The Dutch tax authorities state that a managing director shareholder (DGA) must be paid a salary of at least € 45.000. This is not obligated! The Dutch tax authorities introduced this minimum salary requirement so that a Dutch B.V. can’t pay dividends to its DGA before at least € 45.000 of salary is paid to him, the Dutch B.V. can pay dividends to others.
In The Netherlands dividends are taxed less than salary. Without this threshold no salary would be paid and all free liquid assets would be distributed as a dividend to the DGA.
The myth of € 45.000
As we have mentioned above it is not obligated to pay the DGA a salary of € 45.000 or more.
This means that a starting entrepreneur who doesn't have the liquid assets to pay a salary of € 45.000 doesn't have to. A Dutch startup often needs all its liquid assets to expand their business. No minimum is set for the salary that needs to be paid to the DGA. The amount that has to be paid to the DGA will differ from company to company.
Do’s and Don’ts
Do's
When your company needs its liquidity to grow you can:
When the Dutch B.V. is founded the B.V. has to be registered as a so called withholding company. The Dutch B.V. now has to file withholding returns with the Dutch tax authorities. The B.V. files monthly nil returns and checks at the end of the financial year whether enough liquid assets are available to pay a salary to the DGA. For example: The Dutch B.V. has filed 11 nil returns. In December the liquid assets of the B.V. are € 35.000. A part of this € 35.000 can be saved as working capital and the other part can be paid as salary to its DGA.
A request can be sent to the Dutch tax authorities in which is explained that the company won't have sufficient funds to pay € 45.000 to its DGA. In this request a lower salary has to be proposed.
Don’ts
When your company needs its liquidity to grow you can’t:
As we mentioned above the € 45.000 is a threshold to avoid all liquid assets are distributed as dividend. So don’t distribute dividend to the DGA before at least € 45.000 is paid as salary.
Don’t build up a significant current account with the Dutch B.V, this implies there are enough liquid assets in the Dutch B.V. The Dutch tax authorities will regard the amount of the current account as salary, on which taxes are due.
Social securities
In essence every Dutch resident is subject to social insurance contributions in The Netherlands. The social insurances of The Netherlands include:
The General Old Age Act;
The General Widows/Widower and Orphans Act
The Act on long-term care
In The Netherlands a DGA usually doesn’t have to pay social securities because there is no relationship of authority between the DGA and the Dutch B.V. Meaning that the DGA of a Dutch B.V. can't be fired by the company.
Conclusion
The minimum DGA salary is a threshold, it differs from company to company what has to be paid. No dividend can be distributed before at least € 45.000 is paid as salary to the DGA.
We can help with the negotiations with the Dutch tax authorities, the employment contract and all other necessary contracts regarding these issues (for example management contracts and current account contracts). Get in touch with one of our experts for more information.
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