Maximum amount of debt to your own BV company is a new rule recently introduced. A rule to get shareholders to pay dividend withholding tax.
Maximum amount of debt to your own BV company
You are the shareholder and director of your BV company. Your BV company is doing well and you have need for private liquidity. Hence you loaned money from the BV. True loans, which implies you agreed upon interest payments, repayment schedule and collateral.
In 2024 the maximum amount you can loan from the BV company is EUR 500.000.
What is the problem with a high amount of debt to your BV company?
The issues are multiple. One issue is the reason why the BV is lending you the amounts of money. Is that a business case, in other words, the amount would have been leant to anybody under the same conditions. Or is the aspect of you being the shareholder of influence of these loans. That is the discussion.
On the other hand it is simply a matter of tax collection. By loaning the amount, tax is deferred. Inflation makes the loan become less valuable, hence less tax to be paid in the future. To avoid this and collect now the EUR 500.000 rule is in place. The name of the rule is excessive debt.
What happens when the maximum amount is exceeded?
You have with your BV company a EUR 500.000 loan, but accidentally the current account was also created, in total you have EUR 570.000 debt to your BV company.
EUR 570.000 is more than EUR 500.000, hence the excess of EUR 70.000 is processed as a dividend payment. Over the EUR 70.000 you are charged dividend withholding tax. As a result the maximum amount you can loan from your BV is EUR 570.000. If the maximum is not increased, you are again taxed with dividend withholding tax over the same the following year.
The moment your BV company creates a true dividend, the debt is reduced and the already paid dividend withholding tax compensated. The EUR 570.000 amount of this example is then reduced with the dividend made.
What is the exemption of this maximum loan amount rule?
The exemption of this rule is the debt taken up with the BV company for the purpose of the house being your main residence. If you used a debt of the BV to pay for the house, to pay for maintenance to the house, to pay for an existing debt with a mortgage company, this loan is not in the maximum loan rule.
However, the condition is that the loan is a true Box 1 income tax loan. This implies interest is to be paid, the maximum loan period is 30 years and on an annual basis the loan is being repaid. If one of these aspects is missing, this cannot be a Box 1 income tax loan. That implies this loan does not qualify for the exemption.
Are there more exemptions?
Yes there are more exemptions, but then it gets complex with outside company person, that might be family of you. The question you should ask yourself then: what is wise? Becoming maybe too creative with loans to persons other than yourself, or simply keep it simple. Comply with this rule and do not become creative. We always go for the latter. Do not take unnecessary risks with your earned money and another person. Even if it is family.
Tax is exciting
We think tax is exciting. We also think that is the salary is set correctly, no need for additional money to be taken out of the company. Then again, investments such as property you often cannot pay from your salary. Then a loan agreement is in place. To avoid too much money being loaned from the BV rules have been set.
