Tax return 2023

On March 1st, the digital filing round for Income Tax 2023 (IT 2023) and corporate tax for BV and VOF 2023 (CIT 2023) started. As an office, we have requested and received an extension for all our clients, so we are not bound by the deadline of May 1st, 2024. Despite this extension, our goal is to have completed all annual accounts and tax returns by the summer period.

In this article, you will find the most prominent aspects to be aware of during the tax filing for IT and CIT 2023, and we will also share how our process is unfolding within our office.

As indicated in our newsletter in December, our goal is to finalize all tax returns and financial statements by September. To achieve this, we have set a schedule for starting the IT 2023 and CIT 2023 filings. This is also the reason we have requested and been granted an extension for all our clients from the tax authorities. In case of any unforeseen circumstances, we can anticipate them without facing penalties.

The sooner your administration is complete, the sooner we can start the tax filing process. Contact your designated contact person to inquire about any missing information so that you can anticipate the schedule and, if desired, conclude the process earlier.

The process is as follows:

1. We finalize the administration from an accounting perspective.
2. We send an email asking to review the administration and possibly schedule an (online) appointment to address any questions. In this email, we request to review the accounting online to ensure completeness and accuracy, avoiding the need for adjustments or corrections later in the process.
3. Once we receive approval, we forward the information to our tax team.
4. The tax team prepares the financial statements and ensures compliance with tax regulations*.
5. If there are no questions, you will receive an email from the tax team with the opportunity to review and approve your documents (financial statements and CIT 2023) in our tax portal.
6. Upon receiving approval, we will proceed with the IT 2023 filing, completing everything based on the pre-filled information from the tax authorities (and financial statements).
7. You will also receive an email with the opportunity to review and approve your tax return in our tax portal.

*For sole proprietorships, we directly prepare the income tax return since there is no requirement for financial statements.

This article focuses on the changes from the Tax Plans for 2023 and some aspects you should be extra vigilant about each year.

• Invitation to file remains digital and by mail: You recently received an invitation to file IT 2023. This invitation is still sent via mail in the familiar blue envelope and digitally through your personal Message Box on MijnOverheid. Eventually, the paper invitation will be entirely replaced by the invitation through the digital Message Box.
• Check and supplement the pre-filled return: The Tax Authority already fills in much of the IT 2023 return. For example, the annual statements of your income, pension, annuity payments, and other benefits are already filled in. This also applies to the WOZ value of your own home, deductible mortgage interest, and the balance of the mortgage debt. Bank balances and the (value of) other assets in box 3 are also pre-filled.

Carefully check the pre-filled data, especially if your income situation has changed. Have you refinanced your mortgage? In that case, the interest deduction changes, and you likely incurred additional deductible costs. Additionally, the Tax Authority may occasionally make a mistake, or the data may be incomplete. You are still responsible and liable for the return, even if the Tax Authority has included incorrect information. Furthermore, you need to supplement the return with any non-pre-filled information applicable to your income situation, such as deductions for donations, medical expenses, and paid spousal support.

We have compiled a list of things you may not immediately think of when gathering the data needed to compile your IT 2023 return.

IT 2023 Return Information:

• Owner-occupied home imputed income: In 2023, the imputed income from owner-occupied homes has been reduced from 0.45% to 0.35% on the WOZ value for owner-occupied homes with a WOZ value between € 75,000 and € 1,200,000. Above that, the rate remains at 2.35%. Therefore, you have to add less for the owner-occupied home. The 2023 owner-occupied home imputed income is calculated based on the 2023 WOZ value of your home with a reference date of January 1, 2022. That value has likely increased. As a result, the benefit of the reduction in the owner-occupied home imputed income may be offset.

• Allocating owner-occupied home imputed income and mortgage interest deduction differently: If you have a mortgage for a property that is your main residence, you can deduct the interest. If you took out a new mortgage for the first time on or after January 1, 2013, you must also repay the own-home debt to qualify for the interest deduction. Your mortgage debt decreases annually due to repayment. So, you pay less interest each year and therefore have less interest deduction. You can deduct the mortgage interest at a rate of 36.93%. Since January 1, 2023, you no longer receive higher interest deductions if your income falls within the highest tax bracket. The income threshold at which the first tax bracket of 36.93% transitions to the second (and highest) tax bracket of 49.50% in 2023 is € 73,031.
  • Why distribute differently? Claiming the mortgage interest deduction for the person with the highest income may no longer be the most advantageous option. If your income is higher than € 73,031 and that of your partner is lower than this amount, it is likely even more advantageous to claim the owner-occupied home imputed income and deduction for your lower-earning partner. As a result, the owner-occupied home imputed income is taxed at a lower rate, namely 36.93% instead of 49.50%. However, the most significant advantage is achieved through the higher general tax credit (in 2023: maximum € 3,070) that your lower-earning partner receives due to the mortgage interest deduction. The general tax credit decreases by 6.095% from an income of € 22,660. At an income of € 73,031, this tax credit is entirely phased out to zero. If you have an income above this income threshold, you do not receive a general tax credit. If your partner has an income between € 22,660 and € 73,031 and you claim the owner-occupied home imputed income and deduct the mortgage interest for them, their income is reduced, and therefore their entitlement to the general tax credit increases. Thus, distributing the lower-taxed owner-occupied home imputed income and the higher general tax credit to the lower-earning partner yields more benefits than if the imputed income and the deduction were claimed by the higher-earning partner with income in the second tax bracket. Therefore, be extra cautious when distributing the owner-occupied home imputed income and mortgage interest deduction between you and your partner. Tip: It is also wise to have the provisional refund or income tax assessment for 2024 checked. It may be necessary to adjust these accordingly.

• Submit (modified) own-home loan from family or BV: Did you buy a house or renovate a house in 2023 with a loan from your family, a third party, or your own BV? In that case, you can only deduct the interest from your box-1 income if you provide the data about that loan in the 2023 income tax return. This reporting obligation for loans from non-administration-obliged individuals only applies to loans entered into on or after January 1, 2013, and on which you are required to make annual repayments. If the interest on this loan changed in 2023 or the loan was refinanced, you must also indicate this in your 2023 income tax return.

• Phase-out deduction no or small home debt: In early 2019, the gradual abolition over 30 years of the rule started, whereby you do not have to add imputed rental value to your income if you have no or only a small mortgage. This occurs when the imputed rental value is higher than the interest and/or financing costs you have paid. Until 2019, you did not have to add anything. But since then, you must add 3.33% extra annually. In 2022, it was 13.33% of the balance of the imputed rental value and deductible interest and costs. In 2023, it is 16.67% of this balance.

• Deduction deposit FOR into annuity: You can no longer build up a pension in the fiscal old-age reserve (FOR). Have you built up a FOR in recent years? Then you will have to settle this with the Tax Authorities at some point. The ultimate moment for this is upon cessation of your business. Then you will have to add the reserve to the profit. And then the full amount of the accumulated reserve is subject to income tax. Fortunately, you can arrange for a deductible (bank) annuity for the amount of the accumulated old-age reserve, so that you do not owe income tax on balance upon cessation. The amount by which the FOR decreases is indeed taxed, but on the other hand, the premium for the annuity is deductible. Of course, you must have sufficient liquid assets to deposit the amount of the old-age reserve. If so, you can (partially) deposit the reserve until July 1, 2024, into an annuity and still deduct it in your 2023 income tax return.

• Deduction of donations: Donations to charities with an ANBI status can be deducted if you can prove that you actually paid the donations, for example, with a transfer or receipt. Ordinary donations are deductible above a certain threshold amount depending on your income. The Tax Authorities have already filled in the threshold amount in advance. Periodic donations are fully deductible, but in that case, you must meet certain conditions. The Tax Authorities have registered all charities with an ANBI status. Click here to check if the charity is an ANBI. Cash donations are no longer deductible. Tip: Do you make the same donations to the same charities every year? Consider making it a periodic donation. Then your entire donation is deductible, not just the amount above the threshold.

• Deduction of annuity premium: Do you have a pension shortfall? Then you can arrange for additional income for this. For example, by taking out an annuity policy with an insurer or a home savings product with a bank. The annuity premium you paid in 2023 can be deducted in the 2023 income tax return. Tip: The deduction of annuity premium is not limited to 36.93%. With sufficient income in the highest bracket, you can deduct the premium at a rate of 49.50%!

• Payment of general tax credit to partner without income: Since January 1, 2023, the general tax credit is only paid to the partner without income who was born before 1963.

• Double exemption for policies upon request even in the absence of double beneficiary: Are you fiscal partners with each other and do you want to make use of the double exemption during life with a so-called Broad Revaluation Policy, Capital Insurance for Owner-Occupied Homes (KEW), Home Savings Account (SEW), or an Owner-Occupied Home Investment Account (BEW)? In that case, you and your partner must both be beneficiaries. If you have forgotten this double beneficiary, you and your partner can still use the double exemption by making a joint request in the income tax return, so that the payout comes to each of you half. Then each of you utilizes your own exemption.

• Check interest deduction after temporary rental: Do you have an unsold property that you have temporarily rented out? After the period of temporary rental, the right to interest deduction for the remaining term in which interest deduction is still allowed is revived. That term is 3 years. Check after the temporary rental if that term has expired. Is that the case? Then you no longer have the right to interest deduction.

• Excessive borrowing from your BV?: Are you a director-major shareholder (DGA) of your own BV? And have you borrowed a lot from your own BV (excluding for the own home)? In that case, the following is important for you. At the end of last year, the Tax Authorities checked for the first time whether you and your partner have debts to your own BV that amount to more than € 700,000. In that case, the excess above € 700,000 will be taxed as a substantial interest benefit in 2023 with 26.9% box-2 tax. If your BV lends to your (grand)children or to your (grand)parents or those of your partner, the limit of € 700,000 also applies to these related persons and their partners. If they themselves do not have a substantial interest in your BV (5% or more), then the tax on the excess above this € 700,000 takes place with you. If they do have a substantial interest, then the tax is levied on the borrower/related person themselves.

• Assets in Bridging Box 3: Until 2026, the box-3 tax is calculated based on fixed return percentages for the three categories ‘bank and savings deposits’, ‘other assets’, and ‘debts’. For 2023, the fixed percentage for ‘other assets’ has been set at 6.17%. Recently, the percentage for ‘bank and savings deposits’ has been definitively set at 0.92% and for ‘debts’ at 2.46%. Investment assets such as a securities portfolio or real estate are therefore taxed more heavily than bank and savings deposits. Shares in a reserve fund of an Owners’ Association (VvE) and a third-party account with a notary or bailiff are also counted as ‘bank and savings deposits’. This is regulated in the Tax Plan 2024 but applies retroactively from January 1, 2023. You can therefore take this into account in the 2023 income tax return. Until January 1, 2023, these assets were counted as ‘other assets’ with a much higher return percentage.
  • Claims and debts: Claims and debts between fiscal partners and between parent(s) and a minor child have been declassified retroactively to January 1, 2023. These claims and debts are reported in the same income tax return and may be offset against each other. As a result, you no longer have to report these items in the income tax return. This removes the disadvantage that debts are deductible at a low fixed return percentage, while the claim is included in the box-3 tax at the high fixed percentage of ‘other assets’.
  • Tax-free asset: The exemption in box 3 (the tax-free asset) is € 57,000 per taxpayer. If you have a fiscal partner, you together have an exemption of € 114,000. Does the asset remain below the amount of the tax-free asset? Then you do not have to report your asset to the Tax Authorities and nothing is taxed in box 3 for you. Note: exception! Are you entitled to benefits and do you have box-3 assets? In that case, you may be subject to a different arrangement. For the asset test in the income-dependent schemes, the asset base without deduction of the tax-free part is used. This means that you still have to fill in the assets in the income tax return if your box-3 assets, without applying the tax-free part, exceed € 33,748 (per benefit partner).
  • Ensure correct distribution of box-3 assets Do you have a fiscal partner? In that case, it is important to distribute the assets in the most favorable way between you and your partner. You can also benefit here by distributing the assets in such a way that your partner maximally utilizes the general tax credit.
  • Rented out properties more heavily taxed: Do you rent out properties that fall under rent protection? Then you apply the so-called vacant value ratio for the valuation in box 3. This is an increasing percentage of the WOZ value of the property. As of January 1, 2023, the vacant value ratio has increased significantly, making properties rented out with rent protection significantly more heavily taxed with box-3 tax. For example, rented properties with a rent of 4 to 5% of the WOZ value are valued at 95% of the WOZ value (in 2022: 67%). The highest percentage has become 100% of the WOZ value (with a rent of more than 5% of the WOZ value). Temporary (sub)lease agreements are excluded from the application of the vacant value ratio. This means that the vacant value ratio for temporarily rented (leased out) properties has effectively been abolished. In addition, for rental to related parties (for example, to your child), the percentage of the vacant value ratio is set at the highest percentage (100%). For these situations as well, this effectively means the abolition of the vacant value ratio.

If you have any questions regarding the information in this article, or if you have questions about the year-end closing and our planning in that regard? Or do you want to discuss with our tax advisors the possibilities available towards the end of the year? Let us know and schedule a (online) meeting if necessary with one of our specialists. This way, you can also discuss what we need by the end of the year, and if desired, we can make a plan with you to prepare your annual accounts in time.

This article incorporates the state of affairs in legislation and regulations until February 29, 2024. Although the utmost care has been taken regarding the content, no complete guarantee can be provided for any (printing) errors and incompleteness. The publisher and the distributor hereby exclude liability for this. For an explanation, you can always contact us.