A warm welcome to Americans wishing to move to The Netherlands

 

As from the start of the Trump administration, we have seen an increase in American citizens  migrating to The Netherlands under a DAFT visa, with DAFT meaning the Dutch American Friendship Treaty. Logically, since the DAFT entry conditions are low, the country fits the various needs and wishes of Americans seeking alternatives, and the tax regime is moderate. In this article, we explain some legal and fiscal aspects of such a move.

 

Entrepreneurship under DAFT

To be eligible for a DAFT visa, one of the conditions is that you start a NL business entity and deposit a € 4,500 minimum capital into this business. Basically, there are 2 tastes for private business entities:

  1. A sole proprietorship (eenmanszaak). This a not a legal entity, but it’s the natural person itself, both from a legal and a fiscal perspective. The profit (income -/- costs) of the eenmanszaak are taxable with Box 1 Dutch personal income tax: the rates are 37% (for annual income up to € 75K) and 49,5% (for annual income above 75K). Certain tax facilities are available, reducing the effective tax rate to e.g. 30% at a € 80K annual business income. Since the eenmanszaak is not a legal person, there is no limited liability: creditors of the eenmanszaak can recover their claims from your private wealth. An eenmanszaak partnership operated by two or more people is called a Vof or firma: the legal and fiscal aspects per partner are identical as in a regular eenmanszaak.
  2. A limited liability company (B.V.). This is a legal entity and you’ll be the shareholder and employee of this B.V. As the name indicates, this business form provides limited liability – in general the liability does not exceed the invested equity. The profit of the BV is taxed with corporate income tax, which runs from 19% (for annual profit up to € 200K) to 25,8% (for annual profit exceeding € 200K). Subsequently, once the profit after tax is distributed to you as a shareholder’s dividend, this is taxed with Box 2 personal income tax at 24,5% (for annual dividend up to € 67,8K or € 135,6K if you have a qualifying partner) to 31% for annual dividend exceeding that first bracket. Your salary qualifies as business costs and will thus lower the taxable profit of the BV. However, the salary in itself (as any salary) is taxable with Box 1 personal income tax. This is where the advantage of the BV manifests itself, as your salary from the BV will be eligible for the so-called 30% ruling: up to 30% of your salary can be paid tax-free. The ruling requires a minimum salary of € 51K gross per year and is capped at a maximum salary of € 245K gross per year; the ruling has a term of 5 years.

With 2 variables – being the level of salary from the BV and the timing of dividend distribution – the tax-based choice between eenmanszaak or BV is not a clear cut line. But we’ll be happy to advise you on the best option for your specific situation, also in situations where you already have a US business (S-corp, C-corp or Inc.) in place. Please note that – when choosing for the BV – the BV needs to be incorporated before you actually move to reside in The Netherlands, since the 30% ruling requires that the employee is recruited from abroad. Incorporation is cheap and fairly straight-forward and can generally be done in a week’s time if all required documents are provided timely and correctly.

NL Box 3 wealth tax

Earlier in this article, I mentioned the Boxes 1 and 2 of the Dutch personal income tax act. Box 3 deals with income from savings and investment and applies to assets held worldwide. Unlike the USA, where you may pay taxes on capital gains, the NL wealth tax is based on the value of your assets as per January 1st of each year (the tax year equals the calendar year) and not their actual income. The effective annual tax burden [2025 figures] is 0,52% on the value of savings and 2,11% on the value of other investments. Actual income is not separately taxed, and there is a threshold of € 57,5K for individuals or € 114K for couples. Certain US pension accounts can under conditions be exempt from Box 3’s taxable base, as can non-Dutch real estate. It’s good to know that a Dutch primary residence bought by you is also not part of Box 3’s taxable base. Until 2025, the 30% ruling had an attractive side-effect as it allowed ruling-holders to qualify as fictitious non-resident and thus be fully exempted from Box 3 taxation at all. This side-effect has unfortunately been abolished, although it remains in place until 2027 for persons who got the 30% ruling before 2024.

 

The current Box 3 system of taxation on value cq deemed income has been qualified as contra legem by the Dutch Supreme Court. As a result, a new law is in the making which will base taxation on actual income from assets. However, it is yet unclear if this new law will include unrealized value increase (e.g. on your stock portfolio or NL investment real estate) in its taxable base, or only realized gains. The new law will not enter into force before 2028: in the meantime, each tax payer may opt for taxation on actual income each individual tax year – but unrealized value increase is part of the actual income in this opting-in choice.

 

Although the IRS continues to tax American citizens living abroad, it is not entitled to tax any and all income. The 1992 Treaty for the avoidance of double taxation between the US and The Netherlands describes per specific income type which country is entitled to tax it and which country should withdraw.

 

At Maguire, a team of accredited lawyers, tax advisors and accountants specializes in hosting internationals – and specifically Americans – who move to The Netherlands. We:

  1. incorporate your NL business entity
  2. handle the employment agreement and 30%-ruling application
  3. manage the business tax & accounting
  4. conduct payroll
  5. compose your personal income tax return
  6. conduct tax treaty analysis and tax allocation
  7. consult with your US advisor

Please feel free to contact us to discuss your options and wishes. We look forward to taking good care of your interests!

Patrice van Oostaijen, founding partner of Maguire

patrice@maguiretl.nl