questions about paying tax when buy a business property (office and warehouse)

[kkpiano]

hi,

 

I have a few questions about paying tax when buying a business property.

 

I have a one person company (eenmanszaak), and would like to buy a land in an industrial area to build a house combined with office and warehouse to live and work. I have discussed with the construction company, the total price will be around 800k (excluding btw), including ground, house to live for my family and work, and the warehouse. 50% will be private property, and 50% will be business property.

 

Below are the questions:

1. If my company income is 100k before tax per year, may I use almost all of the company income to buy the business property, so that I only pay a little bit of my company income for tax? Below is the calculation

400k business property / 5 years = 80k per year. (divided by 5 years is because belastingdienst does not allow company to report investment at once, so I have to divide the investment into 5 years, each year pay part of the investment)

100k income - 80K property investment per year = 20K, only this 20k need to pay income tax, then only 36.55% for tax?

 

2. For the following 5 years, there is always 80k each year of the company income does not need to pay tax?

 

3. Is it possible to get refund for the 21% btw for the 400k business property?

 

Thank you very much.

 

Neo

[prinsrachid]

1. If my company income is 100k before tax per year, may I use almost all of the company income to buy the business property, so that I only pay a little bit of my company income for tax?

No, you may not.

 

Business property cannot be depreciated in only 5 years. The depreciation period is at least 5 years, not at most. An office building, however, will usually be written off in 30 to 50 years. Also, you can only write off to 50% of the base valuation of the immovable property (WOZ-waarde). If the business part of the property is valued at 400k, the write-off per year will most likely be something like 4k to 6,5k per year. (400k x 50% / 30-50 years). That is, if you choose to split up the property in half for income tax purposes.

 

The above applies to the situation in which you qualify the property as a business asset for income tax purposes. However, you may also choose to qualify it as a personal asset. In that case it will be regarded as your home, which means you may deduct all interest payments personally. Alternatively, you may choose to qualify the entire building as a business asset. In that case you can activate the full property value, but you will have to correct your profit calculation due to the personal use of a business asset.

 

2. For the following 5 years, there is always 80k each year of the company income does not need to pay tax?

I'm not sure what you mean by 'the following 5 years'. The 5 years following the first 5 years? But I think the answer is no either way.

 

3. Is it possible to get refund for the 21% btw for the 400k business property?

Yes, probably you can, depending on how you qualify the property for value-added tax purposes. However, please be aware of the fact you must also pay a so-called real estate transfer tax (overdrachtsbelasting). This tax is 6% for business property and 2% for residential property.

 

This is a complex matter with various taxes involved. Also, one choice in one regard may have consequences for other types of taxes. In some cases you can also make a different choice for each of the taxes individually, which makes things more confusing. Please make sure you contact a tax professional, before making any definitive steps with regard to income, value-added and real estate transfer tax.

[kkpiano]

Hi, prinsrachid Legend

 

Thank you so much for your quick, detail, and professional answer, you are great :)

[kkpiano]

Hi, prinsrachid

 

I read again your answer, there is one thing might be misunderstood.

 

What I asked is not the depreciation of the business property, but if I can count this business property as company cost if I buy it.

 

So original company yearly income is 100k, the business property is 400k, I pay each year maximal 80k, then my company yearly income becomes 20k, and I only need to pay tax based on this 20k instead of 100K.

 

Would you please to so kind to answer my question?

[Joost Rietveld]

Dear kkpiano,

 

Investing in property is not a tax deductable business expense in itself. So the answer is indeed no.

Prins reffered to depreciation, since depreciation is a tax deductable business expense.

 

So if the annual profit is 100k than tax is levied on 100k minus the depreciation of the property, as explained by Prins.

 

brg

Joost

 

 

[kkpiano]

Dear Joost,

 

Thank you for your kind reply.

 

So based on your explanation, the percentage of tax I have to pay for the money I used to buy a business property will be the same as if I buy a private property. (so 12.25%, 40,40%, and 52%)

 

And if I upgrade my eenmanszaak to bv, then to buy a business property, I only need to pay 20% tax. Is that correct?

 

kkpiano

[Highio]

kkpiano, where do you get your information? It seems that you don't understand the basics of our tax system at all (income or corporate tax and sales tax).

 

Regards,

 

Highio

 

[kkpiano]

Dear Highio,

 

I am very sorry for my poor knowledge of tax :'(

 

For the tax percentage for private person (or eenmanszaak), I got it from

https://www.expatax.nl/tax-rates-2016

 

For the tax percentage for BV, I got it from

https://www.duijntax.com/en/dutch-corporate-income-tax-rate

 

Hope you could correct my mistake of the questions I asked.

[4711]

Frankly, I don't understand a single bit of this story.

A few months ago (quote): "I have a small online shop"...

 

And now you are talking about an investment of about 1 million euro's.

Without any consultants! Just by asking the opinion of someone who's reading this forum.

 

Very strange, in my opinion. And certainly now very wise.

 

[Joost Rietveld]

Yes.

 

Note that a BV has many more rules and consequences which apply. The lower tax rate in itself is no argument to change your eenmanszaak to a BV.

 

Best to get professional help, since forum advice is not supported by your numbers.

 

Best of luck

 

[Highio]

Construction permits and housing in industrial areas are also heavily regulated in here.

 

Who takes care of your tax returns now?

 

If you're financing yourself, you also have resources to buy advice. If you're looking for full mortgage your income is definitely too little.

 

Regards,

 

Highio

 

[kkpiano]

Dear Highio , exhaeller, prinsrachid, and joost.

 

Thank you for all of your answers.

 

The online shop is just a part time job of me and my wife, i also have my own major job. The big part of this 800k will be a mortgage from bank, only a small part will be the money we sell our current house and bank savings.

 

I will ask some professionals for this question, and calculate the tax rate.

 

Anyway, I appreciate very much for all peoples answered my questions in this forum, I hope after some years when i get more knowledge about running a company, i can also help others for the questions they asked:)