Mortgage loan as a measure against the law on excessive borrowing: advice within 24 hours

Currently, as a substantial interest holder, it is possible to postpone income tax in box 2 by borrowing from your own company instead of paying out dividends. The law on excessive borrowing that will come into effect from 1 January 2023 will put a stop to this. From this moment on, current account debts above €500,000 will be taxed as income from a substantial interest - with the exception of mortgage debts. As a substantial interest holder, make sure that you take financial measures to avoid the levy. Consider taking out a mortgage loan as a measure against the law on excessive borrowing, for example.

Excessive borrowing from your own company

With RC financing you can bridge long payment terms, grow or pre-finance work projects. Because you are allowed to be overdrawn up to a certain amount with a current account credit, you give yourself financial space to realize ambitions for your company. But if it is up to the new excessive borrowing law, borrowing will become a lot less attractive from 2023. If at the end of the calendar year the total amount of debts exceeds €500,000, the excess is taxed as a fictitious regular benefit in box 2. And at a rate of 26.9% for the entrepreneur and his partner.

Note: the law on excessive borrowing only has meaning in box 2. The loan continues to exist in its entirety; the interest and repayment payments simply continue. Also on the part that has been taxed as fictitious regular profit in box 2.

Fictitious example of excessive borrowing law in practice

€ 750.000
Director-majority shareholder has a debt to his BV on December 31, 2023

€ 500.000
border

€ 250.000
Excessive share

This excessive portion of €250,000 is taxed in box 2 in 2023 as a fictitious regular benefit at a rate of €26.9% (tax €67,250). The DGA must continue to pay interest on €750,000.

Measures to avoid tax collection

Prevent the sword of Damocles hanging over your head and start taking measures to reduce your company's current account debt to a maximum of €500,000. Consider paying off debts by paying dividends, refinancing real estate through a mortgage loan. We will name a few options to offset current account debts as much as possible.

Refinance or borrow equity through a mortgage loan

As a substantial stakeholder, you can (partially) refinance the current account debt, for example at a bank. Please note that the government wants to adjust the box 3 levy as of 2022 and that the refinancing is not entirely fiscally neutral.

The costs for this are as follows: 210,000 in 20 years fixed interest at 1.79% annuity repaid. This costs 1,041.60 per month.

The above example shows that there must be equity in the house and that the income must allow for a mortgage loan. This is custom work. Our advice is therefore to contact us without obligation for a custom solution to limit your current account debt. If you agree with our proposal, you can count on a custom solution for an amount of € 3,500. This can increase, but it will never be more than € 5,000

Other solutions

The measure will not take effect until 2023. This will give you the opportunity to pay off your current account debt or to start doing so. If you have sufficient private liquidity, you can already reduce the loan. This will mean that you will have to pay less tax at the end of the ride.

Another possibility to reduce the current account debt is to pay out dividends. In that case, take into account the increase in the applicable box 2 income tax rate of 26.9% on the profit distribution. If a dividend payment is necessary to repay the current account debt, then it is often preferable to repay a large part of the debts to companies this year at the lower rate

Claims and debts to your own BV can be settled by selling real estate. If you have real estate in private – even if it is not financed with loans from the BV – you have the option to sell it and use the proceeds to pay off the current account debt. This does not entail any exemption from transfer tax.

What can we do for you?

Don't wait until the last moment of 2023 to get these financial matters in order. We will look at whether a mortgage loan on the equity of your BV suits you to offset the claims and debts to your own BV as much as possible. That may be the case. But it may also be wise to start paying off the current account debt by using liquid private funds. Make a no-obligation appointment with our financially independent advisor for a financial measure that suits your current financial situation.