The benefits for US citizens of starting your business in the Netherlands

Do you want to start a business in the Netherlands?

Do you consider relocating to the Netherlands to start your own business? And do you want to use the Dutch American Friendship Treaty (DAFT)?

The following points might give you important insights.

30% ruling and your own business

One of the most attractive benefits the Netherlands offers to people relocating from abroad for their work is the so called 30% ruling. This means that you will not pay tax on the first 30% of your gross salary. The maximum duration of the 30% ruling is five years.

The idea behind this is that foreign employees have to make extra costs to reside and work in the Netherlands. Employers on the other hand should be able to hire the best employee for the job.

We have applied for this ruling many times over the last decade. Moreover, we can offer you a fast-track procedure. We gladly perform an eligibility check to determine your specific possibilities and chances.

The form of your own business and the 30% ruling

To come into scope of the Dutch American Friendship Treaty (DAFT), the form of your Dutch business is irrelevant.

However, the 30% ruling mentioned above only applies to employees. If your plan is to be self-employed, this could create an issue, as it is not possible to hire yourself as an employee through a sole proprietorship.

There is a solution to this potential problem.

Incorporation of legal entity

Set up a BV

The advice in most cases will be to incorporate a Besloten Vennootschap (BV) – a private company with limited liability and share capital. After the establishment the BV can hire you. It is no problem that you are the sole shareholder and statutory director.

Set up a sole proprietorship

Yet in other cases it might be more interesting to estabilish a sole proprietorship (‘eenmanszaak’) – a private business with unlimited liability and no share capital. This is especially if you expect a lower income than the 30% requires. The tax regime for such a business is different; it is not taxed with corporate income tax. The profit is instead taxed through the personal income tax.

Practically this means that up to a certain amount of profit, a sole proprietorship will be more tax efficient. Besides this, the administration and service costs for this type of business is usually lower. However, should your income increase you cannot use the 30% ruling anymore.

It is also very well possible to start a business together with other individuals. You can conclude an agreement to form a partnership. This partnership will not be considered a separate entity for income tax purposes (but it is for VAT). All persons can enter into a partnership, both individuals and legal entities.

Set up a partnership

Important to know is that if you conclude such a partnership and operate your business under one name, each partner can be fully liable to any outstanding debts the business may have. How this would actually work, depends on how you legally arrange this. The liability can sometimes be decreased, depending on the specifics of the partnership.

Conclusion

Not only is the threshold low for entering the Netherlands as a US citizen, there are also specific tax benefits that make moving to the Netherlands a very attractive proposition.

Together with our partner Dutchtaxadvice we can help you to set up your own company and assist you with all tax, immigration and relocation matters from start to finish. We strongly recommend to contact us before moving to the Netherlands.

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