New rules for director salaries

If you have your own company in the Netherlands, there are rules about how much you need to pay yourself as a salary.

A director and majority shareholder in a Dutch firm currently needs to pay himself or herself a market wage – which means either 75% of the most comparable job, the highest employee wage in the company or group, or at least €48,000 a year.

But in this year’s spring budget, the Dutch government announced that it wants to tighten up these rules to make company directors take more in salary (and, implicitly, less in dividends).

‘We have a standard income, a regular income that the director shareholder has to pay him or herself, which has to be €48,000 or the salary of the highest employee in their group,’ said a tax adviser from Blue Umbrella.

‘There’s a margin to calculate that it also has to be at least 75% of the total income of someone with a similar job. But they want to raise that, so that it has to be 85%, which means the minimum income will then be raised.’

Company profits that are paid out as income are then liable for personal income tax, rather than more beneficial taxes on dividends, for instance – which is potentially a way for the Dutch government to raise more in taxes.

The proposals are not yet law and will be subject to a government debate. However since the government has been forced to reform taxes on savings and assets (box 3), leaving an expensive hole in tax revenues, experts believe the change will probably go ahead.

‘Most directors have an income in the first bracket and keep their income in the lowest bracket, paying out more in dividends,’ said the Blue Umbrella expert. ‘The capacity to do this will probably be limited in the future.’

To check that you are following the rules, or for personal advice, contact Blue Umbrella.