If you own a private limited company PLC or are considering setting one up, you’ll naturally want to know what tax advantages it offers. One of the biggest benefits of a PLC is that you can take advantage of various tax schemes that reduce your taxable profit. In this article, we’ll not only outline the benefits of the PLC structure but also provide a clear overview of interesting deductions your BV may be eligible for.
What is a PLC and what are the advantages?
A PLC is a legal entity, meaning the company itself is responsible for obligations and debts, not you personally. If something goes wrong financially, you are generally not personally liable with your private assets for the company’s debts. This significantly reduces the financial risk for you as an entrepreneur.
In addition, a PLC can become fiscally advantageous once your profit increases. From around €125.000 in annual profit, the tax burden for a PLC is typically lower than for a sole proprietorship. A BV pays corporate income tax (19% up to €200.000 profit, 25.8% above that) instead of the higher personal income tax rates. Thanks to these lower rates, you retain more net profit (profit after tax), which you can distribute to yourself as a DGA (director-major shareholder) or allocate to reserves.
Want to know more about the DGA salary? Read our blog here.
Finally, a PLC often gives your business a more professional appearance. Clients and investors tend to see a PLC as more reliable than a sole proprietorship, increasing your chances of landing larger contracts. A PLC is also relatively easy to transfer, shares can be issued or sold to attract investors without needing to establish a new company. This makes it easier to grow or eventually sell your business.
Want to read more about the advantages of a PLC? Click here.
Interesting deductions for a PLC
A PLC can make use of various tax schemes to reduce its taxable profit. Below, we highlight four key deductions that PLCs can benefit from:
- Small-Scale Investment Deduction (KIA) – This scheme encourages smaller business investments. If your BV invests more than a certain minimum amount in a year (e.g., over €2,400 in 2023), you can deduct an additional percentage of that investment amount from your profit. In many cases, this amounts to 28% of the investment amount (on top of regular depreciation). This results in a direct tax benefit and encourages ongoing business investment.
- Environmental Investment Deduction (MIA) – An additional investment deduction for environmentally friendly purchases. If your investment is listed on the official Environmental List (a government-issued list of sustainable business assets), you can deduct up to 45% of the investment amount from your profit, on top of standard investment deductions. This applies to businesses subject to corporate tax (such as PLCs) and offers a significant tax advantage for green investments.
- Arbitrary Depreciation of Environmental Investments (VAMIL) – Similar to the MIA, the VAMIL is aimed at specific “green” investments. With the VAMIL, you can depreciate 75% of investment costs at any pace you choose. This means you can deduct a large part of the costs immediately or in a chosen period, offering a liquidity advantage, less profit in the current year means less tax, while the remaining depreciation can follow later. This frees up funds within the company.
- WBSO (Research and Development Tax Credit) – A tax scheme that encourages innovation (R&D). If your BV develops new products, processes, or software, the WBSO allows part of the wages and other R&D-related costs to be offset as a tax credit. This results in a reduction of payroll taxes for employees working on R&D. The scheme is not just for large businesses, startups and SMEs can also benefit, provided they meet the criteria. The WBSO effectively reduces innovation costs, making development more financially viable.
Considering converting a sole proprietorship or general partnership (VOF) into a PLC?
Then it’s especially important to understand which tax schemes may apply to your new structure. Learn more about such a conversion here.
Curious how your company can best take advantage of these schemes? Feel free to contact us for tailored advice. That way, you can make the most of your BV structure and your investments.
