Top-10 Year-End Tips
Which tax-related measures can you still benefit from this year as an entrepreneur? How can you respond smartly now to changes that will apply from 2023? Here are ten practical tips.
Please note: Some of these tips relate to proposals in the 2023 Tax Plan that still have to be approved by the Lower and Upper House. The government also frequently announces new plans or revises its plans. It is therefore important to always contact your advisor to discuss the situation.
1. Buy an electric car this year
If you were already planning to buy an electric car costing more than € 30,000 in the near future and register it in your company’s name, you should make the purchase this year, if possible. That is because, from 2023 the reduced addition to taxable income of 16% will apply only to a list price of up to € 30,000, instead of € 35,000 at present. You will therefore benefit from a 6-percentage-point reduction in the addition to taxable income (16% instead of 22%) on the portion of the list price between € 30,000 and € 35,000 for a maximum of five years.
2. Optimise the composition of your box 3 assets
The tax on assets, also known as the box 3 tax, has been the subject of much discussion recently. From 2026 tax will have to be levied on actual returns. Until that time, from 2023 onwards income will still be determined on the basis of imputed returns. However, the actual composition of a person’s assets will be taken as a basis, divided between three different categories: 1. bank and savings balances, deposits, cash; 2. all other assets; 3. all debts. Each category has its own imputed return. The level of this return is not yet known for categories 1 and 3, although it will be significantly higher for category 2 (6.17% in 2023) than category 1. As the reference date for the assets is 1 January, you have only a short time to prepare for this. Bear in mind that any shifting of assets between categories that takes place between three months before and three months after the turn of the year may be ignored in connection with anti-abuse legislation.
3. Make use of the fixed budget under the work-related expenses scheme
This year the fixed budget under the work-related expenses scheme amounts to 1.7% up to a wage bill of € 400,000 and 1.18% on the excess amount. Up to this amount you can grant your employees all kinds of allowances and benefits in kind free of tax, such as the familiar Christmas hamper, and will also pay no tax as an employer, provided that you remain within the fixed budget. You should therefore make use of the fixed budget this year, as any unused portion cannot be carried forward to 2023.
4. Purchase a commercial property, holiday home or investment property in 2022
In 2023 buying a commercial property, holiday home or investment property will become more expensive. This is due to the increase in the transfer tax payable on such properties. If you were planning to purchase one of these properties in the near future, do this in 2022. At present, transfer tax is charged at a rate of 8%, but will rise to 10.4% in 2023. That means you will pay 30% more transfer tax next year.
5. Gifts to assist with purchase of own home
If you want to gift a sum to your children or a third party in connection with the purchase of their own home, this year the gift remains untaxed up to an amount of € 106,671. In 2023 the exemption will be reduced to € 28,947 and will be abolished entirely from 2024. It is therefore only possible to take full advantage of the exemption in 2022. Under the current scheme the recipient of the gift has three years to spend it on his or her own home. This will remain the case for gifts made in 2022: in other words, the recipient has until 2024 at the latest to spend the gift on his or her own home.
Up to now, under certain conditions, it was possible to spread the exemption over three consecutive years. This will remain possible for gifts that were made in 2021 and for which use was made of the exemption referred to above: in such a case it is therefore possible to make further gifts in 2022 and 2023 while benefiting from the exemption. In the case of gifts made in 2022, it is only possible to supplement them in 2023, up to the maximum amount that applied for 2022. From 2023 onwards it will no longer be possible to spread the exemption.
6. Anticipate the higher addition to taxable income that applies after 5 years
The percentage additions to taxable income for private use of a company car apply for a period of 60 months. After this period the percentage valid for the year in question applies. This means that, in the case of electric cars that were first registered in 2018, the addition to taxable income of 4% on the entire list price will change in the course of 2023 to an addition of 16% on the first € 30,000 and 22% on the excess amount. If you own such a car, you may be able to avoid the higher addition, for example by making the car a private asset. This option is particularly attractive for directors/major shareholders (DGAs). For entrepreneurs subject to income tax it is only possible to do this if the use of the car for business purposes will not exceed a proportion of 10% in 2023. Another option is to make sure your private use of the car does not exceed 500 km. There will then be no addition to your taxable income.
7. Group together your healthcare costs
Healthcare costs are still deductible. This year they can still be deducted at a maximum rate of 40%, which will fall to a maximum rate of 36.93% next year. A threshold applies, however, which means that only healthcare costs above this threshold are deductible. If you have paid a substantial sum to your dentist this year, for example, and also want to buy a new hearing aid, consider doing so this year as well. You will probably then exceed the threshold by a larger amount, which will save you tax.
8. Assess the level of your customary salary in combination with your expense allowances and company car
As a director/major shareholder (DGA), you are obliged to award yourself a customary salary each year, which is taxed in box 1. Expense allowances also count towards your customary salary, provided that they are identifiable. As a result, you may not have to award yourself as much in the form of gross salary. Whether the expense allowances are taxed or untaxed is irrelevant. An untaxed allowance for meals or travel expenses is one example. The addition to taxable income for private use of a company car also counts towards your customary salary. In the case of a car with a value of € 60,000 and an addition of 22%, you can therefore reduce your gross salary by € 60,000 x 22% = € 13,200.
9. Optimise the small-scale investment tax credit and be aware of changes to corporation tax
If you invest more than € 2,400 this year, you may be entitled to the small-scale investment tax credit (KIA). This is an additional deduction from your profits. The amount of the deduction decreases the more you invest, starting from an amount of € 110,999. If your investments exceed this amount, you should therefore consider postponing investments at the end of this year if you would then receive a higher KIA in 2022 and 2023. If you are also entitled to the energy investment deduction (EIA) or environmental investment deduction (MIA) for the investment in question, think about whether it makes sense to postpone the investment. Which investments will be eligible for the EIA and MIA in 2023 will not become clear until the end of 2022. Your investment may no longer be eligible in 2023, but it is also possible that in 2023 the EIA and/or MIA will result in a higher deduction. It may also be advisable to put off investments due to the plans to narrow the corporation tax band and increase the rate of this tax. On the other hand, if you are investing € 2,400 or less this year, consider bringing forward an investment you had planned for 2023.
10. Review your tax entity
The corporation tax rate is 15% on profits up to € 395,000. Next year a rate of 19% will apply up to a figure of € 200,000. Above this level profits will be taxed at a rate of 25.8%. In 2023 you will therefore pay more tax in the first band. This band has also been narrowed significantly, which means your profits will more quickly fall under the 25.8% rate. If you own several companies, you can offset profits and losses between them by setting up a tax entity. This advantage comes with a downside, however: you can only benefit from the lower tax band once. Although from 2023 the tax advantage will be a good deal less than in 2022 (maximum of € 13,600 from 2023 compared with € 42,660 in 2022), you may want to review your tax entity. If you want to terminate it with effect from 2023, the Tax and Customs Administration must receive your request before 1 January 2023.