January32025
articles

Tax benefits and deductions for companies in financial difficulties

Financial setbacks can affect any entrepreneur, whether you are a sole proprietorship or a larger SME. Fortunately, there are various regulations within the Dutch tax system that can help you as an entrepreneur to reduce the tax burden. In this blog, we highlight a number of tax benefits and deductions that can be relevant for companies in dire straits.

SME profit exemption

De SME profit exemption is one of the most important tax benefits for entrepreneurs who pay income tax (such as sole proprietorships, general partnerships and partnerships). This arrangement means that you do not have to declare a certain percentage of your profit (after deduction of costs) for tax purposes.

  • How much? In 2023 this will be 14% (note: always check the current figures).
  • For who? Entrepreneurs who meet the hours criterion and make a profit from their business.
  • Advantage in bad weather? Even if your profit is low – or if you just end up in the black – this exemption provides an advantage because you effectively pay less tax.

Self-employed persons' deduction and starter's deduction

If you have a sole proprietorship and meet the hours criterion (working 1.225 hours per year in your business), you are eligible for the zelfstandigenaftrekIf you have just started, the starter's deduction to add to this.

  1. Zelfstandigenaftrek
    • A fixed amount deducted from your profit (subject to annual changes).
    • Direct benefit on your taxable income, which reduces the tax burden.
  2. Starter's allowance
    • An additional increase in the self-employed persons' deduction for starting entrepreneurs (maximum three times in the first five years).
    • Can help to reduce the tax burden, especially in the start-up phase, and thus create some extra breathing space.

Small-scale investment deduction (KIA)

De Small-scale investment deduction (KIA) is intended to encourage small investments in business assets, such as tools, software or computers.

  • How does it work?
    If you make investments above a certain minimum (and up to a certain maximum), you may deduct a percentage of the invested amount from your profit.
  • Benefit from financial problems?
    If you do need to purchase new resources to keep your business running or make it more efficient, you can get some tax relief through this deduction.

VAT regulations

For entrepreneurs who pay VAT, there are various arrangements that can help to alleviate the financial burden.

  1. Small Business Scheme (KOR)
    • If you have to pay less than a certain amount of VAT per year, you may be eligible for an exemption or reduction.
    • This means you have to pay less or no VAT to the tax authorities.
    • Downside: You usually cannot deduct VAT from business expenses.
  2. Postponement of VAT payment
    • In case of temporary liquidity problems, you can sometimes ask the Tax Authorities for a deferral of payment or a payment arrangement.
    • This way you can better absorb any peaks in your cash flow.

Investment deduction for sustainable solutions

Are you considering sustainable or energy-saving investments to reduce your costs (for example, solar panels on the business premises)? Then you can make use of schemes such as the Energy Investment Allowance (EIA). You can deduct a large part of the investment costs from the profit. This can shorten the payback period of sustainable investments and structurally reduce your operating costs.

Fiscal unity and loss compensation

Do you have multiple BVs or companies within a holding structure? In some cases you can opt for a fiscal unit for corporate income taxThis allows you to offset losses in one company with profits in the other.

  • Loss compensation
    • In corporate tax, it is also possible to offset losses against profits from previous or future years.
    • This can help spread the tax burden when you are temporarily in dire straits.

Get help in time

If you can't figure it out, or if you find the regulations complex, don't hesitate to seek professional help, for example from a tax advisor, accountant of debt counselor who specializes in business issues. They can help you to:

  • Taking advantage of the right deductions and arrangements
  • To make a (new) financial plan
  • Contact the Tax Authorities for a deferral or payment arrangements

Keep communicating

Once you have been granted a payment arrangement or deferment, make sure you keeps lines open:

  • Report changes in your situation: Is your business doing unexpectedly better or worse? Inform the Tax Authorities to see if the payment arrangement can be adjusted.
  • Work on a healthy cash flow: Remain critical of your financial administration so that you are not faced with surprises again.
  • Pay future assessments on time: Avoid incurring new debts while you have not yet paid off the old ones.

Conclusion

If your company is in financial difficulty, Dutch legislation and regulations fortunately offer various options to reduce the tax burden. Think of the SME profit exemption, self-employed persons' deduction, KOR and investment deduction. Loss compensation and fiscal unity can also offer a solution if you have multiple companies. Preferably get good information from a professional, so that you make optimal use of the regulations that are available for your situation. This way you can work on the recovery and growth of your company with more financial breathing space.

Do you recognize yourself in (part of) this situation and do you no longer want to walk around with worries? We are ready to help you. Do not wait until the problems increase and take control of your financial future today. Click on the button 'Apply for debt assistance now' and take the first important step towards peace and security for you and your company.