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  • Writer's pictureJenifer Benton

Prinsjesdag 2023 as an IB entrepreneur

The Tax Plan 2024 contains a large number of tax measures that directly affect entrepreneurs. In cooperation with Marree & Van Uunen Tax Advisors, NOAB has prepared this memorandum, which addresses the most important measures for you as an IB entrepreneur. Please note that these are only matters specifically about entrepreneurs in the income tax sphere. Apart from these measures, many other tax changes have been announced. In addition, measures were also announced last year that will take effect as of 2024 (or even later).


There is a major caveat here: this memorandum was written based on the contents of the 2024 Tax Plan Package, as announced on September 19, 2023. The final effect of the plans in the final legislation may still be different. Also keep in mind that this information is general for everyone. To know concretely what consequences these novelties will entail, we are happy to look with you for your personal situation.

More information about Prinsjesdag 2023

Content of this article:

 

1. Self-employment deduction

The self-employed deduction (ZA) is a deduction for entrepreneurs who meet the hour criterion, that is, as a main rule, work at least 1225 hours per year in their business.


It had already been announced last year that the self-employment deduction would be accelerated. This year (2023) the self-employed deduction was still € 5030, next year it will be € 3750 and will be further reduced to € 900 in 2027. The start-up deduction does remain the current € 2,123.

In a table:

Year

Deduction

2023

5.030

2024

3.750

2025

2.470

2026

1.200

from 2027

900

What does this mean for you:

  • Because of the decrease in the self-employment deduction, your taxable profit will increase in the coming years;

  • due to the increase in taxable profits, you will owe more Box 1 tax.

 

2. MKB profit exemption

The MKB profit exemption is an exemption granted to all IB entrepreneurs, regardless of whether they meet the hour criterion or not. The deduction is still 14% of profits through 2023, but will be reduced to 12.7% of profits next year.


This means that the taxation on your business profits will effectively increase.

 

3. Income tax rate box 1

The income tax rate in Box 1 will be increased. The first bracket (for box 1 income in 2023 up to € 73,031) will increase from 36.93% to 36.97% in 2024. Furthermore, the first bracket will be extended from € 73,031 to € 75,624. This seems not too bad, but by reducing the SME profit exemption, the effective rate still rises substantially.


On the other hand, the general tax credit will be increased for everyone, as well as the employment tax credit to which, among others, you as IB entrepreneurs are also entitled.


What does that mean concretely for you:

  • You will owe more income tax on your profits;

  • How much more depends entirely on your private situation. This is truly customized work in which we are happy to assist you.

In a table:

Box 1 - Income

IB/PH

From

To

0

75.624

36,97%

75.624

-

49,50%

Only these rates do not take into account the MKB profit exemption. If we also take that deduction into account, the Box 1 rates for entrepreneurs are:

Box 1 - Income

IB/PH

From

To

0

75.624

32,97%

75.624

-

44,81%

But still these are the "bare" income tax rates. This does not take into account, for example, the earned income tax credit (AK), general tax credit (AHK) and income-dependent health insurance law contribution (ZVW). If we also take these into account, the effective marginal tax burden for entrepreneurs reads:

Company result

Box 1 taxation

From

To

3.750

11.803

29,36%

11.803

25.498

6,897%

25.498

32.277

13,549%

32.277

39.898

41.629%

39.898

75.624

50,757%

75.624

85.794

52,348%

85.794

90,375

47,028%

90,375

125.198

51,315%

125.198

-

44,805%


 

4. Random depreciation over 2023

It had already been decided earlier to stimulate economic development in the Netherlands by allowing accelerated depreciation on a number of business assets. The specific reasons were the energy crisis and the war in Ukraine.


It concerns a temporary extension of random depreciation to a maximum of 50% in the calendar year 2023. Incidentally, this relaxation applies to both IB entrepreneurs and PLCs. And is completely separate from, for example, any claim to an investment deduction.


What does that mean for you in concrete terms: you can already write off 50% of the investments you make in 2023 this year. And the rest you write off according to the normal system.


Example:

  • you invest €100,000 in 2023 in a machine that you would normally depreciate over five years. Assume that the residual value is € 20,000;

  • then in 2023 you may already depreciate (€ 100,000 -/- € 20,000) x 50% = € 40,000 instead of normally (€ 100,000 -/- € 20,000) / 5 years = € 16,000;

  • the other four years you may depreciate the rest, or € 10,000 per year, so that after that you have reached the residual value of € 20,000.

The benefit of this is that you have a liquidity advantage. You will pay less income tax in 2023, but more in future years, of course. On balance, it makes no difference in terms of total depreciation costs, you only bring them forward.


Incidentally, you may only depreciate at random if you meet a number of conditions:

  • it only applies to new business assets, not used ones;

  • you must have made the investment commitment in 2023;

  • commissioning must take place before January 1, 2026.

The facility does not apply to all investments. Some are excluded, such as investments in buildings, ships and some passenger cars. Business assets that are intended to be primarily made available to others are also excluded.

What this means for you:

  • for certain investments, it may be smart to make them this year (2023);

  • Consult with us to see if the random depreciation does apply to that investment.

 

5. Depreciation of buildings

This year you may still depreciate buildings up to a maximum of 50% of the WOZ value, the so-called floor value. At least, if it concerns buildings that you use yourself in your company. For rented buildings, 100% of the WOZ value applies as floor value for depreciation.

The percentage of 50% will be increased to 100% next year. So both buildings in own use and rented buildings may then be depreciated up to a maximum of 100% of the WOZ value.

Incidentally, it is not the case that if the current book value of a building is already lower than that WOZ value, you will have to revalue (taxed) to that higher base value.


What this means for you:

  • you will have reached the bid value of buildings sooner, which means that you are no longer allowed to depreciate the building.

 

6. Reinvestment reserve

If you sell an asset with a book profit, you must settle on that book profit. Under circumstances you may transfer the book profit to another asset in which you reinvest. The current requirement is that the new asset must be used in the same company as the company from which the old asset was sold.


The latter condition will no longer apply as of 2024, at least if there is a partial discontinuation of one company due to government intervention. This extension is primarily intended for farmers who want to partially terminate their business and, in addition, start a new business. They are then allowed to write off book profits on business assets of their one old company on business assets in which they invest in the other new company.


What does this mean for you?

  • If you have to cease part of your business due to government intervention, you can, under certain conditions, write off the book profit on business assets that you sell on business assets in another business that you have or are starting up.

 

7. Business succession plan

As an IB entrepreneur, you can transfer your business to someone else with very favourable tax conditions. If this is a gift, little or no gift tax is payable under the so-called Business Succession Regulations (BOR).


In the coming years (as of 2024), the BOR will be tightened on a large number of points and expanded on a number of points. For example, the exemption amounts will change. Sometimes it is advantageous to bring forward a business succession (for example, in the case of a gift as of 2025, the BOR is only permitted if the transferee is at least 21 years old), sometimes it is actually advantageous from a tax perspective to wait with this (because, for example, less stringent requirements are imposed on the period of ownership of the business). At least, if your planning allows it. It goes without saying that you should never be guided by tax rules alone. You determine your own pace of march. Only if you do plan to transfer your business is it smart to think carefully about the timing of the transfer.


Specifically, what does that mean for you:

  • it may be that bringing forward or delaying a business succession can be fiscally beneficial;

  • discuss this with us, and together we will look from a tax perspective at the year in which your specific situation a business succession is most favorable.

 

8. Other measures

In addition to the above measures, a number of other tax issues are going to change that may be important to you as an IB entrepreneur.


a. Energy Investment Allowance (EIA)

The EIA will be reduced from 45.5% this year to 40% in 2024. The scheme cost the government more money than the budget was. An investment cap was also originally going to be introduced, but that is not going to happen.


b. Tax-exempt travel allowance

The tax-exempt travel allowance for business mileage and commuting will be increased. It is currently €0.21 per kilometer (2023), but will be increased to €0.23 from next year.

Thereby it does not matter how the employee travels: by car, by bicycle or on foot.


c. Expansion exemption public transport card

If you give an employee a public transportation card, the private use that that employee can achieve with it will count as a targeted exemption in the WKR as of next year. Regardless of whether you provide the card to the employee, give it to him or her, or compensate him or her for it.


However, the requirement is that the employee uses the public transport card to any extent for business travel (which includes commuting). This saves administrative inconvenience.


As a result, you no longer have to keep records of how much the employee uses the OV card for private and business travel.


d. Free allowance WKR

This year only, the free allowance has been expanded once to 3% over the first € 400,000 taxable wage bill. From 2024, the free margin over the first € 400,000 will be 1.92% again. Over the amount above € 400,000 the free allowance is and remains 1.18%.


Do not forget to use this free allowance for your employees.


e. Annuity space

You may deduct more annuity premiums from January 1, 2023 (note: 2023!), or deposit money in a blocked bank savings account. In terms of tax planning, this can be very beneficial. For example, the annual space over 2023 has increased to a maximum of €34,550 and the reserve space has been extended to ten years instead of seven years.


Especially for you as an IB entrepreneur, this can be important, because this year (as of Jan. 1, 2023) adding to tax-deferred retirement reserves (FOR) has been abolished.


f. More changes

But more changes have been announced that do not affect you as a business owner so much but are still important enough to mention:

  • through 2023, you received a payment discount if you paid a provisional income tax assessment in a lump sum. That payment discount will be eliminated starting in 2024;

  • agricultural goods and services will no longer fall under the low VAT rate of 9% as of 2024, but under the general 21% rate;

  • in the box 3 taxation, unfortunately, even more ambiguities and uncertainties have arisen. There is a high probability that the Supreme Court will consider the restoration of rights that applies for the period through 2026 to be in violation of the ECHR. This chance has increased due to an opinion of the Advocate General to the Supreme Court. It is very important that - as soon as you receive an assessment containing a box 3 taxation - consult with us to see if this assessment is unlawful or not. If so we will help you take the appropriate action.

  • the Future Pensions Act (WTP) came into effect on July 1, 2023. We recommend that you consult with your pension advisor about this, as there is a good chance that you will need to adjust your pension plans before 2028;

  • although the gift exemption for owner-occupied homes has already been abolished as of January 1, 2023, you may still be able to supplement a gift from 2022 tax-free up to a maximum of € 106,671 this year (2023!) under the transitional rules. If so, that money must have been spent by the donee on their own home before January 1, 2025.

 

To conclude, on Prinsjesdag 2023 for IB entrepreneurs

This memorandum presents the most important changes announced on Prinsjesdag 2023 as an IB entrepreneur. To know concretely what consequences these novelties entail, we would like to look with you to optimize your personal tax situation.

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