Dutch legislation determines that a managing director who is also shareholder for more than 5% in the company needs to meet minimum salary requirements. This to prevent the managing director allocating a extreme low salary income and high dividend payment.
Not only is dividend lower taxed, the low salary make benefit accessible. Benefits such as rent benefit, health care benefit, child care benefit etcetera. This is not the desired situation, as in fact the managing director is not the low salary income employee, the dividend makes good the difference.
The 2014 minimum salary is EUR 44.000. The salary cannot be lower than the highest earning employee in the company and if the managing director creates 90% of the turnover, then the compulsory salary managing director cannot be lower than 70% of the profit (excluding salary costs of the concerning employee).
In 2015 there will be a change in this field, such a change that all rights are waived and new salaries need to be set. The 70% for instance is replaced by 75%.
In 2015 the minimum salary is 75% of the profit
However, the 75% situation only occurs when there is no comparable employee you know of with whom you can compare your salary. Example. You work as rocket scientist in a specific area and you make EUR 200.000 profit. Hence, you need to take 75% as salary being EUR 150.000. With the new rules you can compare your salary with the nearest equal employee. An employee always earns less than the entrepreneur, so if you can find a position nearly equal to being a rocket scientist earning EUR 100.000, you can use this salary. The tax office then has to proof otherwise, which basically will not succeed if you have executed the nearest equal employment requirement correctly. The difference between EUR 200.000 profit and EUR 100.000 salary you can pay yourself as dividend at 25% dividend withholding tax, after corporate income tax has been collected.
In the new rules the salary of the managing director cannot be lower than the highest paid employee, but also not lower than the highest paid employee within the group of companies. This is a new aspect that can make a difference.
New 2015 rules look like the proof of the salary used has moved from the tax office to the entrepreneur, but the Ministry of Finance has stated that this is not the case. Experience will learn.
For starting companies the startup period will determine whether you are able to
qualify with the rules. If not enough profit is made, or cash has been received, you cannot meet the requirements. However, if you have withdrawn during the same year funds from the bank account in the current