ENTREPRENEURSHIP

Incorporating bv (Dutch Limited) with retroactive effect

Table of contents

You have two options for setting up a BV with retroactive effect: 'noisy' and 'noiseless'. Read more about them here.

If you have come to the point where it is more fiscally or legally advantageous to keep your Convert sole proprietorship or partnership into a limited liability company (BV) then this is usually not at the beginning of the (book) year, but sometime during the year. To avoid unnecessary difficulties, something has been arranged for this, namely the establishment of a BV with retroactive effect.

For the retroactive establishment of a BV you have two options: a 'ruisende' and 'geruisloze' inbreng. Depending on the situation, one option may be preferable to the other. But why would you want to set up a limited liability company with retroactive effect, what are the advantages of this over in the middle of the (book) year?

Reasons to incorporate a BV retroactively

There are a number of reasons why you should incorporate a BV retroactively. We've listed them for you:

If you have high profits, it may be more advantageous to retroactively convert your business into a BV. This means that profits earned earlier in the year are taxed at the lower corporate tax rate instead of the high income tax rate. This can save you a lot of money.
Any undisclosed reserves, tax reserves or goodwill released upon the transfer/ discontinuation of the business can, by setting up a BV with retroactive effect, in some cases be dealt with in a more tax-efficient manner.
Establishing a BV retroactively can also be advantageous if you no longer want to be privately liable for debts. This may be so when your business has grown to the point where you enter into larger contracts, for example.
If you are going to collaborate with someone, there is often the choice of a VOF or a BV. In this, a BV may be preferable so that you can both take advantage of both the legal and tax benefits (provided that the situation is appropriate).

Noisy or noiseless incorporation?

As mentioned before, there are two options for retroactively converting your company into a BV. These are the noisy or noiseless incorporation. Both forms have their advantages and disadvantages and their own courses of action.

A transfer of assets subject to tax

To retroactively incorporate your company noisily, you must take action within 3 months in the year. This is because you have to file a letter of intent with the tax authorities in the first 3 months of the year, this means that you inform them that you intend to convert your company noisily into a limited liability company. If you have filed this letter of intent within the first 3 months of the year, then you will be allowed to establish a BV retroactively.

If you filed the letter of intent within the first three months of the year, you do not have to have incorporated the BV within these three months as well. You then have 9 months, until October 1 of the current year, to incorporate the BV and complete all other matters. If you file this application and do not act on it afterwards, this will not be a problem, but you will have to wait until next year for a noiseless incorporation.

A transfer of assets subject to tax-free

Ook is er de optie om de onderneming geruisloos om te zetten. Om je onderneming geruisloos om te zetten in een bv moet je binnen de eerste negen maanden van het jaar een intentieverklaring indienen bij de Belastingdienst. Dit is een aanzienlijke langere termijn dan de drie maanden bij een ruisende omzetting. Heb je de intentieverklaring op tijd ingediend bij de Belastingdienst dan heb je in totaal vijftien maanden de tijd om je bv op te richten en het omzetten te voltooien. Als je met terugwerkende kracht op 1 januari een bv in wilt, heb je nog tot 1 april volgend jaar, indien de intentieverklaring op tijd ingediend is, om alles af te ronden.

Termination profit and annuities

During the cessation of the personal income tax business, a part of the business often comes under the cessation profit. Cessation profit is the release of hidden reserves, tax reserves, goodwill and disinvestment credits. You have to pay tax on this which is taxed the same as normal profit.

However, as an entrepreneur, you may convert (part of) the cessation profit into a annuity. This has the advantage of not having to settle at the moment and possibly paying at a lower tax rate in the future. This is since you will only receive this benefit when you no longer have a profit from business and may also have already quit your BV. As a result, your income in Box 1 is likely to be reduced.

If you want to convert the termination profit, you have to take into account when this happens. This is because there is a deadline for converting the cessation profit into an annuity. This must be done within 6 months of ending the original company. If you do this later, you are too late and it is no longer allowed. You will have to pay over the entire termination profit.

Deadlines bv incorporation with retroactive effect

So there is a lot involved in converting a business, also there are many deadlines you need to be aware of. Here they are again in a row:

A transfer of assets subject to tax: Within 3 months the letter of intent. Within 9 months everything must be completed
A transfer of assets subject to tax-free: Within 9 months letter of intent. Within 15 months everything must be completed.
Convert profits from discontinuing business into annuity: This must be done within 6 months of the dissolution of the company.

Advice on setting up a Dutch limited liability company retroactively

Would you like your convert company into a limited liability company, because you think it is advantageous for your situation? Then take contact with us. We are happy to guide you through the entire process from analysis to completion of incorporation and, if necessary, further help you with your administration and tax returns!.

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