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The "silent contribution" (Art. 3.65 Income Tax Act 2001) allows you to convert your sole proprietorship or general partnership into a private limited company (BV) without immediately settling the tax on hidden reserves and goodwill. Condition: you submit a letter of intent to the Tax and Customs Administration before a certain date and meet the continuation requirements. This is practically useful if you have significant goodwill or hidden reserves in your business and do not want to pay income tax immediately. Silent contribution = no tax "noise" at the time of the transition.
The short answer
- What: conversion of sole proprietorship/general partnership to private limited company without tax settlement.
- Legal basis: Article 3.65 of the Income Tax Act 2001.
- Deadline: file letter of intent with the Tax and Customs Administration within 9 months, with retroactive effect to 1 January of the year of contribution.
- Conditions: the BV assumes the tax book values, you remain involved for three years, and you receive shares instead of goodwill cash.
When is silent smart?
Silent contribution pays off especially if:
- You significant goodwill or hidden reserves in your company (low book value, high market value).
- You do not want to pay income tax immediately on those reserves upon conversion.
- You continue the business and do not sell it within three years.
- You want to build up capital in the BV and fully utilize the holding/operating company structure.
With few hidden reserves or if you have a loss from the income tax period, contribution without taxable income may actually be more attractive — see contribution without taxable income.
The three main requirements
- File a letter of intent. Submit a form to the Tax and Customs Administration within 9 months of the desired effective date (often January 1). This is not an “application” but a notification: I am contributing these businesses in accordance with Article 3.65.
- Establishing a BV. Within 15 months of the effective date. Practically speaking, therefore, by the end of the following calendar year.
- Continuation obligation. You remain a shareholder of the BV for at least three years, and the BV continues the business.
For the official rules, see the Income Tax Act 2001 on wetten.overheid.nl.
What do you get in return?
With a silent contribution, you receive shares in the BV instead of cash goodwill. The BV acquires the book values of your sole proprietorship (no step-up), including any tax reserves such as the retirement reserve.
Practical:
- Assets and liabilities are transferred to tax book value.
- The BV “rolls over” your book values — no profit to be settled immediately.
- Upon the future sale of your BV shares, you will still settle the tax in Box 2.
- Strike deduction (max €3,630 in 2024 figures) is often not applicable in the case of a silent transaction.
Step-by-step plan
- Preparation: discuss with your accountant whether a tax-neutral arrangement is more advantageous than a noisy one.
- File a letter of intent with the Tax and Customs Administration before October 1st if you want to revert to January 1st.
- Establishing a BV with a notary (can also be done with a holding-operating company structure).
- Deed of contribution at the notary: the sole proprietorship/general partnership is transferred to the private limited company.
- Accounting treatment: transfer book values, prepare opening balance sheet for the BV.
- Continue for three years: do not sell shares, run the business through the BV.
Pros and cons
Advantages:
- No immediate settlement of hidden reserves and goodwill.
- Cash remains in the company for growth.
- Fits well with entrepreneurs with strong exit prospects.
Disadvantages:
- No “step-up” — upon later sale, you still settle the entire profit.
- Three-year continuation obligation limits flexibility.
- Strike deduction lapses.
Honest recommendation
A silent contribution is the standard route for those who want to convert their sole proprietorship and expand. The deadline of October 1st (for retroactive effect to January 1st) is concrete — do not wait too long. Discuss the choice between a noisy and a silent contribution with an accountant; sometimes a calculation for your specific situation is decisive.
For further details: converting a sole proprietorship to a BV and establishing a BV with retroactive effect.
Frequently Asked Questions
Conversion of a sole proprietorship or general partnership into a private limited company (BV) without immediate settlement of hidden reserves and goodwill. The BV assumes the tax book values. Legal basis: Article 3.65 of the Income Tax Act 2001.
The letter of intent must be received by the Tax and Customs Administration within 9 months of the desired effective date. For retroactive effect to January 1, the practical deadline is October 1 of that same year. The incorporation of the BV itself must take place within 15 months.
The difference between the book value and the actual (market) value of business assets — for example, a depreciated machine that is still worth a lot, or an accumulated customer portfolio (goodwill). With a taxable contribution, they are taxed immediately; with a tax-free transfer, they are carried forward.
In the case of large hidden reserves or goodwill that you do not wish to settle immediately, and if you continue the business with growth or exit prospects. With small or no reserves, or if you have a loss on income tax, tax-neutral settlement may actually be better.
At least three years after the contribution. If you sell sooner, the tax-neutral facility lapses retroactively — you will still be subject to the cessation profit assessment. The three-year continuation obligation is a strict condition.
Yes, a so-called contribution to an existing holding company. The holding company becomes the shareholder of the operating company that continues your sole proprietorship. However, there are additional tax considerations — have an accountant or tax specialist review the matter.
Notary €600 – €1,500 (BV incorporation plus contribution deed). Accountant and tax advice €1,000 – €3,000. Total often between €1,500 and €5,000, depending on complexity. With large hidden reserves, it often pays for itself handsomely.
