DGA: entrepreneur or employee?
You are a VAT entrepreneur if you carry out your work independently and at your own expense. But it is not so easy to decide with a director-major shareholder (DGA). Because you may be the owner and director of the company, but you are also the only employee. So are you an entrepreneur or an employee?
On April 26, 2002, the Supreme Court ruled that a DGA is an entrepreneur. After all, you decide what happens and you also run all the risks. However, on 18 October 2007, the European Court of Justice took a different position. It was stated that anyone who works on the basis of an employment contract for a taxable company in which he is a shareholder, director and employee is not himself liable to tax. In other words, you are an employee.
DGA is a private individual
Following this ruling by the European Court of Justice, Minister of Finance Jan Kees de Jager suggested that a DGA will from now on be considered a private individual for VAT purposes. Unless he performs activities that fall outside the scope of the employment contract, such as, for example, rental of real estate.
The consequences of this, which can be quite drastic, can be read below.
No VAT on wages
Do you perform work for the company on the basis of an employment contract, or as an employee? In that case, from 18 October 2007, you will no longer have to collect VAT on the salary and the expense allowance (s) you receive for this.
VAT deduction disappears
Because you are no longer a VAT entrepreneur, you must no longer deduct VAT from goods or services that you purchase for your work.
Adjustment of allowances for private use for 2007
For the items that you use not only for your business, but also for private use – for example a car – you must enclose an addition with the last declaration of the year. For 2007, you include 290/365 of this addition, or 79% of the amount you would previously withdraw.
Transfer goods to the company
The goods that you previously purchased and for which you have refunded VAT are now considered private property. You can only avoid this if you transfer the goods to the company before 1 April 2008, but from now on the company must pay VAT on the private use of the goods in question and collect VAT on resale, unless an exemption applies.
No transfer: VAT refund
If you do not transfer goods to the company but keep them private, this is considered a regret. As a result, you must refund the previously deducted VAT at once.
You can reduce the amount you have to repay based on the depreciation method that is usual for VAT. For movables, VAT is revised over a period of 5 years, for real estate it is 10 years. You can also choose to start this review in 2008.
You bought a home on 1 January 2006 and paid € 500,000 for it, of which € 79,831 in VAT. The cancellation on 18 October 2007 is subject to VAT. You choose to revise the VAT from 2008.
Source: The tax authorities
There has been a discussion about refunding this VAT. Tax advisors, including the GIBO Group, want to be able to pay in installments. However, the ministry does not want to cooperate.
The fiscal unit is broken or changed
As a tax entity, you and your BV were considered as one entrepreneur. But because you are no longer an entrepreneur yourself, you can no longer be part of a fiscal unity. This is therefore broken in the case of a BV, or changed if there are two or more BVs.
If you have to pay large amounts in sales tax, the GIBO Group advises you to send the Tax Authorities a written request for the abolition of the tax entity.
As a VAT entrepreneur, you as a DGA fell under the entrepreneurial scheme for the van. In other words: a BPM exemption and a lower motor vehicle tax rate if the van was registered in your name. Now that you are no longer seen as an entrepreneur, you still have to pay the remaining BPM and you fall under the higher MRB rate.
You can avoid this by passing the van on to another VAT entrepreneur. But this must be done before July 2009, otherwise no later than two months after the written notification from Tax that your entrepreneurship has ceased.
The VAT entrepreneur to whom you pass the car on can also be your BV, but this company must then include the payroll to make the van available. BV also owes the VAT correction for private use.
With GIBO Group