End-of-year tips 2020: perspective for the future

We are happy to share our end-of-year tips for 2020 with you, an unusual year in every aspect. 2020 brought a new reality that was unfathomable this time last year. The COVID-19 pandemic caused a massive shock to the world and the global economy, and it has affected every business differently. We are living in uncertain times. But despite all the hardships, you might also want to look at the crisis as an opportunity to make some much-needed decisions, some of which are perhaps long overdue. We urge you to use the last few weeks of the year to shore up your organisation’s resilience.

Perspective for the future of your business

Reflecting on the future of your business in the Netherlands is about determining your focus: what is really important? Whatever happens, you are not alone: Accon International is here to help you and your business.

We wish you good health and all the best in the New Year.

End-of-year tips for 2020

1. Make use of the coronavirus support package
2. Buy an electric car before the year is out
3. Distribute dividend in 2020
4. Work-related costs scheme: increase and decrease in discretionary budget
5. Benefit from the lower corporate income tax rate

Tip 1: make use of the coronavirus support package

Even if the support package offered by the Dutch government may seem complex for businesses at times, you can create major relief by availing yourself of the support measures. You might, for instance, want to:

• Apply for the Reimbursement of Fixed Costs for SMEs scheme (Dutch acronym: TVL); the Netherlands Enterprise Agency is now accepting applications for this type of support from all sectors. We would be happy to tell you more about the conditions.
• Defer your tax payments. Requests for tax deferral will be accepted until the 1^st of January 2021.
• Apply for the Temporary Emergency Bridging Measure for Sustained Employment (Dutch acronym: NOW). This scheme offers compensation for wage costs.
• Submit the request for settlement of NOW 1.

For more information, please click here.

We suggest that you sit down with your Accon International adviser to discuss what would be appropriate in your situation and how you could create some relief. Remember that most of the government support is based on an estimate of your drop in revenue, requiring you to submit a request for settlement at a later date. Please keep track of the submission deadlines.

Tip 2 : Buy an electric car before the year is out

If you are looking to buy or lease a new company car for yourself, in your capacity as the business owner, or for your Dutch-based employees and you favour an electric car such as a Tesla, you should know about the changes in the income step-up for tax purposes for electric cars in the Netherlands.

Income step-up

The income step-up for tax purposes for electric cars bought or leased in 2020 is 8% of the first € 45,000 of the list price plus 22% of anything above that amount. The Dutch scheme will become less generous in 2021. The income step-up will be increased to 12% of the first € 40,000 of the list price plus 22% of anything above that.

Calculate your tax benefit

If you purchase or lease a new electric car before the year is out, the income step-up of 8% of the first € 45,000 of the list price will be available to you for five years. Your Accon International adviser would be happy to calculate the tax benefit for you. Please remember that it may take some time for a new car to be delivered. 

Tip 3: distribute dividend in 2020

The Dutch tax rate on income from substantial interests (Box 2) will increase from 26.25% to 26.9% on 1 January 2021. That is why you may want to distribute any dividend before 2021. If the dividend is € 100,000, you will save € 650 in tax.

Tax-free amount

Please remember to look at this in correlation with tax on capital gains (Box 3). The tax-free amount in this tax band may cancel out your tax benefit. We recommend that you contact your Accon International adviser to discuss what would be the best option for you.

Tip 4 : Work-related costs scheme: increase and decrease in discretionary budget

The work-related costs scheme allows you to offer your employees non-taxable allowances in the Netherlands. The margins for the discretionary budget are set to change again in 2021. Find out what this means for you and your employees.

Are you making optimal use of the work-relate costst scheme this year?

Tip 5: Benefit from de lower corporate income tax rate

The Dutch corporate income tax rate is set to be lowered. Efficient use of this tax facility will significantly reduce your tax burden, freeing up funds for you to do business. The lowest rate was 16.5% in 2020 on profits of up to € 200,000 (and 25% on anything above that). The rate will be lowered considerably in the year 2021, i.e. to 15% on profits of up to € 245,000 (and 25% on anything above that). From 2022 onwards, the 15% rate will apply to profits of up to € 395,000.

With this in mind, you may want to consider discontinuing the tax group between your companies or spreading your operations across multiple companies so that the low tax rate will apply to each company. However, before you decide to terminate the tax group (in Dutch: Fiscale eenheid) regarding one or more group companies, please consult your tax advisor  whether this could have any tax consequences.

Please get in touch with your Accon International adviser if you expect your profit to be higher than € 245,000 (and € 395,000 from 2022 onwards). He or she would be happy to tell you how to make the most efficient use of the reduced tax rate.  More information about the tax changes in 2021.

More information

Please do not hesitate to contact your Accon International adviser to find out more about what to expect in 2021. He or she would be happy to answer your questions and explain the most efficient solutions to you. You can also get in touch with us by sending an email to international@acconavm.nl.