What you need to know about corporate income tax
- Alicia Heeger
- The basis
- 12 Oct 2023
- Edited 12 Oct 2023
- 3 min
- Managing and growing
As an entrepreneur, you pay tax over the profits you make. Depending on your company's legal structure, this is either income tax or corporate income tax. In this article, you can read all about corporate income tax (‘vennootschapsbelasting’, vpb). How do you file a corporate income tax return? When does it apply, what are the tax rates, and what do you pay attention to?
Who pays corporate income tax?
Do you do business in a bv (private limited company), an nv (public limited company) or a 'coöperatie' (cooperative)? If so, this legal entity (or legal person) must file a corporate income tax return. Corporate income tax is a direct tax on a legal person's profits. Other legal persons, such as a ‘stichting’ (foundation) or ‘vereniging’ (association), pay corporate income tax only in certain cases (in Dutch). In this article, we will use the bv as an example.
Filing a corporate income tax return
Usually, your accountant, bookkeeper, or tax consultant will file the corporate income tax return for you. The tax return is filed online via the website of the 'Belastingdienst’ (Tax Administration). You only have to check this tax return yourself, before it is submitted definitively.
When you check the tax return, it is useful to understand how corporate income tax works.
Does your business have to file a corporate income tax return? If so, you will receive a provisional assessment ('voorlopige aanslag', VA, in Dutch) from the Tax Administration at the beginning of the year. This VA shows an amount. This amount is a provisional calculation based on previous years. You have to check this carefully and change it if necessary. A VA can be increased a maximum of 3 times a year. You can also object to a VA. Eventually, a final assessment always follows.
Do you expect to have to pay corporate income tax and do not automatically get a VA? Then contact the Tax Administration and apply for a VA.
Tax over the financial year
Corporate income tax is calculated over the profit of a financial year (‘boekjaar’) of your business. The financial year can be equal to a calendar year, but it does not have to be. The length of the financial year is stated in the articles of association. You file a corporate income tax return for a calendar year (in Dutch) before 1 June of the following year. Does the financial year not run parallel with a calendar year? Then you file your tax return within 5 months after the end of the financial year. Is it not possible to file a tax return on time? Then ask for a postponement (in Dutch).
What falls under corporate income tax?
You pay corporate income tax on the taxable profit of the legal person. That is the profit remaining after deducting losses you can offset.
The taxable profit of your business is calculated as follows: deduct the purchase value and the operating costs from the turnover. Operating expenses are, for example, labour costs and depreciation. What remains is your gross profit. The next question is whether there are any deductions or off-settable losses that reduce this gross profit. After any deductions, the taxable profit remains. See the calculation example below.
Do you have losses? Then you may deduct them (in Dutch). The profit you are ultimately left with is called the ‘taxable profit’. You pay corporate income tax on this. Corporate income tax is a fixed percentage of the taxable profit. Usually, an accountant or tax adviser calculates the profit for a private limited company (bv).
Using deductions and allowances
For depreciation on business assets, mostly the same rules apply as for income tax. The exception is depreciation on buildings (in Dutch). For corporate income tax purposes, the Valuation of Immovable Property (‘WOZ-waarde’) of the building is the base value. This means that for corporate income tax purposes you are allowed to depreciate the property up to the WOZ value of the property.
There are also tax schemes that apply specifically to corporate income tax, such as the participation exemption ('deelnemingsvrijstelling', in Dutch) and the fiscal unity ('fiscale eenheid', in Dutch). First, check if you meet the conditions (in Dutch). Only then are you allowed to use them and can they be beneficial.
Consult with your accountant, bookkeeper, or tax adviser so that you make the best use of deductibles.
Corporate income tax rates 2023
The corporate income tax rate depends on your profits. In 2023, you will pay 19% tax on profits up to €200,000. For profits above €200,000, you will pay 25.8% tax. The rates and amounts can vary from year to year. So, check carefully what the rate is for the year for which you file your corporate income tax return.
Calculation example corporate income tax
Below is an example of how to calculate corporate income tax.
|Purchase costs||-/- €100.000|
|Other costs||-/- €200.000|
|Losses carried forward from 2022||-/- €100.000|
|Corporate income tax rate 2023||19%|
|Corporate income tax payable||€19.000|
Please note: This article is intended as general information and not a substitute for professional advice. Consult a tax adviser, accountant, or bookkeeper for information on your specific situation.