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Defaulting on interest payments will cost dearly

It is easy for a director and major shareholder (dga) to make arrangements with his own privately held corporation (bv). But it is not quite without obligations, as the dga found out in the case below. In this case, the dga had a current account with his company, and it was agreed that the company would receive 5% interest annually on the balance of the account. But the dga failed to pay that interest in 2015 and 2016. The tax inspector regarded this as a profit distribution to the dga, and attributed it to box 2 income. The dga argued it was not a profit distribution because the money had not ‘left the company definitively’. The court gave short shrift to this. It was agreed that the dga would pay 5% interest. But that could not be retraced. The interest had not been calculated, paid or credited, nor did it appear as income in the records. Therefore, the company had missed out and the dga had saved. The court concluded from the exhibits that both the dga and the company were aware of the fact that the bv had been favored. Thus, the unpaid interest was rightly a taxed profit distribution.

Court of Gelderland, June 28, 2021, (publication date August 18, 2021)  ECLI (abridged): 32482

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