Bringing a company into a BV: quietly or silently, and what startups should pay attention to

Why a company's contribution to a BV is so important

For startups and scale-ups, there often comes a time when the existing structure no longer fits well with the next growth phase. Think of an entrepreneur who currently still works from a sole proprietorship, or founders who do business through a partnership and want to transfer their activities to a BV.

Then the question quickly arises how this switch should be structured for tax purposes. That is not a detail. Indeed, the choice between a noisy and a silent contribution determines whether there is direct taxation of the accrued value in the company, or whether that claim is transferred to the BV structure.

In practice, we see that this is where many misunderstandings arise. Entrepreneurs often look at the establishment of the BV first, while the tax story starts earlier, namely with the transition time and the way in which the contribution is designed.

What is the difference between noisy and silent input?

At a rustling contribution Basically, the entrepreneur ceases his business when it is contributed to the BV against the distribution of shares. As a result, the strike profit must be settled. These strike profits include silent reserves, goodwill, fiscal reserves and any divestment benefits.

That makes a rushing contribution potentially costly. Especially if value has already been built up in the company, for example in profit capacity, assets or goodwill, taxation can increase sharply immediately.

At a noiseless contribution this direct levy on the strike profit is actually prevented. The existing income tax claim against the company is then converted into a combined claim at the level of the BV and the substantial interest. In other words: the claim will not disappear, but will move on to a different fiscal jacket.

This is often attractive for founders, because a change in legal form does not immediately result in immediate settlement. At the same time, silent input is not a free route without conditions. Although the BV takes over the entrepreneur's tax position at important points, not everything changes automatically. In this way, losses that can be deducted cannot be transferred.

When is silent input possible?

The silent contribution facility is open to income tax entrepreneurs and, subject to conditions, also to certain co-beneficiaries. The latter mainly applies in situations where someone no longer acts as an entrepreneur in the classical sense, but their justice builds directly on a previous position as an entrepreneur.

For tech companies, it is particularly important that silent input is not a general escape, legally and fiscally, that you can use at any time and in any form. In principle, the law is aimed at contributing to a newly created BV. The standard terms and conditions do approve, subject to conditions, that contribution to an existing BV is also possible. In practice, this makes the route more flexible, but it remains something that needs to be carefully structured.

Another important limitation is that with silent input, you cannot simply transfer a part of your subjective business and continue the rest yourself. However, prior to the transition period, you can dispose of part or withdraw certain assets from the company, after which the remaining company will be silently contributed.

This is especially relevant for startups. Many young companies have a mix of activities, assets and agreements that, in practice, are not always neatly aligned with the same tax line. Then it is important to first clarify exactly what the company you want to contribute is.

The transition time: this is where the tax story really starts

A mistake that many entrepreneurs make is thinking that everything only starts when the BV is notarized. This is different from a tax point of view. Indeed, from the transition period, the company is expected to be operated at the expense of the BV to be set up.

In principle, that transition period coincides with the beginning of the preliminary period. A partnership usually concludes a pre-agreement for this purpose. In the case of a sole trader, a unilateral statement of intent can be used instead. The date of that preliminary agreement or statement of intent marks the beginning of the preliminary period.

That moment is important, because from then on, results can be attributed to the BV, even if that BV does not yet exist under private law. The profit from the preliminary period is then taxed in the first financial year of the BV after it was actually established.

For founders, this means that timing is not an administrative afterthought, but a decisive part of the tax outcome. The chosen date has an impact on the allocation of profit, in the question of when to settle and in the applicability of facilities.

Preliminary and pre-term: what is allowed and what is not allowed?

The preliminary period runs from the preliminary agreement or letter of intent to the notarial establishment of the BV. For a noisy input, this preliminary period does not in itself have a fixed maximum period, although it does test in terms of content whether the pre-agreement really had meaning. A paper intention without a real intention to set up the BV does not hold up for tax purposes.

With silent input, that is tighter. Then the BV must be established within fifteen months of the transition time, and the contribution must also be completed within that period.

In addition, under certain conditions, a pre-period are used, i.e. a period that is still before the pre-agreement or statement of intent. This can be fiscally interesting, but only within clear limits.

In the event of a noisy contribution, a retroactive effect of up to three months can be allowed. In that case, the start does not have to coincide with the beginning of the financial year. However, the BV must be established within nine months of the start of that pre-trial period and the contribution must also take place within that period.

In the case of a silent contribution, a preliminary period of up to nine months can be allowed. On the contrary, the start must be in line with the beginning of the financial year. Here, too, the BV and the contribution must be realized within fifteen months of the start of that period.

There is something else to add. A preliminary period is not accepted if it only aims at an occasional tax benefit. Also, no business facilities may be used in income tax during that period.

For startups and scale-ups, this is a classic example of something that seems simple on paper but quickly goes wrong in execution. Those who work retroactively must ensure that the file, the timing and the chosen facilities are tightly linked.

What about profit, employment remuneration and depreciation in the meantime?

The fact that the company can already be operated at the expense of the BV in the preliminary period does not mean that the BV is already an existing tax subject in that phase. That is why the profit from the pre-period and any pre-pre-period are only included in the first financial year of the BV.

The founder's employment remuneration also deserves attention. Over the preliminary period, employment remuneration for the founder is tax deductible from the profit attributable to the BV. With the founder, this remuneration is taxed as a result of other activities.

There are several views on the exact interpretation of the founder's position in the preliminary period, including the question to what extent the fictitious wage scheme and the posting scheme already play a role. In practice, it is particularly important that you should not treat this phase as a fiscal no-man's land. Remuneration and property relationships can also have tax consequences before formal incorporation.

Depreciation of assets in the pre-period or pre-term is possible. In addition, the difference is whether the input takes place silently or silently. In the event of a recurring contribution, depreciation is based on the economic value of the contributed assets. If you contribute silently, you will simply continue on the transferred tax book values.

For companies that have already built up valuable assets, that difference can affect profit determination after conversion.

When is the strike profit taxed in the event of a costly contribution?

In the event of a substantial contribution, not only the amount of the strike profit is relevant, but also the year in which that profit is recognised. The entrepreneur can attribute that strike profit to the year in which the preliminary period or pre-period begins. You can also choose to account for the strike profit in the year in which the BV is established and the contribution actually takes place.

This choice makes no difference when it comes to the basis of profit. Indeed, the size of the strike profit is determined by the situation at the start of the pre-period or pre-period. The timing can therefore influence the placement over time, but not on the underlying valuation of what is contributed.

This is relevant for founders because a conversion often mainly looks at the legal completion, while the fiscal valuation question is already fixed.

Silent input has conditions that can make or break your structure

Silent input sounds appealing, but only works within a fairly strict framework. A few points stand out.

First of all, in the event of a silent contribution, the company's own funds should be converted into share capital as much as possible. Limited current account crediting is allowed, but that space is limited. In addition to the materially due income tax and contributions at the transitional period, only a limited rounding credit is allowed, namely 5% of the capital paid up to the shares with a maximum of €25,000.

In addition, the purchase price of the substantial interest is not freely entered, but calculated according to a fixed tax system. This includes fiscal book values, certain exempt positive and negative benefits, reserves, stipulated annuities and permitted crediting. The inspector will then determine the purchase price by decision.

In addition, the application of the silent contribution facility should be actively requested, with submission of the required information. The inspector decides on this by objectable decision, including the applicable conditions.

For startups and scale-ups, this means that a silent conversion is not only a substantive tax choice, but also a process choice. Without the right formalities, without the right time and without a correct recording, you run the risk that the chosen route will not work out as intended.

Special situations: where extra alertness is needed

Contribution from a partnership

In principle, partners can choose individually whether to contribute silently or silently in a partnership. In theory, this can therefore vary from partner to partner.

In practice, a more uniform approach is often chosen, precisely to avoid implementation problems. One joint BV can be set up to contribute the entire company's assets, but it is also possible to work with a personal BV per partner. In the latter case, the BVs can then continue the business together.

In the event of a silent conversion, it is therefore important that the partner's eligibility to the business assets remains almost the same.

Multiple companies or an existing BV

In the system of the law, the silent contribution facility is linked to the subjective company. However, it is conditionally approved that several subjective companies are silently inserted into one BV.

Despite the legal premise of a newly established BV, input into an existing BV is also possible under certain conditions. This may be important for companies that are already working on a holding or operating company structure.

A rented company

The rented company is a nuance-sensitive file. In certain cases, silent input remains possible, especially when the co-eligibility builds directly on the previous position as an entrepreneur. At the same time, the standard terms and conditions show reluctance to contribute silently from a rented company.

This makes this a topic where the actual layout and the chosen route weigh heavily.

Resell or liquidate quickly after the contribution

After silent input, the BV does not necessarily have to continue the company for a fixed minimum period. But the contribution should not form part of a set of legal acts aimed at transferring or liquidating the company.

A rapid sale of the entire company after the transition period is therefore sensitive. However, selling a part may be possible, as long as what remains in the BV still qualifies as a company. A transfer of the company may also be possible, as long as it does not lead to a strike.

The stock side is extra important. If the shares are sold within three years of the contribution, it is presumed that the contribution was part of an assembly aimed at transferring the company, unless the contrary is made plausible.

For startups, this is particularly relevant when it comes to growth plans, restructuring and proposed transactions. Anyone who links a BV conversion to a rapid exit or transfer must carefully assess that coherence beforehand.

Don't forget the other taxes

A company's contribution to a BV does not only affect income tax.

When transferring real estate located in the Netherlands or limited rights established thereon, transfer tax may come into play. There is an exemption for the contribution of an entire company into a BV, subject to certain conditions. This includes contributions against the distribution of shares, a contribution by an entire company into a newly established NV or BV and a share relationship that is in line with the previous entitlement to the company.

Dividend tax also plays a role. When contributing in kind, the capital paid up for tax is very important, because it helps determine what can in principle be repaid untaxed later and what is seen as a dividend. In the case of silent contributions, the valuation of the contributed company depends on the moment from which the company is operated at the expense and risk of the BV.

In principle, when transferring a company, VAT is not levied when a company is transferred. The BV then replaces the transferor for VAT and takes over the associated rights and obligations, such as current review periods. However, it is important that the BV intends to continue the company and not liquidate it immediately.

What founders should mainly take away from this

Bringing a company into a BV is much more than signing a notary for tax purposes. The real buttons lie in the choice between noisy and silent, in the definition of exactly what is being inserted, in the transition time and in the conditions that apply to the chosen route.

For startups and scale-ups, the core is usually this: if you want to speed up a BV structure, you should not only look at the founding date, but especially at the fiscal architecture behind it. A well-chosen route can prevent immediate settlement, but only if timing, documentation, formalities and follow-up plans are logically linked.

At Startup-Recht, we regularly see that the best outcome is not achieved by converting as quickly as possible, but by first understanding what the company is worth, which components last, which tax claims remain and what the plans are after the contribution. That is exactly where the difference is made between a proper conversion and a structure that raises questions later.

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