nl tax advantages sole proprietorship vs private limited company
TRANSCRIPT
NL tax advantages Sole Proprietorship
vs Private Limited
Companyby
Jürgen van de Sande8 June 2016
Let’s introduce myself
Jürgen van de Sande AA
accountant partner
starting companies and growers SMEsannual reports, fiscal declarationsfinance, structure/organization, acquisitiondwo and accountancy departments
OUR VISION
An entrepreneur’s life is full of important events. Like starting your company, growing or downsizing, cooperating or ending
your business. Each and every choice you make will affect the future of your company.
De Wert is your partner of choice. We have been supporting entrepreneurs since 1959 with accountancy, tax and HR advice, payroll and administrative services. Therefore, no matter what
phase your company is in: rest assured with De Wert.
Introduction De Wert
The first step is the hardest …
Little ones grow
Sometimes it hurts to let go
Program
• Introduction to the legal forms in NL
• Introduction to NL tax regime
Sole Proprietorship Private Limited Liability Company
• How To Calculate Your Net Income
Scope for today’s program
• Introduction will be short!
• More details How and why to start as a Sole Proprietor http
://www.slideshare.net/senoltapirdamaz/how-and-why-to-start-as-a-sole-proprietor
Starting as a Private Limited Company http://www.slideshare.net/jurgenvdsande/starting-as-a-private-limited-company-in-nl
B.V.
Which legal forms do we know in NL?
stichting
V.O.F. coöperatie N.V.
and more...eenmans-zaak B.V.eenmans-zaak
Common legal forms
• Sole proprietorship (eenmanszaak)
• General partnership (vennootschap onder firma, V.O.F.)• Limited partnership (commanditaire vennootschap, C.V.)• Professional partnership (maatschap)
• Private limited liability company (besloten vennootschap, B.V.)• Public limited liability company (naamloze vennootschap, N.V.)
• Cooperative (coöperatie)• Foundation (stichting)
Choice legal forms
• Income tax• Corporate income tax
• Fully liable• Limited liability
Tax regime versus Liability
Sole Proprietorship
• Entrepreneur’s allowances
• Retirement reserve
• SME profit exemption
• Income Tax
Based on Tax Legislation 2016
Entrepreneur’s allowances
• Entrepreneur• Hour criterion (1.225 hours)
• Deduction before taxes Self-employed persons’ allowance € 7.280 Starters’ allowance € 2.123
Retirement reserve
• Deduction before taxes 9,8% of the profit Maximum of € 8.774
• Look out! Tax-deferred retirement reserve
• Addition to your taxable income Ending your company National old age pension (AOW)
SME profit exemption
• Deduction before taxes 14% of the profit after entrepreneur’s allowances
• Also in case of losses Lowering your fiscal loss
Private Limited Liability Company
• Salary director/shareholder
• Additional costs
• Corporate Income Tax
• Income Tax (salary, dividend and substantial interest)
Based on Tax Legislation 2016
Salary director/shareholder
• Usual wage settlement (article 12a Wage Tax) A minimum wage of € 44k applies for employees with a
substantial interest in the employer Not applicable when the usual wage is less than € 5k per year
• Others have a higher wage? 75% of that higher usual wage, but at least € 44k The salary of the highest-paid employee
• No profits to pay € 44k salary as a startup? Request for a decision “reducing usual wage”
Additional costs
• Initial / startup costs Notary for deed of incorporation + € 600 Accountant / lawyer for several contracts
(employment, management, loans) + € 900
• Yearly costs Salary administration + € 300 Annual report, publication report, minutes + €
1.200 Corporate income tax declaration + €
300 Income tax declaration / profit calculation -/- €
300
Corporate income tax
Tax base and rates
• CIT is charged on the taxable profits earned by the company in any given year less the deductible losses.
• The following are the applicable corporate income tax rates for 2016:Profit from Profit up to and including Rate€ 0 € 200k 20%> € 200k 25%
Corporate income tax
Dividend (tax)
• Pay out profits to the shareholders
• Tax rate is 15%
• Advance tax payment on CIT and income tax
Income tax
Boxes
Box I: Taxable income from work and home
Box II: Taxable income from substantial interest
Box III: Taxable income from savings and investments
(no further explanation)
Income tax: Box I
Taxable income from work and home
• Profits from business activities
• Income from current employment Salary director/shareholder
• Tax rate is progressive to a maximum of 52%
Income tax: Box II
Taxable income from substantial interest
• Minimum of 5% of the issued capital of shares
• Regular benefits and/or sales benefits Dividend Sale of shares
• Tax rate is 25%
How To Calculate Your Net Income
Get started!
Model report - Profit and loss account
net turnovercost of salesgross margin
personnel costsamortisation/depreciation of (in)tangible fixed assetshousing costscar and transport costssales costsother coststotal operating expenses
operating resultfinancial income and expense
result before taxationtaxation
result after taxation
How To Calculate Your Net Income
Sole Proprietorship(eenmanszaak)
Profit and loss account
net turnover 600.000
cost of sales 310.000
gross margin 290.000
personnel costs 80.000
amortisation/depreciation of (in)tangible fixed assets 10.000
housing costs 20.000
car and transport costs 14.000
sales costs 15.000
other costs 12.000
total operating expenses 151.000
operating result 139.000 financial income and expense 5.000-
result 134.000
Income tax declaration
profits from business activities 134.000substract: addition to retirement reserve 9,80% 13.132
max 8.774 8.774
substract: entrepreneur's allowance- self-employed persons’ allowance 7.280 - starters’ allowance 2.123
9.403 profits from business activities before SME profit exemption 115.823 substract: SME profit exemption 14% 16.215
taxable profits from business activities 99.608
income tax box 1 43.323 income related contribution health care insurance act 2.902 total tax 46.225
net income 87.775
Income tax declaration
profits from business activities 134.000substract: addition to retirement reserve 9,80% 13.132
max 8.774 8.774
substract: entrepreneur's allowance- self-employed persons’ allowance 7.280 - starters’ allowance 2.123
9.403 profits from business activities before SME profit exemption 115.823 substract: SME profit exemption 14% 16.215
taxable profits from business activities 99.608
income tax box 1 43.323 income related contribution health care insurance act 2.902 total tax 46.225
net income 87.775
deferred tax (for retirement reserve) 1.330 net income after deferred tax 86.445
total tax including deferred tax 47.555
How To Calculate Your Net Income
Private Limited Liability Company
(besloten vennootschap, B.V.)
Profit and loss account B.V. sole pro-
prietorship additional costs B.V. B.V.
net turnover 600.000 600.000 cost of sales 310.000 310.000 gross margin 290.000 290.000
personnel costs 80.000 67.000 147.000 amortisation/depreciation of (in)tangible fixed assets 10.000 10.000 housing costs 20.000 20.000 car and transport costs 14.000 14.000 sales costs 15.000 15.000 other costs 12.000 1.500 13.500 total operating expenses 151.000 68.500 219.500
operating result 139.000 68.500- 70.500 financial income and expense 5.000- 5.000-
result before taxation 134.000 68.500- 65.500 taxation 20% 13.100
result after taxation 52.400
Profit and loss account B.V. sole pro-
prietorship additional costs B.V. B.V.
net turnover 600.000 600.000 cost of sales 310.000 310.000 gross margin 290.000 290.000
personnel costs 80.000 67.000 147.000 amortisation/depreciation of (in)tangible fixed assets 10.000 10.000 housing costs 20.000 20.000 car and transport costs 14.000 14.000 sales costs 15.000 15.000 other costs 12.000 1.500 13.500 total operating expenses 151.000 68.500 219.500
operating result 139.000 68.500- 70.500 financial income and expense 5.000- 5.000-
result before taxation 134.000 68.500- 65.500 taxation 20% 13.100
result after taxation 52.400
available for dividend 52.400 dividend tax 15% 7.860 net dividend 44.540
Income tax declaration
income from current employmentsalary 67.000 taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
total tax 27.485
net income 39.515
Income tax declaration
income from current employmentsalary 67.000 taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
income from substantial interestdividend 52.400 taxable income from substantial interest 52.400
income tax box 2 25% 13.100 substract: dividend tax 7.860
total tax 27.485 5.240
net income 39.515 39.300 78.815
Income tax declaration
income from current employmentsalary 67.000 taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
income from substantial interestdividend 52.400 taxable income from substantial interest 52.400
income tax box 2 25% 13.100 substract: dividend tax 7.860
total tax 27.485 5.240 total tax including corporate income tax 53.685
net income 39.515 39.300 78.815
Income tax declaration
income from current employmentsalary 67.000 taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
income from substantial interestdividend 52.400 taxable income from substantial interest 52.400
income tax box 2 25% 13.100 substract: dividend tax 7.860
total tax 27.485 5.240 total tax including corporate income tax 53.685
net income 39.515 39.300 78.815
Income tax declaration
income from current employmentsalary 67.000 taxable from current employment 67.000
income tax box 1 26.367
employed person's tax credits 1.784-
income related contribution health care insurance act 2.902
income from substantial interestdividend 52.400 taxable income from substantial interest 52.400
income tax box 2 25% 13.100 substract: dividend tax 7.860
total tax 27.485 5.240 total tax including corporate income tax 53.685
net income 39.515 39.300 78.815
deferred tax (for income from substantial interest) 5.027 additional costs B.V. 1.500 total tax with deferred tax and additional costs 47.112
So … summarizingSole proprietorship (eenmanszaak) Private limited liability company (B.V.)
business result
134.000 business result
134.000
salary entrepreneur 67.000
substract: addition to retirement reserve
8.774 additional costs B.V. 1.500
substract: entrepreneur's allowance
9.403 result before taxation 65.500
substract: SME profit exemption
16.215 corporate income tax 13.100
taxable profits from business activities
99.608 result after taxation B.V. 52.400
salary 67.000
income tax box 1
43.323 income tax box 1 26.367
employed person's tax credits - employed person's tax credits -1.784
health care insurance act
2.902 health care insurance act 2.902
deferred tax (for retirement reserve)
1.330 deferred tax (for income box 2) 5.027
additional costs B.V. 1.500
total (deferred) tax
47.555 total (deferred) tax and additional costs 47.112
… are you ready to make a better decision for your
own business?
So …
Questions?