FAQs: the minimum director’s salary requirements
What are the minimum director’s salary requirements?
If you hold a substantial share interest (> 5%) in your BV while being a director, you will be considered a shareholding director, or “DGA” in Dutch. Dutch law states that DGAs need to receive a minimum salary for their work as directors. This minimum is the highest of one of the following three:
(A) 100% of the salary earned by an employee working in a comparable job in regular employment. This can be hard to establish but is topical for freelancers working in big organisations alongside regular employees doing similar work.
(B) The salary earned by the most-earning employee in your company.
(C) € 56,000 (2024)
There are some other circumstantial rules, but these are the main ones to stick to at the beginning. Once the company starts to grow and make substantial profits, you will need to adjust your director’s salary upwards. Always stay in close contact with your accountant on what position to take. Don’t have one? Feel free to reach out to our accounting partner via here.
How can I avoid having to pay this minimum director’s salary.
Many starting business founders are in this situation: there is not enough cashflow to pay this salary. In this case you have two options:
1. Request a lower salary level from the Dutch Tax Authorities. You accompany your request with a revenue prognosis of your BV.
2. Perform “zero” salary payment and tax returns each month. If at the end of the year your BV has turned a profit, make a salary payment to the extent this is possible without compromising the BV’s finances. This approach is perfectly acceptable to the Tax Authorities. You cannot pay yourself money the BV doesn’t have and you’re not required to take out a loan to meet the minimum salary requirement. Just don’t try to fool anybody by giving yourself loans or dividend payments instead of performing salary payments.
3. Appoint a holding company as director of your BV. Do remember that in this case the requirement shifts to the holding company.
We recommend going for option 2. But always confer with your accountant first. Don’t have one? Feel free to reach out to our accounting partner via here.
When determining the height of the minimum salary, what salary components are taken into consideration?
The gross salary, any bonuses, holiday allowances, benefit package, pension schemes, and company car all add up to the minimum income requirement.
What's the least a director can earn (DGA wage) in 2024?
For 2024, the DGA has set the lowest salary at €56,000 annually, a significant rise from 2023's €51,000, influenced by 2023's inflation data. What's the rationale behind this specification? Simply put, hefty taxes are imposed on salary (up to 49.50% in 2024), while dividends get a considerably lesser tax rate (up to 31% in 2024). Consequently, business owners prefer to minimize salary payouts and compensate with dividends. However, the Dutch Tax Department finds this method unsatisfactory, therefore, a minimum salary payout is ensured before dividends can be disbursed. Being a self-directed board member with a 30% ruling, I also carry a salary threshold.
How does this relate to my 30% ruling requirements (if you have one)?
The 30% ruling is lower than the DGA's minimum, being around €46,107 per annum in 2024. So, sticking to the director's least salary keeps you within all criteria. Should one possess a 30% ruling, it’s crucial to make enough salary payouts to fulfill this condition, an essential factor to consider while trying to decrease your director's salary requirement.
Provided I remunerate myself €56,000 annually, would this be a fixed fee or will my BV be obliged to cover any additional premiums?
As a general practice, an employer covers the taxes on the disbursed salary. If you are the sole shareholding director of your BV, these premiums are incorporated into your monthly tax payments.
Choosing to waive employment insurance can reduce your monthly premiums, but only when the DGA holds sufficient leverage within the shareholders' meeting to avert their own termination as a statutory director of the company. This could vary as more shareholding directors join the company. Discover more details here.
What is the last thing I should consider related to the DGA salary?
If you haven't met the minimum salary requirement yet, avoid paying dividends to yourself or engaging in large personal loans with your BV, especially without commercial interest.
Furthermore, avoid a large current account deficit with your BV. Does the least salary requirement also apply to an eenmanszaak (single ownership or ZZP)? It does not.
What happens if I appoint a personal holding as director, and not myself?
Does the minimum salary requirement apply to directors who live in another country?
Beware that residence and tax residence are not the same thing. A director residing abroad may be considered Dutch tax resident if his or her permanent residence or whereabouts is in the Netherlands. Check this article for more info.