The Dutch Income Tax Act determines that salary is everything that arises from an employment relationship. This salary is subject to income tax, but there are exceptions to this rule that are specified in the Working Conditions Decree (WKR). As a DGA, you are also an employee of your BV, which means that these tax-free exceptions also apply to you!
The WKR specifies what an employer may provide to their employees without it being subject to taxable income. There are three categories:• Zero valuation: These are items that the employee needs to perform their work, such as work clothes or a laptop. The employer can provide these items tax-free to the employee;• Specific exemptions: These are certain allowances that the employer may provide tax-free to the employee, such as travel expense allowances or meals at work;• Free space: In addition, the employer has the option to provide a certain percentage of the wage costs to their employees tax-free, at their discretion. This can take many forms, such as drinks, Christmas hampers, or even a cash bonus!
As a DGA, the above also applies to you! Based on the free space in the WKR, an employer may provide their employees with 3% of the wage costs tax-free. This is limited to €400,000. Above this amount, the percentage decreases to 1.18%. If you exceed this amount, you will be subject to a final levy of 80%.This means that if you earn €70,000 as a DGA, you may pay yourself a tax-free bonus of €2,100! This is very interesting.However, this freedom is limited by the so-called customary remuneration test. This rule states that anything provided through the free space that deviates by less than 30% from what is customary in your sector is always allowed. If it deviates more, you must prove that it is customary in your specific case.However, it is assumed that all allowances below €2,400 are customary. Only amounts exceeding this threshold are subject to the customary remuneration test.
Sometimes you can achieve additional tax benefits by paying out an even higher bonus than the 3% of the free space. As mentioned earlier, anything paid above the free space is seen as a final levy wage, which is taxed at 80%. However, it may be more advantageous to choose this option rather than paying out through regular salary.
Let’s assume a DGA who earns €100,000. The tax rate they are subject to is 49.5%. The BV wants to pay a net bonus of €4,000. To achieve a net compensation of €4,000, a compensation of €7,767 must be paid.If the DGA’s salary is €100,000, the free space in 2023 is €3,000, which is 3%. To reach a compensation of €4,000, the free space is exceeded by €1,000. The WKR levy is then €800, which is 80% of €1,000.The advantage of applying the final levy wage is then €2,676
You can see that in some cases, it may be advantageous to exceed the free space.
Not your regular financial advisor. Unlock your financial potential
and get your money to work!
✔️ Always available for all your questions
✔️ Customized advice for your business
✔️ For long-term relationships
Spaarndammerstraat 27Hs,
Amsterdam
06 11734637
willem@suijkerbuijk-co.nl
