the exemption method will be withdrawn is not yet known. However, it is possible that the amendment will take effect as early as 1 January 2021. For further explanation, please read our previously published article.
Employment tax
Make use of the job-related Investment Discount (BIK)
The job-related Investment Discount will be introduced as of 2021 and already applies to investments made as of 1 October 2020. With this investment discount, both private (IB) and corporate (Vpb) entrepreneurs can, under certain conditions, offset part of their investments against their payroll taxes. For investments up to and including five million euro, 3.9 percent of the investment can be deducted from the wage tax. For larger investments, a reduction of 1.8 percent of the investment amount in excess of five million euros also applies.
Postpone final payment BIK investment
One of the conditions for the Job-related Investment Discount is that the assets must be paid in full between 1 January 2021 and 31 December 2022 and must be put into use within six months of that full payment. Investments for which full payment has been made in 2020 do not qualify. In the case of investment commitments entered into in the period October to December 2020, it is advisable to agree with the supplier that the last payment will be made in 2021.
Review the income position of expatriates with a reduced term of the 30%-ruling
As of 1 January 2019, the duration of the 30% ruling has been reduced from eight to a maximum of five years. A transitional period of two years applies for expatriates who, due to the measure, would lose their benefit of the 30% ruling in 2019 or 2020. This transitional rule will expire on 31 December 2020 at the latest. As a result, as of 1 January 2021 a substantial group of employees will no longer be able to benefit from the 30% ruling and will receive a lower net income than they had previously expected. We advise you to check whether you have adjusted the payroll administration for these employees. As of 1 January 2021, these employees will also no longer be eligible to opt as partial non resident taxpayers for income from substantial interests (box 2) and savings and investments (box 3).
Aimed exempted expatriate costs
Due to the reduction of the duration of the 30% ruling, the possibility of tax-free reimbursement of actual extraterritorial costs will also be reduced to a maximum of five years. We advise you to check which costs you can still reimburse tax-free after this period, e.g. business travel expenses.
Reimbursement of fixed (travel) expenses
In 2020 employers are allowed to continue making untaxed payments of fixed travel expenses (for commuting) even if the kilometres are not actually travelled. The government has indicated to extend the scheme until 1 February 2021. We advise you to start determining your policy on the reimbursement of travel expenses as of 1 January 2021, in anticipation of more structural working from home if this applies to your organisation.
Reimbursement of fixed expenses
In 2020, employers are allowed to continue to pay the fixed expense allowances tax-free, even if the employee no longer incurs the costs because he (often) works from home. With effect from 2021, this approval no longer applies. As of 1 January 2021, fixed expense allowances will then be (partly) taxed. We advise you to start determining your policy as of 1 January 2021. A new fixed expense allowance often requires an investigation into the actual costs and also (re)coordination with the Dutch Tax and Customs Administration.
Home working allowances
In the new situation since the corona crisis, employers want to facilitate their employees with e.g. an office chair or a second monitor. This is also necessary from the point of view of the health and safety responsibility of the employer on the basis of the Dutch Working Conditions Act. This is all the more true when working from home on a structural basis. The Dutch government has not created any new tax facilities for homeworking allowances. You must therefore make use of the existing possibilities, including the targeted exemptions for health and safety provisions and for necessary ICT resources, and meet all the conditions for this. When determining the policy on facilitating homeworking, it is important to take the tax frameworks into account from the outset.
Optimisation of the work-related costs scheme
As a result of the corona crisis, the work-related expenses budget for 2020 has been increased once from 1.7% to 3% for the first EUR 400 000 of the wage bill. Check whether you have correctly processed your reimbursements and benefits in kind in 2020 for the work-related costs scheme. Also check whether you still have budget left within the work-related costs scheme to make optimal use of the scheme, for example by exchanging gross for net wages.
Corporate income tax
Innovation box rate increases
The Dutch government plans to increase the effective rate of the innovation box from 7% to 9% as of 2021.
Prevent loss forfeiture
Currently as a main rule, losses can be carried forward six years. After that period, losses that have not yet been set off are forfeited. It is possible to prevent loss forfeiture as of 2021 by taking measures in 2020, for example by releasing a reinvestment reserve. The principle of sound business practice also offers some scope. The government has proposed unlimited loss carry-forward, as a result of which loss forfeiture would no longer be an issue from 2022 onwards. In addition, there will be a limit on the amount of losses (both forward and backward) that can be set off in a year, namely up to a maximum of 50% of the taxable profit in a year. However, up to EUR 1 million in taxable profit, you will be able to offset your losses in full. Read more in our article 'Loss relief becomes limited to 50% of the annual profit’.
Make use of the coronavirus tax reserve
Are you expecting a loss for your company in 2020 due to the coronavirus crisis? If so, you may already be able to form a coronavirus reserve in your 2019 corporation tax return. This could provide a liquidity advantage.
Interest on corporate income tax
Due to the corona crisis, the interest on corporate tax for the period from 1 October 2020 to 31 December 2021 has been set at 4%, instead of the original level of 8%.
Restriction on the offsetting of foreign losses
The liquidation and cessation loss regime will be adjusted so that liquidation and cessation losses can only be offset under stricter conditions, and possibly only to a limited extent. If, before or on 31 December 2020, you decide to liquidate a group entity or cease the business of a permanent establishment, such liquidation or cessation will still be subject to the wider transitional regime. Read more in our article 'Legislative proposal on the limitation of liquidation loss filed'.
Exit tax
The own-initiative bill ‘Dividend tax on the transfer of the head office’ is designed to tax (latent) profit reserves in the event of emigration or cross-border reorganisations to countries that do not impose a dividend tax claim on these profit reserves. The bill would have retroactive effect to 18 September 2020. There are still many questions about the compatibility of this bill with EU and treaty context. Nevertheless, it is advisable to keep an eye on this development if you ever wish to relocate your company abroad or carry out a cross-border reorganisation (cross-border merger, demerger or share merger). Read more in our article ‘Dividend exit tax for companies proposed'.
Adaptation at arm's length principle announced
On Budget Day, it was announced that the government wants to tackle informal capital structures and will table a separate bill in the spring of 2021 to amend the arm's length principle by 2022. The at arm's length principle ensures that trading between group entities will take place in accordance with the market. The bill will limit the downward adjustment of the Dutch taxable amount if this amount is not taxed or is taxed at a lower rate at the level of the recipient. It is advisable to identify whether this occurs in your company.
Additional substance requirements for service companies
From 1 January 2021, additional substance requirements will apply to service companies. A service company is a Dutch tax entity whose activities consist for more than 70 percent of the direct or indirect receipt and payment of interest, royalties or rent from a foreign group entity. The new substance requirements, which supplement the current substance requirements for service companies, are EUR 100,000 in labour costs and office space for at least 24 months. If these requirements are not met, information is exchanged with the country from which the interest, royalties or rent is paid (the source state). The result could be that the source state deprives the taxpayer of treaty benefits.
Withholding taxes
Interest and royalty tax
From 2021 onwards, interest and royalty payments you make will, in certain cases, be taxed in the Netherlands at a rate of 25 percent (withholding tax). The withholding tax relates in particular to interest and royalty payments made to group companies established in low-tax jurisdictions. By considering this in advance, you may be able to avoid this and make your corporate structure more future-proof. A similar type of withholding tax may become due on dividend payments from the Netherlands in 2024.
Transfer tax
Ensure good timing for the acquisition of real estate at the end of 2020 or the beginning of 2021
Depending on your situation, it is useful to consider whether you would like to acquire a property in December or whether it would be better to wait until January. The general rate of transfer tax will be increased from 6% to 8% by 2021. This applies, for example, to business and factory premises, but also to homes that the buyer does not use to live in permanently and to the acquisition of the economic ownership of a home.
Starters on the housing market, on the other hand, will benefit from a transfer tax exemption. A starter must be younger than 35 years of age when purchasing the first dwelling for which the exemption is claimed, but must have reached the age of majority. There will be a property value limit of € 400,000 under the starter exemption. This property value limit will apply from 1 April 2021. For a dwelling above that value limit, two percent tax would have to be paid on the full value. Starters who wish to buy a home above the housing value limit can benefit from this exemption from 1 January to 1 April 2021.
Gift tax
Take advantage of the temporary increase in gift exemption in 2021
The existing gift exemptions for children and other recipients will be increased by 1,000 euros but only for the year 2021. With this crisis measure, the exemption from gift tax per child for 2021 amounts to € 6,604 for gifts from parents and the exemption for other recipients for 2021 to € 3,244. Through this increase in the exemption from gift tax, private donors such as family and/or friends can help an ailing entrepreneur to get through the corona crisis.
DAC6
Timely mandatory reporting of cross-border tax structures
Rules on mandatory exchange of information on cross-border arrangements entered into force retroactively on 1 July 2020. These rules derive from an EU directive (DAC6). This Directive requires relevant advisors or taxpayers to report a wide range of cross-border tax arrangements whose implementation started after 25 June 2018. The first reports will be made by 31 January 2021 at the latest. If your company has an international structure, we recommend that you work with your adviser to determine how you will fit this mandatory exchange of information into your tax and compliance strategy. It is also important that you report in a timely manner, for example, if no external advisor is involved in a transaction subject to reporting requirements, or if the advisor in question makes use of a legal right to withhold information (lawyers, etc.). This will avoid an administrative fine of up to EUR 870,000 (amount 1 January 2020).
Pensions
Ensure that the pension scheme is transposed to the new system on time
The legislation accompanying the new Pension Agreement will enter into force on 1 January 2022. In the period from 2021 to 2023, you will have to make important choices about your employees' pension scheme. You are obliged to change all pension schemes to a defined contribution scheme in accordance with the new legislation. You will also have to adapt current defined contribution schemes.
As an employer, you are responsible for completing a draft transition plan by 1 July 2023 at the latest. This is a decision containing a description of the new pension scheme, the necessary compensation scheme and possibly the valuation of old pension rights. In most cases, the employer is also obliged to set up a compensation scheme. The choices made must be substantiated both qualitatively and quantitatively.
Find out more
Would you like more information about the application of one or more tips and attention points? Or do you need advice? Please contact your PwC adviser. They will be happy to help you.
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