Changes in borrowing from your own company

The Excessive Borrowing (from Own Company) Act will come into effect in the Netherlands in 2022. This means that any debts you may have to your own company may become taxable. If these debts are higher than € 500,000, they will be taxable as dividends received from a company in which you hold at least 5% of the shares.

The applicable tax rate on these dividends will increase from 25% to 26.9% over the coming years. The new rules do not pertain to debts you have taken out for your own home. Although there is some small print: owner-occupied home debts are subject to certain conditions.

To avoid becoming liable to tax, you will have to take action before 31 December 2022.

Dividend distribution in 2019

A popular solution to reduce the debts is to distribute a dividend, which can serve to cancel your debts to your company. Because of the rising tax rate on income from a substantial interest, it would be more tax-efficient to distribute a dividend in 2019 (25%) than it would be to do so in 2020 (26.25%). If you distribute a dividend of € 400,000, this rate difference will result in a benefit of € 5.000.

Our advice: look at the big picture

Given that there are many more legislative changes on the cards, we recommend that you sit back and look at the big picture before you decide what measures to take. You might just be surprised at what you find.