In 2022, mortgage interest will only be deductible up to a maximum of 40%. In 2023, this will decrease further to 37%. This raises the question of whether a mortgage with your own private limited company (BV) is still attractive. What are the advantages for you as a managing director?
Popular financing option
As a managing director, you can borrow money from your private limited company (BV) for consumer expenses, such as a new car, but also to finance your home. This can be done when purchasing a home, or if you plan to renovate. A few years ago, this was a very popular financing option. This was because mortgage interest was deductible at the highest income tax rate (at the time, 52%), while interest was taxed at a low rate within the BV.
No more tariff advantage
This advantage is no longer available. Most deductions are only deductible under income tax in 2022 at the rate of 40% and in 2023 at the lowest income tax rate of 37%. Because the combined corporate tax and income tax levy on your BV profits amounts to a minimum of 37,87%, this raises the question of whether a mortgage with your own BV is still so attractive. Your tax advantage is more than offset by the tax on the interest held by the BV.
Often still attractive
Yield advantage. In most cases, a mortgage with your own BV will still be attractive. Why? Because the rate advantage described above is not the only advantage.
The advantage of a mortgage with your own BV is that this often results in a return advantage. Liquid assets that were held without return
Within the BV, investments are made risk-free. This yields a return equal to the interest on the loan. Note: To achieve the same return elsewhere, you will need
more risks must be taken. After all, there's nothing more to be gained from a savings account.
Avoid bank interest surcharges
In addition, partially financing your home through your private limited company (BV) can also be advantageous compared to bank financing for your home. If you finance more than two-thirds of your home's value through a bank, you'll face an interest rate surcharge. This means your interest rate will increase by, for example, 0.2%. If you finance 90% of the value, an additional surcharge will be added. Tip: By having part of the financing run through your own BV, you can avoid such interest rate surcharges.
Record in writing
When taking out a mortgage with your own private limited company (BV), you must draw up an agreement. Of course, you must comply with the tax and legal requirements. Please note:
Please note that you must repay the loan in annuity payments within a maximum of 30 years. This requirement does not apply if you transfer a mortgage from before 2013 to your BV. In that case,
these remain interest-only.
Bill 'Excessive Borrowing Act...'‘
Home loans excluded
Also keep in mind the proposed law, the "Excessive Borrowing from Your Own Company Act," which will likely be implemented in 2023. Home loans are not covered by this. Note: However, if you take out a home loan from your private limited company after January 1, 2023, a mortgage right must be established. Otherwise, the loan will be included in the calculation of whether you have borrowed more than €700,000 from your private limited company.
A return advantage for the private limited company (BV) and/or avoiding interest surcharges at the bank can make a mortgage with your own BV attractive, despite tax developments. Have your advisor assess your situation so you can make a well-informed decision.
