If the Tax Authorities can demonstrate that you will never be able to repay a large current account debt with your own private limited company (BV), this is considered a taxable dividend distribution, even if the Tax Authorities initially simply follow your tax return.
What happened in court recently?
Large current account debt
A recent case before the Court of The Hague concerns
A managing director who owes his BV many millions of euros. He has included this amount in his current account in previous years (ECLI:NL:GHDHA:2022:59).
Waiver up to and including 2013
However, the managing director is unable to repay this. His financial position is not very sound anyway. He is negotiating with his bank to have some of his other debts forgiven. In 2016, the tax advisor decides to write a letter to the Tax Authorities. In it, he explains the situation as of the end of 2013 and proposes to have part of the debt to the private limited company (BV) forgiven as well.
Increase in current account in 2014/2015
Even before an agreement has been reached with the Tax Authorities, nearly €2 million in debt waivers are being implemented within the private limited company. Moreover, the managing director continues to withdraw funds from the current account in 2014 and 2015. This raises questions for the Tax Authorities. However, the 2014 and 2015 income tax returns have already been filed and processed automatically. Can the Tax Authorities still correct these?
Can the Tax Authorities make additional assessments?
New fact
For an additional assessment, a so-called "new fact" must be present. If the Tax and Customs Administration discovers a new fact that was previously unknown to them (or reasonably should have been known), a final assessment can still be corrected. Is that the case here?
2014
There is little discussion about this for 2014. The final 2014 assessment was issued on December 1, 2016. While the tax advisor had already contacted the Tax and Customs Administration in 2016 about the current account balance, this only concerned the period up to and including 2013. It wasn't until 2017 that the Tax and Customs Administration raised questions about the write-down in the corporate income tax return, after which the ball started rolling. This occurred after the final 2014 assessment was issued, meaning a new fact was present.
2015
For 2015, things are more complicated. This return was only processed automatically on December 8, 2017. At that point, the discussion with the Tax Authorities regarding the depreciation had already begun. Therefore, there was no new fact.
Obvious error
Nevertheless, this year is also eligible for a correction, because the 2015 assessment imposed on the managing director was clearly incorrect (a clear error). Considering the €111,131 deposit in the current account, it should have been clear to him that the assessment was far too low. NB. If this results in an underpayment of more than 30%, a new fact is not necessary for an additional assessment.
Taxable dividend distributions
The outcome of this procedure is that the Tax Authorities may tax the increase in current account balance as a dividend distribution in box 2 for both 2014 and 2015. NB. In view of the upcoming implementation of the bill "Excessive Borrowing from Own Companies Act," the Tax Authorities will increasingly and more easily be able to designate large debt positions within one's own private limited company as dividend distributions.
Prevent large current account debts with your own BV by paying off your salary Vote on your spending. Especially in light of the upcoming implementation of the "Excessive Borrowing from Own Companies Act," the Tax and Customs Administration will increasingly and easily be able to designate large debt positions held by your own private limited company as dividend distributions.
