Transition from entrepreneur for income tax to a private company

In the transition from entrepreneur for income tax to a private company the tax regime which applies to the company changes. The entrepreneur's business results are taxed in the income tax and there are some entrepreneurs facilities. In the private company, the result is corporate tax. The remaining result stays in the company. If the company pays out to shareholders for achieved results, substantial interest tax must still be paid.

There are two ways to bring the entrepreneurship into a private company:
1) transfer subject to tax
2) Silent transfer

1) transfer subject to tax

The transfer subject to tax of the entrepreneurship into a private company means that the income tax of the entrepreneur is discontinued. Income tax is still payable on the hidden- and fiscal reserves and goodwill. The profit thus created may be reduced by the discontinuation relief. There is also the possibility to convert a portion of the discontinuation profit into an annuity.

2) Silent transfer

Under certain conditions a silent transfer into a private company is possible. In that case, the entrepreneurship has the same carrying amounts as in the private company and (at that time) no tax is payable on any gains such as tax and hidden reserves and goodwill. Because the private company continues with the same carrying amounts, the tax results of the company are higher than in the case of a transfer subject to tax and more corporation tax is paid the years after the transfer. In the beginning, the tax values are lower than with a transfer subject to tax.

The choice between the methods depends largely on the situation and the future prospects of the entrepreneur / company.

Jolles & Ko Accountants B.V. can optionally assist in making the choice and by effecting the transfer.