Discontinuation profit: ending your business in the Netherlands
Are you thinking about ending or selling your business in the Netherlands, or are you converting a sole proprietorship (eenmanszaak) into a private limited company (bv)? These are examples of cessation of business. In the latter case, you become director-major shareholder (DGA in Dutch). After cessation, you may have to deal with discontinuation profit (stakingswinst) and discontinuation relief (stakingsaftrek). Are you wondering if this applies to you? Read this article or contact us!
Income tax on discontinuation profit
When you (partly) end or sell your Dutch company, you have to pay income tax on the discontinuation profit. But what is this? The profit is the difference between the book value of your company and the actual value of the company at the time of cessation. This is usually caused by:
- Hidden resources. This occurs when an asset has more value than its fiscal book value. Think of a business property that has increased in value.
- Tax reserves. This allows you to set aside money in a tax-efficient way for future expenses, like retirement savings. If you stop your company, you are no longer allowed to use this, and you still have to pay income tax on the tax reserves.
- Goodwill. This increases the value of your company when it is sold through, for example, brand awareness.
Tax benefit: discontinuation relief
So, you have to pay tax on discontinuation profits. Are you self-employed? Then you are entitled to a tax benefit, the discontinuation relief (stakingsaftrek). This is an amount (up to € 3,630) that you may deduct from the discontinuation profit, which reduces the tax to be paid. It is good to know that you can only use the full relief once. Do you not have to use the whole amount? Then you can use the remaining amount if you end another company in the future.
No tax when starting a new business
Are you ending your current business, and starting a new business within a year? In this case, you do not have to pay tax on your discontinuation profit if you invest this profit into your new company!
We are happy to help!
There are quite a few things to consider when ending your business in the Netherlands. Estimating the discontinuation profit can be complicated. We are happy to help you with the discontinuation profit! Feel free to contact us using the details below.
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