One of the first things you need to arrange when you start as an entrepreneur in the Netherlands is choosing a legal form. Most starting entrepreneurs choose between a sole proprietorship/sole trader (eenmanszaak in Dutch) or a limited company (bv in Dutch). But what is the best choice?
Choose the right legal form
If you are going to choose between a sole proprietorship and a bv, several factors can influence your decision. Therefore, ask yourself the following questions when deciding on the legal form of your company:
How much profit are you going to make?
If you are going to make a lot of profit, a bv is advantageous. If you are not sure about this yet, a sole proprietorship is the way to go. The exact height of the profit depends on several factors. Roughly speaking, the turning point is at a profit of € 150,000. Do you expect to make more profit? Then, a bv will probably be more beneficial.
Keep in mind that when you are just starting as an entrepreneur, you can use the start-up deduction for a sole proprietorship. In this case, the turning point will be a bit higher. As a starting entrepreneur, it is often more beneficial to start as a sole proprietorship (zzp’er).
How much risk do you dare to take?
If we look beyond the tax advantages of a sole proprietorship with a lower profit and a bv with a higher profit, we quickly arrive at the degree of liability. The difference between a sole proprietorship and BV:
- A sole proprietorship is a legal form without legal personality. This means that you are personally liable for the debts of your company.
- A bv is a legal form with legal personality. The BV is liable for the debts, so not you personally. A BV can be extra attractive in a high-risk industry.
Dutch tax return: sole proprietorship vs. BV
There is a difference in filing tax returns between a sole proprietorship and a bv:
- A sole proprietorship pays income tax on the profit.
- The bv pays corporate tax on the profit and dividend tax (26.9%) on the profit distribution. In addition, the bv must pay a salary to the DGA, on which the DGA pays income tax.
Minimum salary of the DGA at a bv
The director and major shareholder (directeur-grootaandeelhouder, or DGA in Dutch) is someone who works for the bv and has at least 5% of the shares. According to the Dutch tax authorities, the minimum salary of a DGA must be € 47,000. The reason for this is to prevent tax avoidance; without this rule, you can largely pay out your salary in dividends, which is only taxed at 26.9%.
However, there are ways to get out of this rule. As a starting entrepreneur, you often do not have enough room to pay out € 47,000 in wage. No worries! All you have to do is to request a reduction from the Belastingdienst.
From sole-proprietorship to a BV
Do you expect your profit to be around or above the turning point? Then it might be fiscally advantageous to convert your sole proprietorship into a bv. Or is the profit of your bv declining? Then, you can convert it to a sole proprietorship.
Do you doubt whether converting the legal form will be beneficial for your taxes? We are happy to advise you about this. Feel free to contact us using the details below.
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