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Work space in your own home: Substantial shareholders and their home office

The corona-virus means increasingly working from home, not only by employees but also by private entrepreneurs (including self-employed persons) and the employees who are also so-called DGAs (employees also being substantial shareholders with their own company, further: BV).

Until recently, the tax rules for these three groups were very clear: in most cases there was no fiscal attractiveness for these workspaces:  allowances for the employees for the work space in the private home constitute taxable wages for the employees or for the latter are not deductible for income tax. After all, 2 important conditions should be met before the light is green : the workspace should have sufficient “independence” and should be “adequately used” for business purposes. A workspace is ‘independent’ if the space could be rented out separately. Consider the following criteria: Your own entrance , your own toilet and separate energy supply, etc. The workspace is “sufficiently used” if you achieve a minimum number of workable hours related to your turnover in or from this workspace. In case you still have an office elsewhere, this means that at least 70% of the total income from work must be carried out in your home office.  If you do not have an office outside your office, you must earn at least 30% of your total income from work in that workspace and at least 70% from that office. This means that you have to spend a fair amount of your working time in the office at home.

If you do not meet the above requirements (independent work space and sufficient use), you cannot deduct (or reimburse free of tax) expenses for income tax purposes, not even for the furnishing. A desk, chair, lamps and other items are then for your own account.

For the DGA’s with a BV and workspace in their own homes, we have an alternative.

This work space does not have to meet the aforementioned independence criterion in order to be able to deduct all costs related to this space at the level of BV, namely in the situation that the ownership pf this work space is transferred to BV The BV will then (together with the DGA) become partial owner of the house. Legally, this can be effected by creating apartment rights via a notarial deed with an association of owners. In this situation, the BV becomes the legal owner of the office part of the house through the deed of division and the B.V. and the DGA become members of the association of owners.

In our view, it is sufficient to only transfer the economic ownership of the workspace to the BV.  You effectuate this in a (non-notarial) agreement, in which it is determined which part of the house may be used exclusively by the BV and which part may be used exclusively by the DGA privately. Furthermore, an agreement must be made about the use of the common areas and bearing the costs, such as maintenance, insurance and property tax (OZB) . This solution is simpler and more flexible than creating legal ownership and you save the costs of the public notary. As from the transfer, all expenses (including utilities, internet etc.) related to the business part is deductible at the level of BV for corporate income tax purposes. When the house is sold, a proportional part of the sales proceeds accrues to the BV (whereby any capital gains are taxable at level of BV). 

The downside of the structure is that the B.V. needs to pay 8% transfer tax on transfer of the value of this office property . This applies to both a legal and an economic transfer. Furthermore, the interest owed on the part of the existing (mortgage) debt of the DGA will no longer be deductible for income tax purposes (under circumstances the financing cost can be deductible at BV level). After the transfer, BV is allowed to depreciate the business part of the house for corporate income tax purposes. Finally, the ownership part of the B.V. should really correspond to the business use: if the share is larger than the BV actually uses, a business rent payment for this part will have to be taken into account by the DGA as a (deemed) taxable dividend or (deemed) taxable salary.

We will be happy to advise you whether such an (economic) transfer is beneficial in your specific situation.

Tax specialist