How does the deemed dividend mechanism work?
At year-end, the Tax Authority checks whether your total outstanding loans from connected BVs exceed €500,000. If yes, the excess is added to your box 2 income in that year. You pay 24.5% or 31% box 2 tax on the excess — even if you haven't received a single euro in actual dividend.
Example: €700,000 in BV loans
| Item | Amount |
|---|---|
| Total loans outstanding | €700,000 |
| Threshold | €500,000 |
| Excess (deemed dividend) | €200,000 |
| Box 2 tax due (24.5% on first €68,843 + 31% on remainder) | approx. €57,500 |
How to avoid the threshold being breached
- Formally declare dividend (with proper box 2 planning) to reduce the loan balance
- Repay excess loans before year-end
- Ensure home loans are properly documented as secured mortgages (excluded from cap)
- Spread loans across years to stay under the threshold
The follow-up question
Alongside this belong Borrowing from Your BV, Excessive Borrowing from a BV (Wet Excessief Lenen) and Interest on a Loan from Your BV.