Keywords: substantial interest, excessive borrowing, Dutch legislator

With the Wet Excessief Lenen bij Eigen Vennootschap (Excessive Borrowing from Own Company Act; “EBOCA”) the Dutch legislator aims to discourage excessive borrowing from one's own company. The substantial interest holder who borrows more than € 500,000 will be faced with a fictitious regular benefit.

"For the € 500,000 limit in the EBOCA, all types of loans count. Debts of the substantial shareholder with several of his companies are added together for the measure against excessive lending from own companies. Therefore, splitting up structures or companies does not offer any solace. What matters is the total size of the debts[1]."

This is what specialist Jeroen van Strien writes in a new Theme on the website of Navigator with regard to the EBOCA. This new tax measure will enter into force on January 1, 2023.

The topic contains an overview of the legislation and answers questions such as which debts count and how the fictitious regular benefit works. On the latter, Van Strien writes that the legislator decided that the national regular benefit can also be a negative amount to avoid double taxation. "Without this measure, double taxation would occur, for example, in the situation where a debt is repaid that was previously designated as a notional regular benefit and then the repaid amount is distributed as a dividend[2]."

For more information on how the EBOCA could affect yourself as a substantial shareholder for Dutch Tax law purposes, do not hesitate to contact us.