We now receive daily requests to assist clients with incorporating a BV company, the economy must be doing well. Naturally I try to convince them to start with a so called one man company (eenmanszaak), but I am not always successful. Especially when the 30% ruling can be continued or a product is being sold with product liability possibilities.
During a meeting the pros and cons of the BV company versus the one man company are discussed. Once the BV company turns out the be the best choice, we explain to the client the obligations and responsibilities that come with holding the shares of a BV company and being the director. The aspect of social insurances is most of the time referred to as an aspect for when the BV is doing well, hence I address the topic now.
How is the managing director socially insured?
Basically he is not. The salary specification nor the employers costs of the managing director will show social premium contributions other than the obligatory health care insurance. What does that imply? That implies that the managing director is not insured for disability and unemployment.
The lack of unemployment benefit is a risk the managing director understands and will happily take. But we doubt the disability is understood as well.
One of the most expensive insurances you can have in the Netherlands is the disability insurance. The reason why this is so expensive is in the obligation of the insurance to pay you for the rest of your working life a benefit due to the fact that you are not able to work anymore.
Common sense should bring you to the conclusion that you cannot do without this insurance. Every employee has such an insurance, obligatory by law, so that is a signal how important it is to have such an insurance.
This insurance will make it possible to keep your house the moment you cannot work due to a disease of some sort. The benefit will pay for the rent or mortgage, for the food you need to survive, while you are hospitalized for instance.
Hence we cannot stress enough that you need to take out such an insurance and learn to accept the costs of this insurance as part of being a managing director shareholder. The costs of the insurance is tax deductible for the company. A small relief.
A pension insurance is not obligatory in the Netherlands, unless your employment is subject to a collective labour agreement (CAO) where the pension is set as obligation. Managing Directors shareholders never comply with these rules.
You might have learned about building a pension right within your BV company. I hope you also learned that this has become a nightmare for managing directors who have not reached the pension age yet. The rule is that you can only pay yourself a dividend, if this dividend payment does not cause a future liquidity problem for the company. As the pension obligations are valued differently since a couple of years, every BV company will have liquid issues, regardless of dividend payments.
In short, a pension obligation terminates the dividend payment. Moreover, the rules related to a pension are not flexible. We have the opinion that you started your BV company to be in charge of your working life. A pension is not making you in charge, but making you a subject of rules and regulations which are constantly changed even thought the game had already started playing. Therefore we are not in favor of a pension, in house or external. Make alternative arrangements.
When is the managing director socially insured?
There does exist a situation that the managing director is obligatory socially insured. That is the situation in which either the shareholder has not enough share capital or not enough voting rights to prevent getting fired by the other shareholders. When that is the case, the managing director is socially insured and can be subject to a collective labour agreement, with pension obligations.
Orange Tax Services
We can assist you with the setup of the BV company and process the administration and tax filings for you. The disability insurance is a different topic and we recommend you contact an insurance agent and obtain several quotes. The price is important, but the conditions are maybe even more important.