Running a business is a thrilling experience. But at the end of the day, you need to earn your keep as well. There are essentially two ways in which you can extract money from a Dutch BV to your private bank account : by way of salary payment or by dividend payment. Dividend payments are taxed more favorably than salary payments. You would be forgiven for thinking: “I’ll skip the salary payments and instead only pay dividends to myself.” If this seems a bit unfair towards ‘normal’ working people, well, that’s because it is. That’s why there’s a rule that prevents this from happening.
When you hold a substantial share interest (> 5%) in a BV of which you are also a managing director, you’re referred to as a ‘director and major shareholder’ (DMS, in Dutch: DGA ) by the Dutch Tax Authorities (Belastingdienst). If you fall under this definition (as almost any business owner will) Dutch tax rules state that you first have to pay yourself a minimum salary of €45.000 before you can start paying out dividends to yourself. This way, the income tax burden is shared more equally between entrepreneurs and normal employees.
This begs the question: what if you don’t expect to earn that much money to begin with? The short answer: you don't need to worry about this. You cannot pay yourself what you don’t have. And now for the longer answer…
As explained, the Dutch Belastingdienst wanted to prevent tax inequality. Of course they didn’t want to miss out on the higher income tax rate, too. By just saying that an amount of money was dividend instead of salary, a DMS could in theory get around his income tax bill. With this in mind, the Belastingdienst came up with the ‘customary salary scheme’ (gebruikelijkloonregeling). As it is hard to establish different customary salaries for each individual case, one fixed amount was chosen as a “rule of fist”. This amount is set at €45.000. However, if the Belastingdienst is made to understand that you’re not able to pay yourself a salary of €45.000 - or any amount for that matter - you will not be held to this rule.
How to bypass the DMS salary
There are two options to ensure that you don’t have to pay yourself the € 45.000 salary when your company is not in a financial position to do so:
This is the easiest option. Your BV opts for a withholding agent status and submits a “zero return” for payroll taxes every month. At the end of the calendar year you check whether you have the financial leeway to pay a small amount of salary, and you pay tax over this amount. For example, imagine that you have € 40.000 on your BV’s bank account in mid December. You reserve an amount of € 20.000 for building a new website. The rest can be paid out as salary. This does not reach the rule-of-fist amount, but is totally acceptable to the Belastingdienst. We regularly arrange this for our customers.
For example, imagine that you have € 40.000 on your BV’s bank account in mid December. You reserve an amount of € 20.000 for building a new website. The rest can be paid out as salary. This does not reach the rule-of-fist amount, but is totally acceptable to the Belastingdienst. We regularly arrange this for our customers.
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You can also send a request to the Belastingdienst, containing a prognosis of the first period of the year which shows that there is not enough cash flow to meet the minimum DGA salary. The Belastingdienst hardly approves this anymore and states that a minimum salary must always be paid. This is why we don’t advise this option anymore.
What NOT to do!
Do not pay yourself dividends before you pay yourself the salary of €45.000. The Belastingdienst is very strict about these practices and will definitely take action when they notice.
Don’t let your BV lend you (as a DMS) a significant amount of money. The Belastingdienst believes that doing so implies there is also enough cash flow to pay the DMS salary.
It’s not that hard to get past the mandatory DMS salary, as long as you have an explanation which you can substantiate with facts and data. Still in doubt or in need of any advice? Please don’t hesitate to fill out our contact form or give us a call at 020-3080675. Good advice is just one click or a phone call away.