Calculating discontinuation profit when ending a business
Does closing your business leave you with a profit? If so, you will need to pay tax on this profit in your income tax return. Read how to calculate discontinuation profit (stakingswinst) and whether you can apply for discontinuation relief (stakingsaftrek).
What is discontinuation profit?
Discontinuation profit is the difference between the book value of your business and its actual value at the time you end or transfer your business. This may be because your business assets have increased in value since you purchased them. Examples include the surplus value of a building, or a machine that you have depreciated.
You must also settle amounts that you were previously able to deduct from your profits, such as the retirement reserve (oudedagsreserve) and investment deduction (investeringsaftrek).
In the tax return for year that you end or transfer your business, you must add the discontinuation profit to your income. You then pay income tax on this amount.
Calculating the discontinuation profit
You calculate the discontinuation profit by deducting the value of your business in your accounts (book value) from the actual value of your business at the time of ending or transferring your commercial activities. In some cases, you may also be able to use discontinuation relief. To make the calculation, you will need all the numbers from your accounts and the numbers related to the closing of your business.
Determine the current value of your business by checking the following:
This is the amount your business is worth according to your accounts.
Check whether your business assets have increased in value compared to the amounts stated in your accounts. You calculate the hidden reserve as the actual sales value minus (-) the value of the business assets in your accounts.
Goodwill comes, for example, from a good reputation within your market or having a unique product. Read more on how to calculate goodwill.
Are you selling a business asset for which you received an investment deduction (investeringsaftrek) less than 5 years ago? In that case, you may have to repay part of that tax deduction. You do so via the capital disposal charge (desinvesteringsbijtelling, in Dutch). This also applies if you transfer the business asset to your private assets. You then add the capital disposal charge to the discontinuation profit.
Fiscal reserves are amounts of money that you put aside (reserve) and that you can deduct from your taxable profit. The most important fiscal reserves are:
You have received a tax deferral on the amounts that you included in your reserve(s). If you end your business, you must settle the tax on these reserves with the Tax Administration.
Ask an expert for advice
Calculating the discontinuation profit is complicated. Ask your accountant or tax adviser for help with the calculation.
Discontinuation relief and other tax deductions
You pay less tax if you use these deductions:
Discontinuation relief
You can deduct a maximum of €3,630 in discontinuation relief (stakingsaftrek) from the discontinuation profit. You can only claim this relief once in your lifetime. View the conditions for discontinuation relief.
Additional annuity premium deduction
You can use part of the discontinuation profit to pay your annuity premium (lijfrentepremie). According to the Income Tax Act, you may do so until 1 July of the new calendar year after you ended or transferred your business. You are then entitled to an additional annuity premium deduction. The maximum amount of the tax deduction depends on your age and situation. View the amounts and conditions for the additional annuity premium deduction (in Dutch).
Tax schemes for special situations
In some cases, you can defer (doorschuiven) the tax on the discontinuation profit or use a different scheme. This means you might not have to settle with the Tax Administration, or you might only have to pay part of the tax. There are schemes for the following special situations:
- You inherit a business and continue to run it (in Dutch).
You must always apply for the relevant scheme at your tax office.
Check the conditions and deadlines for your situation
Ask advice from your accountant or financial expert. Or contact the Tax Administration via your tax office or the Tax Information Line (0800-0543).