Netherlands Company and Dividends

[Codio]

Hello!

I have a question. I want to set up a company in the Netherlands and perhaps i would love to move there to live.

I know that the Corporate tax in the Netherlands are:

15% until 245.000€ (395k from 2022)
21% above 200.000€

And that's fine, reason why i want to open the company there. So far so good.

What's NOT fine is the income taxes that are as follows:

36.65% 0 - 20.711€
38.10% 20.711 - 68.507€
51,71% 68,508€ -

Real question:
Since i don't want to pay such a high income taxes (since i want to move to the Netherlands) and since the dividends are taxed at 15%, can i pay myself once a year (or every quarter) with the dividends instead of the salary and pay just 15% to the GOV? Or the dividends are considered "income" and so they go in the "income tax"?

Hope it was clear.
Thanks

 

[Vor]

Hey there I am in NL. Depending how much you are needing to actually pull out as salary I can tell you first hand that your rates wont be as bad as this. I took 50K euro roughly as salary from my business and my total taxes is 6K euros because when you are self employed you get a much larger deduction along with their is SME exemption on a portion of your profit etc. If you shield most your income inside the company and only pull out like a sub 60K euro salary I have found it to be lower taxes than when I lived in the USA. If your employed this is a totally different story and they will smoke you for taxes lol.

My effective income tax rate was about 11%-12% on personal (50K euro salary pulled from corp) long story short and I am not even utilizing all exemptions like pension deduction, which would save me another further amount.

 

[Codio]

Hey there I am in NL. Depending how much you are needing to actually pull out as salary I can tell you first hand that your rates wont be as bad as this. I took 50K euro roughly as salary from my business and my total taxes is 6K euros because when you are self employed you get a much larger deduction along with their is SME exemption on a portion of your profit etc. If you shield most your income inside the company and only pull out like a sub 60K euro salary I have found it to be lower taxes than when I lived in the USA. If your employed this is a totally different story and they will smoke you for taxes lol.

My effective income tax rate was about 11%-12% on personal (50K euro salary pulled from corp) long story short and I am not even utilizing all exemptions like pension deduction, which would save me another further amount.

Hey Vor, this is very helpful, thank you. I didn't speak with any tax advisor so the rates above are from my searches on the internet. Do you know something about dividends? My salary would be 200k up to 1M a year. Currently it's 200k but before pulling out 1M i want to be sure that the half don't go in Taxes.

 

[ImKing]

My effective income tax rate was about 11%-12% on personal (50K euro salary pulled from corp) long story short and I am not even utilizing all exemptions like pension deduction,

that is really not bad compared to many places in Europe it is a very low tax rate you are paying there.

 

[Vor]

that is really not bad compared to many places in Europe it is a very low tax rate you are paying there.

This is largely due to the fact I’m keeping bulk of profits in my business shifted to holding company. Realistically how much does one need to live on in terms of salary? €50,000 is more then enough for me to travel, dine out frequently, buy expensive items, etc. Things like my vehicle are leased business expense, phone bill etc.

SME Profit exemption and the other self employment tax credits is what will save you tons if you keep your salary to that €50K-€100K level. Netherlands is harsher on the employed for taxes by a lot tbh. If you take my salary I took as an employed person you will find your taxes owed to be literally double.

 

[Vor]

Hey Vor, this is very helpful, thank you. I didn't speak with any tax advisor so the rates above are from my searches on the internet. Do you know something about dividends? My salary would be 200k up to 1M a year. Currently it's 200k but before pulling out 1M i want to be sure that the half don't go in Taxes.

Their is 3 tax boxes here. Box 1(income, Box 2(dividends) Box 3(Wealth).

Company dividends would be taxed under box 2 and this is at a lower rate than box 1 income.

Box 1 income would be your salary it would be advisable most likely at the amounts your talking to not take that big a box 1 salary and instead take box 2 dividends from your corp distribution.

Fun to note Box 3 is personal wealth and dividends are NOT subject to taxation since the wealth is taxed at a fictitious rate instead. In years the market does well and you make money this will work to your benefit. In years the market does poorly this will not since you still have the wealth tax liability at whatever your amount is in personal wealth be it lower. Over the exemptions of like €30K individual €60K couples(general range not exact amounts)

If you wanna really get the full Dutch tax haven effect look into the Caribbean territories where their is low corp rates, 0% capitol gains, and lax tax enforcement.

Always speak to an accountant I am NOT an accountant so take my insights with a grain of salt and of course seek professional assistance. I’m giving you view though of someone living in and operating business in Dutch tax system.

 

[Mr Gus]

Its 25% above 245K and 395K in 2022.

You will have to pay out a minimum salary of 47K, if you can't you will have to tell the tax man in advance. If you make 1M in profit and take out 47K the taxman will likely not agree with that and it could be set up to 2/3 of your profits if you don't have any employees working for the company besides yourself.

47K will result in 33% in taxation or something.

So let's say 200K in profits:
47000 in salary taxes at 33% = 31.500
153000 taxed at 15% = 22.950
Let's assume you pay out the remaining as dividends at 26.9% (NOT 15%!) (153.000-22.950 = 130.050)
26.9% of 130050 = 34.983

Leaving you with a total tax bill of 73.433 or around 37% (IC = 15.500 + CIT = 22950 + DIV = 34983)

Also don't forget that you will face exit taxes when you leave the Netherlands, all the money you build up in your Dutch company when you become resident will eventually have to be paid out as dividends at 26.9% even if you leave the country and become resident somewhere else.

If your profits will rise to 1M your will end up paying max 45%, so if you like to pay taxes the Netherlands is one of the most beautiful countries in the world. Also let's not forget the high taxes on fuel and cars, the ridiculous expensive public transport.

The only thing the Netherlands might be good for is the wealth tax, especially if you make crazy returns.

 

[Vor]

Its 25% above 245K and 395K in 2022.

You will have to pay out a minimum salary of 47K, if you can't you will have to tell the tax man in advance. If you make 1M in profit and take out 47K the taxman will likely not agree with that and it could be set up to 2/3 of your profits if you don't have any employees working for the company besides yourself.

47K will result in 33% in taxation or something.

So let's say 200K in profits:
47000 in salary taxes at 33% = 31.500
153000 taxed at 15% = 22.950
Let's assume you pay out the remaining as dividends at 26.9% (NOT 15%!) (153.000-22.950 = 130.050)
26.9% of 130050 = 34.983

Leaving you with a total tax bill of 73.433 or around 37% (IC = 15.500 + CIT = 22950 + DIV = 34983)

Also don't forget that you will face exit taxes when you leave the Netherlands, all the money you build up in your Dutch company when you become resident will eventually have to be paid out as dividends at 26.9% even if you leave the country and become resident somewhere else.

If your profits will rise to 1M your will end up paying max 45%, so if you like to pay taxes the Netherlands is one of the most beautiful countries in the world. Also let's not forget the high taxes on fuel and cars, the ridiculous expensive public transport.

The only thing the Netherlands might be good for is the wealth tax, especially if you make crazy returns.

The cost of cars here makes me wanna gouge my eyes out Agree with everything wie7se says! 1M+for sure better options elsewhere for lower income/corp tax bill. NL works well for me but I am not making $1M+ also I am close to getting the passport and getting rid of my American one which there is nothing quite worse than the US passport.

 

[Diego Reppas]

Hello!

I have a question. I want to set up a company in the Netherlands and perhaps i would love to move there to live.

I know that the Corporate tax in the Netherlands are:

15% until 245.000€ (395k from 2022)
21% above 200.000€

And that's fine, reason why i want to open the company there. So far so good.

What's NOT fine is the income taxes that are as follows:

36.65% 0 - 20.711€
38.10% 20.711 - 68.507€
51,71% 68,508€ -

Real question:
Since i don't want to pay such a high income taxes (since i want to move to the Netherlands) and since the dividends are taxed at 15%, can i pay myself once a year (or every quarter) with the dividends instead of the salary and pay just 15% to the GOV? Or the dividends are considered "income" and so they go in the "income tax"?

Hope it was clear.
Thanks

Bro just make a holding bv - bv structure and shift dividends from opco to holding BV. This is tax free. Then once the money is in the holding just loan in to yourself (shareholder loan). This is untaxed up to an amount of 500k. You will be paying income tax on 47k salary which is mandatory and Dutch corporate income tax - but this way you do skip on the income tax from receiving dividends

 

[Mr Gus]

Bro just make a holding bv - bv structure and shift dividends from opco to holding BV. This is tax free. Then once the money is in the holding just loan in to yourself (shareholder loan). This is untaxed up to an amount of 500k. You will be paying income tax on 47k salary which is mandatory and Dutch corporate income tax - but this way you do skip on the income tax from receiving dividends

You can't just loan the money to yourself, the interest rate has to be competitive, so you can't lend yourself the 500K with zero interest and with no collateral. Lending out the money to invest in to crypto or even stocks means you will have to set a quite high interest rate, because no 3rd party is going to lend you 500K to invest into stocks with low interest.

 

[Diego Reppas]

You can't just loan the money to yourself, the interest rate has to be competitive, so you can't lend yourself the 500K with zero interest and with no collateral. Lending out the money to invest in to crypto or even stocks means you will have to set a quite high interest rate, because no 3rd party is going to lend you 500K to invest into stocks with low interest.

True, the interest rate has to be market rate. Should have added that.

 

[Mr Gus]

The only way of lowering your tax bill a bit is buying a very expensive home with a huge mortgage on it. You can deduct the mortgage interest from your PIT.

Let's say 1 million euro home with 1 million euro mortgage against 2%, means you can deduct 20.000 - 5000 (EWF) = 15.000 from your PIT.

 

[Diego Reppas]

The only way of lowering your tax bill a bit is buying a very expensive home with a huge mortgage on it. You can deduct the mortgage interest from your PIT.

Let's say 1 million euro home with 1 million euro mortgage against 2%, means you can deduct 20.000 - 5000 (EWF) = 15.000 from your PIT.

Or you can try and make sure that you don't earn and personal income besides the 47k minimum director salary (or you can live outside of the Netherlands, but in a treaty country which would trigger a tax treaty override, negating the minimum director salary as well).


In fact, in my opinion money should stay in BVs as much as possible as you don't pay wealth tax this way (assuming you remain in the Netherlands) .

 

[mikestachurski]

Its 25% above 245K and 395K in 2022.

You will have to pay out a minimum salary of 47K, if you can't you will have to tell the tax man in advance. If you make 1M in profit and take out 47K the taxman will likely not agree with that and it could be set up to 2/3 of your profits if you don't have any employees working for the company besides yourself.

47K will result in 33% in taxation or something.

So let's say 200K in profits:
47000 in salary taxes at 33% = 31.500
153000 taxed at 15% = 22.950
Let's assume you pay out the remaining as dividends at 26.9% (NOT 15%!) (153.000-22.950 = 130.050)
26.9% of 130050 = 34.983

Leaving you with a total tax bill of 73.433 or around 37% (IC = 15.500 + CIT = 22950 + DIV = 34983)

Also don't forget that you will face exit taxes when you leave the Netherlands, all the money you build up in your Dutch company when you become resident will eventually have to be paid out as dividends at 26.9% even if you leave the country and become resident somewhere else.

If your profits will rise to 1M your will end up paying max 45%, so if you like to pay taxes the Netherlands is one of the most beautiful countries in the world. Also let's not forget the high taxes on fuel and cars, the ridiculous expensive public transport.

The only thing the Netherlands might be good for is the wealth tax, especially if you make crazy returns.

Why wealth tax in NL is a good thing if you make crazy returns? Due to the fact that there is no capital tax gains on it and you pay effective rate of 1.75% wealth tax (every year!)?

 

[mikestachurski]

You can't just loan the money to yourself, the interest rate has to be competitive, so you can't lend yourself the 500K with zero interest and with no collateral. Lending out the money to invest in to crypto or even stocks means you will have to set a quite high interest rate, because no 3rd party is going to lend you 500K to invest into stocks with low interest.

So lending out money to yourself is not possible in NL right? Funny it is possible in many other EU countries e.g. Poland, Estonia etc. where if you have a lot of cash in company you can lend it to yourself and set the T&Cs of the loan e.g. 50 years at 0.5% interest rate but from what you are saying it is not possible in NL.

 

[Mr Gus]

Why wealth tax in NL is a good thing if you make crazy returns? Due to the fact that there is no capital tax gains on it and you pay effective rate of 1.75% wealth tax (every year!)?

Yeah for that reason, however it could also turn against you when you make negative returns. It's not 1.75% more like 1.25% if you have 1 million, 0.95% for 500K and 0% for 100K. It's a progressive wealth tax. You might reach 1.75% when you get over 10M.

 

[Mr Gus]

So lending out money to yourself is not possible in NL right? Funny it is possible in many other EU countries e.g. Poland, Estonia etc. where if you have a lot of cash in company you can lend it to yourself and set the T&Cs of the loan e.g. 50 years at 0.5% interest rate but from what you are saying it is not possible in NL.

Realistically that is not possible no. If you lend yourself the money for a house you can set a much lower interest rate because you have collateral and you can find a 3rd party very easily that can lend you that money under the same terms.

But lending yourself 1M against 0.5% to put it into BTC or stocks will probably not hold up for the Dutch tax authorities haha

 

[mikestachurski]

Yeah for that reason, however it could also turn against you when you make negative returns. It's not 1.75% more like 1.25% if you have 1 million, 0.95% for 500K and 0% for 100K. It's a progressive wealth tax. You might reach 1.75% when you get over 10M.

The only challange is that if you have e.g €2m in BTC and pay 'let's say 1.5% wealth tax on it' you will need €30k to cover this tax bill. If you don't have cash flow to cover it you will have to sell your assets (BTC in this case) to cover the tax bill.

It is different if you would have e.g. €2m of dividend paying stocks and dividend you would receive would be let's say 5% €2m*5%*15% (Dividend tax) = €85k in your pocket and than you pay €30k to the tax man (wealth tax) and you are €55k better off.

Or do I miss something?

 

[mikestachurski]

Realistically that is not possible no. If you lend yourself the money for a house you can set a much lower interest rate because you have collateral and you can find a 3rd party very easily that can lend you that money under the same terms.

But lending yourself 1M against 0.5% to put it into BTC or stocks will probably not hold up for the Dutch tax authorities haha

I agree Dutch Tax man is experienced in those kind of things vs. Poland or Estonian Tax man

So for asset like BTC (if you have decent amount) you would rather hold it as private person not in BV - that would be your advice? (of course not financial advice bla bla bla)

 

[Mr Gus]

The only challange is that if you have e.g €2m in BTC and pay 'let's say 1.5% wealth tax on it' you will need €30k to cover this tax bill. If you don't have cash flow to cover it you will have to sell your assets (BTC in this case) to cover the tax bill.

It is different if you would have e.g. €2m of dividend paying stocks and dividend you would receive would be let's say 5% €2m*5%*15% (Dividend tax) = €85k in your pocket and than you pay €30k to the tax man (wealth tax) and you are €55k better off.

Or do I miss something?

If you have 2 million in dividend stocks (assuming US stocks) it would look like this:
5% of 2M is 100.000
Dividend withholding tax is 15% leaving you with 850000
Box 3 tax would be 30.492 over 2M, however you can deduct the 15% withholding tax, so you will be left with the same 30.492 in tax leaving you with 70K after tax.

Btw you can also get returns on your BTC/WBTC with DEFI (Aave, Pancakeswap) and CEFI (BlockFI, Celcius) however it involves a a lot more risk then just hodling.