Tax on dividend payments to go up in 2020

The income tax rate for dividend payments made to directors-cum-controlling shareholders, which this year still amounts at 25 percent, is set to increase, to 26.25 percent in 2020 and on to 26.9 percent in 2021. There is a correlation between this “Box 2” income tax rate increase and the reduction in the corporation tax rates for private limited-liability companies’ earnings, from their current (2019) level of 19 percent for the first 200,000 euros in earnings to 16.5 percent in 2020 and on to 15 percent in 2021. Any profits over and above 200,000 euros are currently taxed at a rate of 25 percent. This rate will not change in 2020, but will drop to 21.7 percent in 2021.

Although the impending “Box 2” rate increase may be a reason to schedule a dividend payment (in order for example to redeem the director-cum-controlling shareholder’s debt to the company) before the current year is out, we would point out that there could be consequences in terms of the “Box 3” taxation of such dividend payment during the same financial year.

Dutch version: Tariefstijging dividenduitkering 2020