What is corporation tax?
Corporation tax (VPB) is the tax that companies pay on the taxable profit.
Who has to pay corporation tax?
The following legal forms must always pay corporation tax:
- Aktieselskabet (NV) and anpartsselskabet (BV)
- Other companies whose capital is wholly or partly divided into shares
- The open limited partnership
- Certain associations such as the cooperative, other cooperatives and mutual insurance companies.
Self-employed people or sole traders pay tax via income tax.
A butcher shop makes a profit of €56,722 in a financial year. If it is a sole proprietorship, the profit goes through payroll and income tax. If it is a limited company, the butcher pays tax on the profit.
Does BV pay out the rest of the profit as dividends? The butcher then pays private income tax on this amount. However, in that case the butcher must pay dividend tax.
Organizations with limited tax liability
Some organizations are only required to pay corporation tax in certain situations. Tax and Customs calls it ‘limited tax liability’.
This applies to:
- Cultural institutions
- Religious community
- ANBIs (Generally Beneficial Institutions)
- Sports clubs and organizers of sporting events
These organizations are not completely exempt from corporation tax. They also sometimes have to file a corporation tax return. For example, if they meet the following criteria:
- There is an organization of capital and labor
- The organization must participate in society (it is not a matter of a closed clientele)
- The organization strives for profit
Innovation box: tax advantage for innovative entrepreneurs
The innovation box (formerly the patent box) is a reduced corporate tax rate. The scheme has been developed to stimulate innovative entrepreneurship and is aimed at anyone who profits from innovative activities.
If you are eligible for this, you pay less tax because you can apply a lower tax rate to part of the profit.
For 2020, it is 7%. From 2021 this will increase to 9%.
There are a number of conditions that companies must meet in order to be eligible for the innovation box. Here are the most important ones:
- The company is obliged to pay corporation tax.
- The company has generated an intangible asset, has undertaken the research and development work for itself and has done so at its own expense and risk.
- The company has received an R&D report for this
Additional rules apply to larger taxpayers. Check them out here.
Corporate tax rates
Corporation tax has fallen in recent years. Since 2020, the government has been working to introduce a new tax plan to reduce the tax burden on NVs and BVs.
Corporation tax 2022
Two rates apply for the financial year 2022:
- For profits up to €395,000 the rate is 15%
- For profits over €395,000 the rate is 25.8%
Corporation tax 2021
Other rates apply for the financial year 2021:
- For profits up to €245,000 the rate is 15%
- For profits over €245,000 the rate is 25%
Entrepreneurs can use various deductions and tax schemes to reduce the taxable profit so that less tax has to be paid.
For example, there are certain investments you can write off:
- Small-scale investment deduction (KIA)
- Environmental investment allowance (MIA)
- Energy investment allowance (EIA)
Companies also have the option of offsetting losses. If a company ends a financial year with a loss, these losses can be offset by offsetting them against results from other years. This can be done in two ways:
- Offset in taxable profit from previous years (carry back)
- Offset in future years’ expected taxable profit (carry on)
Until 2021, there was a 6-year deadline for this, but since 2022, losses can be investigated without limitation. However, a maximum amount has been set. Is the taxable profit in 2022 €1,000,000 or less? Losses can then be settled in full. For higher profits, settlement is possible up to 50%.
Read more about deductions and tax schemes here.
Submit a business tax return
Organizations subject to corporation tax file a tax return for the financial year. If this coincides with the calendar year (in most cases), you must submit the tax return by June 1 of the following calendar year. If it is a broken financial year, the declaration must be submitted no later than 5 months after the end of the financial year.
Did the business start in the middle of the year? Then you can choose to request an extended financial year. In that case, the financial year runs until 31 December of the following year.
Provisional corporation tax assessment
Each company receives a preliminary assessment at the beginning of the financial year. This amount is based on data from previous years. If you expect your company to make more or less profit, you can request a change to the preliminary assessment.
Objections can only be made against the final employment or an additional employment for corporation tax. If you or your accountant do not agree with the preliminary assessment, you must also request a change. Companies must pay tax on the profit: corporation tax. These are the conditions plus the rates in 2022.
You can request a postponement digitally or via a form on the Tax Authorities’ website. Tax will respond to the request within 3 weeks.