DGA Salary- Afroodmethode- Comparable Salary Question 2022

[Karekla]

Dear All,

 

Good morning. I got a question regarding the salary of a DGA within a BV. I have read multiple forum posts and Internet sites but still confused a bit. Contacted a potential accounting firm and when asked I didn't get a very comprehensive answer so I challenged them back and waiting for an answer.

 

I have been living and working in the Netherlands for the past 4 years as a Project Planner in Construction

 

(I will use example figures for my case below)

 

In 2018 I was a company employee receiving 70k plus company housing, car and other benefits

 

In 2020 I was a company employee receiving 90k plus company house, car etc.

 

I  2021 I became a consultant through an umbrella company where I am on a temporary yearly contract and getting paid by the hour and making 120k a year.

 

I now want to open my own Dutch BV and I am wondering what would be the lowest salary the tax authorities would accept. All of thr income would be generated by myself and I won't have 30% ruling. 

 

If my revenue is 140k let's say, my gross profit 130k (without salary paid) would they expect me to pay 75% of the 130k or could I argue that normally a construction project planner can get up to 90k which would be on the high end in the industry anyway and then I go 75% of 90k?

 

Could they argue that since now as an employee I make 120k, It should be 75% of 120k and no less and essentially the comparable measure in this case its my own self?

 

I was intending of pay myself around 68-70k ( based on 75% of 90) which is way above the 48k threshold but not sure if this will be accepted.

 

Thank you and appreciate any help I can get.

 

 

 

19 augustus 2022 aangepast door Karekla
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[Joost Rietveld]

Dear Karekla,

 

Welcome to the forum.

 

You have probably read some articles dating from different years. Up till 2015 the so called afroommethode kind of dictated the DGA-salary in cases where the DGA was the sole earner of the BV's turnover. Effectively this meant that your salary as a DGA was roughly about 63% of the BV's turnover. This had to do with a technicality in the law with regards to the reference salary a DGA had to base his salary on.

 

As of 2015 this technicality was changed and gave way to a less strict application of the afroommethode. This means that, for sole earners too, the DGA-salary is once again based on the reference salary one earns in a business where the performed job is about the same as the DGA's, but without being a shareholder.

 

So the main rule is back to where we were before the afroommethode was formed as jurisprudence. That main rule is now that the DGA-salary is a minimum of 48k per year, but - if higher - also a minimum of 75 percent of what is to be considered a normal salary for someone performing the same job without being a shareholder. The afroommethode will only be applicable in cases where a reference salary is - in good justice - not available.

 

In your case this means most likely: 75% of 90k

 

best

Joost

 

 

[Karekla]

Dear Joost,

 

Thank you so much for your comprehensive and detailed response. 

 

What stops the tax authorities of taking as a comparison my current employment salary of let's say 120k a year and applying the 75% on this? Could they do this or the comparison needs to be more aligned with market standards where the 90k figure would be more applicable?

 

Once more thank you in advance. 

 

Have a great weekend and looking forward to your reply. 

 

(P.S: I added you on LinkedIn as well as I had seen from other forum posts your expertise on the subject but it was before I saw your reply. Thank you once more)

19 augustus 2022 aangepast door Karekla

[Joost Rietveld]

The 120k salary from your current employment might be a good reference if the work you'll be doing out of the BV is roughly the same. So yes, that could be the case, but not necessarily. It's always possible to plead your case if you think the 90k salary is the most comparable