The holding pays the operating company’s accountant, the operating company transfers a management fee to the holding, and halfway through the year the holding lends money for a new machine. All of these amounts end up on one account between the two bv’s. That also raises the question of whether interest has to be charged on the balance, and how much. Interest on a current account between bv’s (rekening-courant) causes a lot of confusion, partly because a well-known threshold of €17,500 is applied on several websites to a situation for which the Belastingdienst (the Dutch Tax Administration) does not state it.
Below you can read what a current account between bv’s is and when interest comes into play. After that: how an arm’s-length interest rate is set, a worked example, what corporate income tax does with it and how to record the arrangements in four steps.
Key points:
- A current account is one running account between two parties. Amounts are set off against each other immediately and only the balance is owed (Article 6:140 of the Dutch Civil Code).
- Between related bv’s, the terms must be those that independent parties would agree. Otherwise the Belastingdienst determines the profit as if they had been (Article 8b of the Corporate Income Tax Act 1969).
- The Belastingdienst describes the €17,500 interest-free threshold for the current account between a shareholder and their own bv, not for two bv’s.
- Both bv’s record in their accounts how the interest rate was set. A written current account agreement makes that easy.
What is a current account between bv’s?
A current account between bv’s is a running account on which two companies keep track of what they owe each other. If the holding pays an invoice for the operating company, the holding gets a claim. When the operating company later transfers profit or a fee, that claim goes down. The Dutch Civil Code sets out how such an account works: monetary claims and debts that are entered in one account are set off by operation of law immediately, and at any moment only the balance is owed. The party keeping the account closes it every year and informs the other party of the balance. If that party does not object within a reasonable time, the balance is deemed settled between the parties. The two bv’s can also agree otherwise in their own arrangements, because the law leaves room for that.
In a group with a holding and one or more operating companies, this is the usual way to book amounts between them, and the current account between holding and operating company is the best-known example. Think of recharged costs, a management fee, a dividend not yet paid out or an advance. It is not only between parent and subsidiary. Two sister companies with the same shareholder can also have a current account with each other. In the books, one bv shows the balance as a receivable on the balance sheet and the other as a debt.
Current account or loan
A current account is different from a loan. According to the Belastingdienst, small amounts are booked back and forth via a current account and set off against each other continuously: something is advanced briefly and paid back soon after. A loan between bv’s has a fixed amount, a term and arrangements for repayment. An amount that stays on the current account for a long time without repayment can count as a loan. The Belastingdienst gives its own example of this: if an amount is lent through the current account without repayment for a term of ten years, that is an interest-bearing loan that has to meet all arm’s-length conditions.
Do you have to charge interest between bv’s?
For corporate income tax, the answer is in Article 8b of the Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969). If a bv takes part in the capital, management or supervision of another bv, the terms between the two must match what independent parties would agree in the course of business. If they differ, the profit of both bv’s is determined as if those arm’s-length terms had been agreed. The same applies to two sisters, if the same person takes part in both. The interest on the current account also falls under those terms.
In short: interest on the current account between bv’s follows the arm’s-length principle. The question is always which interest an independent party would charge on the same balance.
The €17,500 threshold
Many websites say that no interest needs to be charged on a current account up to €17,500. The Belastingdienst describes that threshold on its page about the current account between a shareholder and their own bv. The balance on the current account must then never exceed €17,500 at any time during the year. If the balance goes higher even once, interest must be charged on the whole amount, and the arrangement does not apply where there is a loan. The Belastingdienst gives an example. On 1 January the balance is €10,500, in April it rises to €20,500 and on 31 December it is €15,500. Because the balance did not stay below €17,500 all year, interest must still be charged over the whole year. For the current account between two bv’s, the Belastingdienst names no amount on that page. For that situation the main rule of Article 8b applies: terms as between independent parties.
Current account with the director-shareholder
Besides the current account between bv’s, a director and major shareholder (dga) can also have a current account with their own bv. Separate rules apply to that. According to the Belastingdienst, since 2023 what someone, together with any fiscal partner, borrows from their own bv above a threshold is taxed as income from a substantial interest in box 2. That threshold was €700,000 in 2023 and is €500,000 from 2024. That rule on excessive borrowing is about the person who borrows from the bv, not about money moving back and forth between two bv’s. It helps to keep the two accounts strictly separate in the books. For a loan from the bv to the dga, the Belastingdienst uses as its yardstick the terms the bv would also set for a third party in comparable circumstances, and advises putting them in a loan agreement.
How do you set an arm’s-length interest rate?
The law does not set a fixed percentage for interest on the current account. The arm’s-length rate depends on the situation. MOS Accountants describes three components: the base rate, a mark-up for the term and a risk mark-up. The bv that is owed money on balance receives the interest, whether that is the holding or the operating company. The base rate is the market rate at the moment the money becomes available, with the euribor rate as a possible starting point. For the risk mark-up, MOS Accountants mentions among other things:
The higher the risk for the bv lending the money, the higher the mark-up. A balance that can be called in at any time and is covered by a pledge can carry a lower rate than a subordinated claim without security. MOS Accountants sums it up as tailor-made work. So put on paper which base rate was used, which mark-ups and why, so that years later it is still clear how the interest rate on the current account came about.
Worked example
A worked example with amounts for illustration only: the holding has a claim of €100,000 on the operating company for the whole year. Suppose the two bv’s substantiate an arm’s-length interest rate of 5% a year on the basis of market rates and mark-ups. The interest for that year is then €5,000. For the operating company that is a cost, for the holding it is income. If the balance changes during the year, the interest can be calculated per month or per quarter on the average or the actual balance, as set out in the agreement. If the interest is not paid but added to the account, the balance of the current account grows with it. If the position reverses, because the operating company passes money on to the holding in a good year, the roles reverse too: the holding then pays the interest and the operating company books the income.
| Situation | What applies to the interest |
|---|---|
| Shareholder and own bv | Up to €17,500 all year, no interest; above it, interest on the whole amount (Belastingdienst) |
| Holding and operating company | Arm’s-length interest under Article 8b of the Corporate Income Tax Act 1969, substantiated and recorded |
| Two sisters with the same shareholder | Article 8b as well: terms as between independent parties |
| Bv’s in one fiscal unity | Taxed for corporate income tax as if there were one taxpayer |
Interest and corporate income tax
Interest on the current account is a cost that lowers the profit of the borrowing bv, and income that raises the profit of the lending bv. For the group as a whole the two cancel each other out, but per bv it counts for corporate income tax. A current account with a group company that makes a loss can therefore have a different effect than in a group where all bv’s make a profit. If too low or too high an interest rate is agreed, the Belastingdienst can correct the profit of both bv’s to an arm’s-length rate.
Two arrangements change the picture. If the parent holds at least 95% of the shares in the subsidiary, they can form a fiscal unity on request: tax is then levied as if there were one taxpayer. In addition, Article 15b sets a general limit on interest deduction. The balance of interest paid and received is deductible up to the higher of two amounts: 24.5% of the adjusted profit or €1,000,000. Anything above that is carried forward to a following year and is then deductible to the extent there is room under that limit in that year. Article 8b also requires both bv’s to include information in their accounts showing how the interest rate came about, and whether it matches what independent parties would agree.
Good to know: the right interest rate depends on the amounts, the term and the security within the group itself. An accountant or tax adviser can substantiate it case by case.
Recording a current account agreement
A current account relationship between bv’s can exist without a contract, but according to MOS Accountants, putting it in writing helps avoid discussion with the Belastingdienst. In Article 8b(3), the law asks both bv’s to record in their accounts how the terms came about. For a current account between a bv and its holding, in practice it comes down to four steps:
Name the two bv’s, the maximum amount, when a balance can be called in and what security stands against it.
Record which base rate and which mark-ups were used, and why. Keep the documents the percentage is based on.
Book every amount going back and forth on the current account, with date and description. Close the account every year and send the balance to the other bv.
Calculate the interest on the balance as agreed, book it at both bv’s and pay it or add it to the account under the agreement.
Two bv’s, two business accounts with Vivid
A current account is easier to keep track of when each bv has its own account. For a bv, the business account is in the company’s name, and with Vivid you open one for the holding and one for the operating company separately, fully online. What helps:
That way the amounts moving back and forth between the bv’s sit on separate accounts, each entry with its own description. It makes the annual closing of the current account and the interest calculation a lot clearer.
Vivid in short: a business account of its own for each bv, sub-accounts for the interest and exports to the bookkeeping, from €0 a month with Free Start.
An account for every bv in the group
Open a business account with a Dutch IBAN online for the holding and the operating company.
Frequently asked questions
What is a current account between bv’s?
A running account on which two companies keep track of what they owe each other. Amounts are set off against each other immediately and only the balance is owed.
Is interest required between a holding and its operating company?
Article 8b of the Corporate Income Tax Act 1969 asks for terms that independent parties would agree. That also applies to the interest: if it differs from an arm’s-length rate, the profit is determined as if an arm’s-length rate had been agreed.
Does the €17,500 threshold also apply between bv’s?
The Belastingdienst describes that threshold for the current account between a shareholder and their own bv. For two bv’s that page names no amount; the arm’s-length principle applies.
How high is an arm’s-length interest rate on the current account?
There is no fixed percentage. MOS Accountants starts from a base rate such as the market rate, plus mark-ups for term and risk. Record how the percentage was set.
What is the difference between a current account and a loan?
Through a current account, small amounts go back and forth and are set off continuously. A loan has a fixed amount, a term and arrangements for repayment.
What changes in a fiscal unity?
In a fiscal unity, corporate income tax is levied as if the bv’s together were one taxpayer. One of the conditions is that the parent holds at least 95% of the shares in the subsidiary; both bv’s must request it.
Is a current account agreement mandatory?
Article 8b(3) of the Corporate Income Tax Act 1969 asks both bv’s to record how the terms came about. A written agreement keeps that clear.
This article provides general information and is not tax or legal advice. The rules and amounts mentioned are as published by the Belastingdienst and as set out in the Dutch Corporate Income Tax Act 1969 and the Dutch Civil Code, and may change. Vivid’s payment services are provided by Vivid Money S.A., an electronic money institution authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg; its Dutch branch is registered with De Nederlandsche Bank (DNB) as an electronic money institution.
