How to become a sole trader in the Netherlands and pay 18,51% on an $200,000 AUD income

Oct 16, 2023

A lot of Australians are looking for ways to migrate to Europe, and work from there as a sole trader. Living the life as a so-called “digital nomad” means you can work from Europe and keep on serving your existing clients from a different time-zone. The only thing that changes is the weather in the background of your zoomcalls. When comparing possible destinations in Europe, there are two major things to consider: the tax implications and the visa requirements. The Netherlands is one of the top destinations for Australian digital nomads, and in this article we will be zooming in on the situation “up there”.

Why the Netherlands?

Why would you want to move to the Netherlands? Apart from the weather, the Netherlands is one of the most attractive places to live in Europe. The cultural highlights are all well known, but what you’re really looking for is a place that offers a comfortable lifestyle and attractive, stable financial circumstances. We will list them shortly below (the list is by no means exhaustive):Short distances mean you will not be wasting your time with travelling to and fro. A one-hour commute is very long by Dutch standards;The Netherlands has a huge economy as compared to its size : it ranks as 7th biggest export country in the world. This brings loads of opportunities for business;Everybody speaks English in the Netherlands;Private health doctors are free and most medicine costs are covered;The Netherlands is a gateway to Europe, with a world class airport and infrastructure;The Netherlands gives direct access to the EU VAT network, if you plan on doing business within Europe;The Netherlands scores No.1 in the area of children’s well-being, according to a survey by international children’s rights organization UNICEF. (Report Card 16);In the Netherlands it’s easier to loan for the purchase of a primary residence, up to 100% of the property value (as opposed to 80% in Australia);The Netherlands has a mortgage interest rate deduction scheme. You can deduct the interest rate on the mortgage for your primary residence from your taxable income. This means buying a house is affordable and attractive. The 30% ruling (explained below) means Dutch taxation is very light on an Australian expat’s wallet, and it offers a tax exemption on assets left back home (see explanation below).Double taxation treaty with Australia means any tax structuring with a company back home will never yield double taxes.

Figure 1 : A short comparison between the Netherlands and Australia

Work and residence permit

So when you’ve finally made up your mind that you want to live and work in the Netherlands, you are going to need a valid work and residence permit (together called a “visa”). It’s important to note that the Netherlands has a very strict admission policy when it comes to incoming non-EU passport holders. But the Australians are in a lucky position. Normally non-EU passport holders are required to obtain a Temporary Residence Permit (in Dutch: MVV) as part of their migration into the Netherlands. They need to await the verdict on their MVV before they can migrate here. This can easily take 3 months.  Australians are among the very few nationalities that are exempt from this requirement. This means that they don’t need to get an MVV, and can simply await the verdict on their visa in the Netherlands. Australians are able to pick up a so-called “residence endorsement sticker” within 2-3 weeks after arriving in the Netherlands, which gives them full labour and residence rights straight off the bat. The period in between can be spent under the regular 90-day Schengen tourist visa.

Now let’s take a look at the actual visa options (the MVV above is just a preliminary hurdle). First off: there’s no such thing as a “Digital Nomad Visa” for the Netherlands. But there are still a number of good options available for Australian immigrants to the Netherlands. The Netherlands is of course part of the EU, which means it allows for visa-free relocation and labour rights for other EU passport holders. At first sight this does not benefit Australian passport holders, but there are a number of possible avenues left to approach this:
(1) Having a secondary EU passport
Australia is a nation of immigrants, so a lot of Aussies have a secondary passport inherited from their parents. If such a passport is a European passport, you will have a very easy way into the Netherlands. It may also be possible you don’t have such a passport but you are in fact eligible for it, in which case it’s very worthwhile to contact the Embassy of that country in Australia and find out about the ways in which to obtain this passport. EU passport holders can register at their new municipality in the Netherlands as a “Citizen of the Union” and that’s it. You are then able to work and reside in the Netherlands indefinitely.

(2) Having a partner with a secondary EU passport.
Maybe you are not the lucky holder of (a right to) an EU-passport, but your Australian partner or spouse is. If you are in such a position, your partner or spouse can follow the course as set out above under (1). You as a partner or spouse can then follow that EU-passport holder to the Netherlands under a procedure called Verification against EU-law. You will then be required to submit a document proving your pre-existing relationship. A marriage certificate of course seals the deal here, but being married is not a requirement at all. Being registered at the same address in Australia for 6 months is proof enough of a durable relationship. With a Verification against EU-Law procedure, you will become able to work and reside in the Netherlands indefinitely. (3) Having a partner with a valid visa
The Netherlands has 2 main visa options for non-EU residents to become employed at a Dutch company in regular employment (not self-employment). These are the Highly Skilled Migrant Visa and the EU Blue Card. If your spouse or partner obtains such a visa as part of their prospective employment at a Dutch company, you as their partner or spouse get a free ride with it: a full residence and working permit, which includes the right to work self employed in the Netherlands. As the partner of such a valid visa holder, you will become able to work and reside in the Netherlands for a period equal to the period granted to your partner under their visa.

(4) The Regular Self Employed visaIf all else fails, you still have the option of last resort called the Self Employed Visa. This one is the toughest to get, because you need to provide a lot of documentation substantiating your prospective business in the Netherlands. This includes a business plan, website, investments, contracts, anything that proves your contribution to the Dutch economy. It is not impossible to obtain however, so if you feel like giving it a shot just reach out to us.

NOT an option: The Startup Visa

This is the one option that sounds like your friend here, but in fact you should never go for. If you think the regular Self Employed Visa is hard to get, imagine that one plus having to convince a recognized “facilitator” of your business idea before you can even get going. To add insult to injury, the startup visa needs to be renewed every year. Forget about this one folks.In another article we explain 7 visa options for non-EU business owners in the Netherlands.
Setting up your sole tradership in the Netherlands
Now that you have your visa situation sorted, let’s take a look at setting up your sole tradership in the Netherlands in an efficient manner. The Netherlands basically has 2 company types you can choose from as a sole trader: the ZZP/eenmanszaak and the BV. You can find a lot of information about the comparison between these two company forms. But as an incoming digital nomad, your first order of business is not the company form itself but checking whether you are able to obtain the much vaunted 30% ruling.  Originally intended for attracting highly skilled (and highly paid) employees, it is now extensively used by incoming sole traders as well. The 30% ruling gives you a 30% tax break on your income, and a lot of other nice benefits. The main requirements are:

(1) You must earn at least € 41,953 per year (a lower threshold applies to under-30s). It is advisable to have a salary of at least € 60,000 per year;
(2) You must work from a Dutch BV and be hired from abroad as its director;
(3) You may not have lived within 150 km of the Dutch border for more than eight months out of the last 24 months prior to the start of self-employment in the Netherlands.

So if you want to go for the 30% ruling, you are required to work from a BV. So what it’s really about is choosing between the ZZP/eenmanszaak or the BV+30%. And that one boils down to the question: are you able to earn at least $100,000 AUD per year (per person) in the Netherlands? That solves the question of choosing between company forms for you then. Setting up your sole tradership tax efficiently
If you are moving to the Netherlands and expecting to earn $100,000 AUD (about € 60,000) per year, the choice for the BV+30% is an obvious one. Let’s take a look at what you would be paying in taxes with €60,000 per year in earnings in a BV+30% ruling:

Figure 2 : BV+30% tax treatment of € 60,000 in salary

That’s € 48,894 net over € 60,000, which makes for an effective tax rate of 18,51%. As the income increases, the taxation increases as well of course. This is because a higher proportion of the income starts to fall into the highest tax bracket (49% on income above € 73.032, 36,93% on income below (2023)). Below you will find an example of how € 120,000 ($200,000 AUD) is taxed as income:

Figure 3 : BV+30% tax treatment of € 120,000 in salary

That makes for 28,31% in taxes over the total income. This is quite a low taxation by any standard, but still a way off the 18,51% mark. But bear in mind this is the taxation over one income, of which a sizable portion falls into the highest tax bracket. That’s why a lot of digital nomad spouses and partners choose to work together from one BV and then split the profits earned between them. This way you can split one € 120,000 ($200,000 AUD) sole tradership profit into two € 60,000 ($100,000 AUD) incomes, meaning the two incomes will both separately not fall into the highest tax bracket and be twice treated in accordance with figure 1 above, instead of once in accordance with figure 2. Voilà : 18,51% on your $200,000 AUD income in the Netherlands.

As if that’s not enough, the BV+30% ruling gives you many other benefits:Partial non-resident tax status for Dutch Box 2 and Box 3 taxation. This means that any foreign savings, stocks, crypto, real estate and other assets are kept out of your Dutch income tax returns. Relocation cost expensing in your Dutch BV. As a prospective employee of your new Dutch BV, you need to be relocated to the Netherlands. These relocation costs there are necessary for the business. You can therefore pay them out of the company’s revenues and deduct them there, instead of out of your private pocket. The costs covered here include: the costs for relocating your household goods, plane tickets for yourself and your direct family members. Additional generic relocation cost expensing of € 7,750. That’s right, on top of the actual relocation costs you can expense an additional € 7,750 as “generic relocation expenses” in your Dutch BV company (2023). If you bring children along with you, you can expense the expat schooling costs for each child as a business expense in the Dutch BV. Just make sure the school is an international or expat school, not a regular school.Free driver’s licence swap. Holders of the 30% ruling are also allowed to swap their foreign driver’s licence for a Dutch driver’s licence. You need to wait until the final verdict of your 30% ruling though. Just make an appointment at your Dutch “gemeente”,  present your 30% ruling and your foreign driver’s licence, and all will be arranged. Limitation of liability. Oft overlooked, but working as a sole trader can in some cases lead to damages and liabilities. For example when you are doing consulting work and your advice was a bit off the mark. Any damages resulting from your work stop at the Dutch BV’s doorstep, because it has limitation of liability. That means you can never be held liable in private, so you keep your personal assets safe. Below you will find all benefits of the BV+30% when compared to the ZZP/Eenmanszaak.

Figure 4: BV+30% benefits

Example: Jonathon and Emily from Melbourne

Jonathon from Melbourne is a consultant who provides hourly consultancy services, primarily to Australian clients. These services can easily be delivered remotely. In November 2021, he and his fiancée Emily visited the Netherlands to explore the feasibility of relocating. Emily had fallen in love with the country during a previous study tour and Jonathon was keen on making this dream a reality for them.

However, upon reviewing the income tax rates, it became apparent that the move could potentially reduce their annual net income. Financially, it just didn’t seem like a good idea. While researching Jonathon came across the BV+30% ruling setup. This made him figure out a strategy to transition to the Netherlands while minimizing their combined tax liability. They were able to apply for the 30% ruling because they set up their BV company and signed the director’s labour agreement with the BV, while still living in Melbourne. This setup allowed them to charge the clients a yearly amount of $200,000 AUD (€ 120,000), with each of them earning €60,000. With the 30% tax ruling applied, they are taxed at a rate of 18.51% on a combined total of €120,000. Back in Australia, Jonathon and Emily both had regular 9-5 jobs with 2 hour commutes, zero flexibility and a 32.33% income tax rate each.

But how to go about obtaining a visa then? Both Jonathon and Emily held Australian passports. But, as it turned out, Emily was eligible for a Slovakian passport through her Slovak heritage. She only needed to come and pick up the passport. This way, Emily was able to register in the Netherlands as a Citizen of the European Union, and take Jonathon with her as her unmarried partner under a Verification against EU-law procedure. As of March 2023 they have been happily settled in Amsterdam, and together working remotely for Jonathon’s BV and clients. If you are looking for a set up similar to Jonathon and Emily, feel free to reach out!

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