Would you like to convert your sole trader business into a private limited company (BV) without immediately receiving a hefty tax bill? Then a silent transfer may well be the route for you. With this method, the tax liability is effectively passed on to the BV, meaning you pay no cessation profit at the point of transfer.
What is a silent transfer?
With a silent transfer, you transfer your sole trader business into a BV without paying income tax at that moment on the accrued hidden reserves and provisions. The tax authority treats the transition as though no tax settlement takes place: the BV takes over the book values of the sole trader business and the latent tax liability transfers with it. It is, in effect, a deferral of taxation, not an exemption.
The alternative is a taxable transfer, whereby you do settle your liability with the Tax Authority immediately. Which option is more advantageous depends on your situation, the extent of your hidden reserves, and your future plans. Always seek personal advice before making a decision.
How does it work in practice?
With a silent transfer, you move from income tax (box 1) to corporation tax. For tax purposes, the BV simply continues the sole trader business. The Tax Authority imposes a number of strict conditions for this. You submit a request to the tax inspector and apply for what is known as a silent transfer ruling.
The transfer is then recorded in a notarial deed and a transfer description. The BV receives the assets and liabilities of your business at the fiscal book values that also appeared in your income tax return. For more context on the entire conversion process, you can also consult our page on converting a sole trader business into a BV.
Conditions for a silent transfer
The Tax Authority applies strict requirements. If you do not meet all the conditions, the transfer is automatically treated as taxable and you will pay tax immediately. The most important conditions are as follows:
- Submit the request in time: You must have submitted a request to the tax inspector no later than the date of incorporation of the BV, or within a specified period after the desired transfer date.
- Retrospective effect of a maximum of 9 months: The transfer can take effect retrospectively by up to nine months, for example from 1 January of the current year.
- Continuity requirement: You, as the former business owner, must remain employed by the BV for a minimum of three years or retain the shares for three years. If you sell earlier, the tax liability may be brought forward.
- Shares may not be disposed of immediately: The shares you receive upon transfer are subject to restrictions for a certain period; you may not simply sell them.
- Full transfer: You transfer the entire business, including all assets and liabilities. Selective transfer is not permitted.
- Notarial deed required: The incorporation of the BV and the transfer must be recorded by a notary, including a description of the business being transferred.
Advantages of a silent transfer
The greatest benefit is, of course, that you have no immediately taxable income at the point of transfer. You do not need to draw on your business reserves to meet a tax assessment. This gives the new BV a solid financial foundation from which to start.
Plan een vrijblijvend gesprek en ontdek wat we voor je kunnen betekenen.
Plan een gesprekOther advantages:
- The BV starts with the historical book values, which may create opportunities for depreciation.
- Accrued fiscal reserves, such as the old-age reserve (FOR), can also be transferred silently under certain conditions.
- You maintain continuity in your business operations; clients and suppliers notice no fiscal difference during the transition.
Disadvantages and points to consider
A silent transfer is not always the smartest choice. There are also situations in which settling immediately is the better option:
- The BV takes over the low book values, which means that upon a later sale the profit will be greater and you will still face a significant tax charge.
- The continuity requirement limits your flexibility if you wish to sell or wind up the BV within three years.
- If you are entitled to cessation relief or annuity premium relief, a taxable transfer can sometimes work out more advantageous on a net basis.
- The administrative and notarial costs are slightly higher due to the required ruling and transfer description.
A thorough calculation of both scenarios is essential. Consult a tax adviser who is familiar with your figures.
Silent transfer and the 30% ruling for expats
Are you a foreign entrepreneur or expat considering setting up a BV in the Netherlands? If so, additional fiscal aspects come into play, such as the 30% ruling and international tax treaties. A silent transfer is also possible in that case, but requires extra attention to cross-border considerations. Do also explore what tax advice for expats could mean for your situation.
Why Belastingadviseur Eindhoven
At Belastingadviseur Eindhoven, we help business owners in Eindhoven and the Brabant region with transitions like this every day. We compare the silent and taxable transfer options side by side for you, ensure the correct requests are submitted to the Tax Authority, and guide you from start to finish. Together with our partners within Adviesgroep Eindhoven, we also arrange the notarial incorporation, the administration and tailored tax advice.
Would you like to know which method works out most advantageously for your situation? Feel free to contact us without obligation. We are happy to think things through with you.
Frequently asked questions about silent transfers
What is the difference between a silent transfer and a taxable transfer?
With a silent transfer, you pay no income tax at the point of transition; the tax liability is passed on to the BV. With a taxable transfer, you settle immediately with the Tax Authority on the cessation profit, but you may benefit from cessation relief or annuity premium relief.
How far in advance do I need to submit a request?
You must submit the request no later than the date of incorporation of the BV. The transfer can take effect retrospectively by up to nine months before that date. Acting in good time is therefore important.
May I sell my shares immediately after a silent transfer?
No, the continuity requirement obliges you to hold the shares for a minimum of three years. If you do not, the Tax Authority may still charge you the deferred tax liability.
Can I transfer only part of my business silently?
No, a silent transfer requires you to transfer the entire business, including all assets and liabilities. Selective transfer is not permitted for tax purposes.
Is a silent transfer always more advantageous than a taxable transfer?
Not necessarily. Depending on the extent of your hidden reserves, your future plans, and any available reliefs, a taxable transfer can sometimes work out more favourably on a net basis. Have both options calculated by a tax adviser before you decide.
We are happy to think along with you. For advice tailored to your situation we would gladly sit down with you. No rights can be derived from the content of this page and it may contain inaccuracies.
