As is known, a loan from the director / major shareholder to his own BV must be business at the outset. The Supreme Court recently issued an important ruling on a loan that becomes unworkable during the ride.
What is going on?
Mrs. X granted loans to her husband’s BV in 1998 and 2000. A transport company is operated in this BV. The loans were due with a three-month notice period. The BV has used the loans for the purchase of means of transport. The interest on the loans is credited to the principal. In August 2005, the BV established a lien on the means of transport as security for the repayment of the loans.
In September 2005, the BV dismissed the staff. The BV has sold the means of transport to an affiliated company. Mrs. X reduced the loans to zero in 2005.
Court ruling in Arnhem
Court of Arnhem (LJN: BW7233) has refused to deduct the impairment loss because it is an undesirable debtor risk. The Court has left open the question whether the loans at the time of taking out were not effective. According to the Court, the loans have in any case become non-operational during the term due to insufficient action by Mrs X at the time when a third party would have acted.
According to the Court, X did not act, or at least insufficiently, after she knew that the BV suffered significant losses. For example, X has:
- the loans were not claimed when full repayment was still possible;
- allowed the interest to be credited; and
- no use was made of the lien at the time the means of transport were sold to an affiliated BV.
Supreme Court ruling
The Supreme Court recently overturned the ruling of the Court.
For not taking into account a debtor loss on a loan that was business when it was contracted, the inspector must prove:
- at what time a business acting third party in similar circumstances would have taken what measure to safeguard his rights; and
- to what extent it would have succeeded.
If this analysis implies that and to what extent a third loss would have suffered, the loss suffered by Mrs X is deductible to that extent. Another Court must now assess this.
Tip. As soon as it appears that the BV cannot meet its obligations, it is advisable to claim the loan. Otherwise you run the risk that the impairment loss is not deductible. Fortunately, the burden of proof lies with the inspector.