Excessive borrowing from your own private company?

There have been several warnings in the past few years to the effect that borrowing from your own private company would be curtailed. In the government’s eyes, many directors and major shareholders are using their companies as their own personal piggy bank. While these plans are not part of the Budget Day proposals, we nevertheless would like to highlight the subject here.

The Dutch House of Representatives has now passed the bill and the Dutch Senate has yet to have the final say on it. Entry into force is scheduled for 1 January 2023. The first review date under these plans will then be 31 December 2023.

Borrowing on arm’s length terms

This means you can borrow no more than €700,000 from your private company from the end of 2023. A money loan from your own private company must be on arm’s length terms. Your Accon International legal adviser can arrange the documents. If you want to borrow more, the excess amount will be taxed in box 2, regardless of whether you have received any actual dividend. This taxation does not alter the debt either. For 2023, the tax rate in box 2 is still 26.9 per cent, but in 2024 it will rise to a maximum of 31 per cent (and a minimum of 24.5 per cent for amounts up to €67,000).

However, there are some exceptions to this rule, such as home equity loans. Please also be aware that these rates also apply to debt taken out from the company by certain family members and relatives.

Overdrawn loans? Repayment solutions

It is important to determine with your adviser whether and how you will repay any overdrawn loans. One solution may be to refinance the debt via your bank. You can also make repayments using a dividend pay-out from your company or use private liquidity to pay back the debt.

What is important with the dividend pay-out solution is whether you intend to pay out dividend this year, next year or even only in 2024. Please make sure to observe the statutory provisions, such as a payment test and proper decision making. You should also critically check your financial position in box 3.

The optimum solution differs for each entrepreneur. We recommend you contact your Accon International adviser to discuss what would be the best solution in your situation. Please send an email to international@acconavm.nl.