For directors and major shareholders (DGA - directeur-grootaandeelhouder) of private limited companies (BVs) in the Netherlands, there are specific rules around the minimum salary that must be paid to the DGA. This salary is referred to as the customary salary (gebruikelijk loon), and it’s subject to regular adjustments by the Dutch government.

What is a Dividend?

A dividend is a portion of the company’s profits distributed to shareholders. As a DGA, you can pay yourself a dividend after the company has made a profit, but there are specific rules and tax implications you must follow.

Conditions for Dividend Payments:

• Profit Requirement: Dividends can only be paid from the company’s retained earnings. This means your company must be profitable and have sufficient reserves to distribute profits.
• Solvency Test: Before paying dividends, your company must pass a solvency test. This ensures that after the dividend payment, your company will still be financially healthy and able to meet its obligations.
• Approval by Shareholders: The decision to distribute dividends must be approved by the shareholders, usually formalized in the annual general meeting.

Taxes on Dividends:

• Dividend Tax: Dividends are subject to a 15% withholding tax, which the company must pay to the tax authorities when dividends are distributed.
• Income Tax on Dividends: As a DGA, dividends received are also taxed in box 2 of the Dutch tax system, at a rate of 26.9% on the income from substantial shareholdings. The 15% withholding tax is deducted from this, and the remaining tax must be paid via your personal income tax return.

For example, if you receive a €10,000 dividend, the company withholds €1,500 in dividend tax, and you are liable for an additional €1,190 in income tax (after the 15% withholding tax).

DGA Salary (Gebruikelijk Loon)

Another way to take money out of your business is by paying yourself a salary. The customary salary rule requires you to pay yourself a salary that meets specific criteria, which is taxed as regular income under box 1.

Pros of DGA Salary:

• Regular income.
• Can optimize personal and company tax planning.

Cons of DGA Salary:

• Subject to income tax and social security contributions, making it less tax-efficient compared to dividends.

Loan from the Company

You can also take money out of your company as a loan, but this option comes with strict rules:

• The loan must be a genuine business loan with a clear repayment plan, interest rate, and terms.
• The loan cannot be used to avoid taxes, and excessive loans without repayment may attract penalties or reclassification as hidden dividends.

Pension Contributions

As a DGA, you can set up a pension within your company and make contributions toward your retirement. This can be a tax-efficient way to withdraw profits for future use, though the money must remain in the pension fund until retirement.

Conclusion

Withdrawing money from your business as a DGA can be done in several ways, each with its own tax implications and legal requirements. Dividends offer a tax-efficient method, but they require careful planning and adherence to regulations. At Cash Vision, we recommend working with a tax advisor to determine the best strategy for taking money out of your business while maximizing tax efficiency and ensuring compliance.