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 2022? Here are ten practical tips.
Please note:The government’s plans still have to be approved by the Lower and Upper House.
1. Buy an electric car quickly
If you were planning to buy an electric car in the near future and register it in your company’s name, do so this year. From next year the addition to taxable income is increasing from 12% to 16% and this lower rate will apply only on the first € 35,000 of the list price instead of € 40,000, as is currently the case. By purchasing the car in 2021, you will benefit from the lower addition to taxable income for five years. This year you will also benefit from a 13.5% environmental investment deduction up to a maximum list price of € 40,000.
2. Review your tax entity
The corporation tax rate is 15% on profits up to € 245,000. Next year this rate will apply up to a figure of € 395,000. Above this level profits will be taxed at a rate of 25%. 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. You should therefore review your tax entity and terminate it in good time if you wish to do so. If you want to terminate it with effect from 2022, the Tax and Customs Administration must receive your request before 1 January 2022.
3. Take advantage of the increased gift-tax exemption
In connection with the coronavirus pandemic, exemptions from gift tax have been increased by €1,000 for this year only. The amount of the exemption now stands at € 6,604 for gifts to children and at € 3,244 for gifts to grandchildren and other third parties. Take advantage of this additional exemption!
4. Make use of the fixed budget under the work-related expenses scheme
This year, in connection with the coronavirus pandemic, the fixed budget under the work-related expenses scheme amounts to 3% up to a wage bill of € 400,000 and 1.18% on the excess amount. The rate that applies up to a wage bill of € 400,000 is being reduced to 1.7% in 2022. If possible, you should therefore make use of the fixed budget this year, as any unused portion cannot be carried forward to 2022.
5. Avoid losing tax credits
There are some tax credits that your partner can only receive to a limited extent if he/she has insufficient income him/herself. This applies to the general tax credit, the employed person’s tax credit and the income-dependent combination tax credit. Anyone born before 1 January 1963 is not affected by the restricted payment of the general tax credit, but is subject to the restrictions relating to the employed person’s tax credit and income-dependent combination tax credit. You can avoid losing these tax credits by allocating income to your partner in box 2, such as dividends, or having your partner pay tax on assets in box 3.
6. Optimise the small-scale investment tax credit
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. You should therefore consider postponing investments at the end of this year if you would then receive a higher KIA in 2021 and 2022.
7. Keep an eye on the Environmental List
If you make environmentally friendly investments, you may be entitled to the environmental investment deduction (MIA). The percentages for this deduction are being increased in 2022, so postponing your investments until 2022 would be an attractive option. However, it is not yet clear which assets will be eligible for the MIA in 2022 and what percentage will apply to the asset in question. This will be published at the end of 2021 in a new Environmental List (Milieulijst). Keep an eye on this at the end of this year and decide then whether you would be better off making your environmentally friendly investment this year or next year. Make the necessary preparations now with your supplier.
8. Plan cash withdrawals
Your private assets are taxed in box 3. The reference date for this is 1 January of the year in question. You should therefore make sure that you do not withdraw too much cash from your sole tradership or company before 1 January. That’s because, depending on the level of your assets, in 2022 you will pay up to 1.71% in tax on the cash withdrawn. You can also pay cash from your private assets into your business before 1 January.
9. Gifting sums for a person’s 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 or the repayment of their mortgage, this year the gift is untaxed up to an amount of € 105,302. If you make the gift this year, this will reduce your assets in box 3 by the same amount, which could save you up to around € 1,800 in tax.
10. Group together your healthcare costs
Healthcare costs are still deductible. This year they can still be deducted at a maximum rate of 43%, which will fall to a maximum rate of 40% 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.