Determine DGA salary

How to determine the customary salary

The Dutch Tax Administration uses three benchmarks for determining the DGA salary. The highest outcome sets your minimum. With solid substantiation you can deviate under certain circumstances. This is how we approach it:

We start with a role scan and market comparison, test internal pay ratios and check whether the statutory standard amount is appropriate. In doing so, we weigh company growth, profitability, scope of duties, number of BVs and the salary–dividend ratio. The result is clear advice with file-ready substantiation that holds up to questions from the Dutch Tax Administration. Want to spar with a specialist? Our Tax advisor for DGA and BV structures helps with the tax substantiation and coordination with the Dutch Tax Administration.

When may you pay out less or even nil?

In specific cases, you can lower your salary as a DGA or temporarily set it to nil. Examples:

• No or minimal work - if you effectively perform no duties, there is no or only a limited customary salary.

• Start-up with an R&D (S&O) declaration - under conditions the salary may be set lower.

• Insufficient funds or continuity risk - if paying the customary salary endangers the business, a reduction can be defensible.

• Part-time, multiple BVs or multiple DGAs - allocate the salary in proportion to duties and responsibilities per entity.

These situations always require careful substantiation and preferably prior coordination. Profinancials assesses the criteria, prepares the file and - if needed and in time - requests approval from the Dutch Tax Administration for a lower or nil salary. Are you a local entrepreneur with a BV? See our tax advice for local entrepreneurs with a BV.

Net salary of the DGA: what counts

The determined gross salary translates through payroll taxes into your net salary. Important factors:

• Add-on for company car or bicycle - counts as salary and affects your net result.

• Holiday allowance, bonus and 13th month - make explicit choices in your salary agreements and pay period.

• Work-related costs scheme - reimbursements can fall within the discretionary scope instead of salary.

• Health Insurance Act - the employer variant applies to DGAs; we include this properly in the calculation.

• Payroll tax credit and state pension age (AOW) - correct application and calculation period make a net difference.

We provide a clear gross-net calculation, including scenarios for the salary-dividend mix and the effect of reimbursements and add-ons. That way you know exactly what you take home and why. Your DGA salary directly affects box 1; read more about Income tax for DGAs: filing and optimization.

What we need from you for solid advice

• Brief description of your role, duties and time spent

• Annual figures, forecast and liquidity position

• Salaries within the BV and, if applicable, within the group

• Industry, market position and any collective labor agreement information

• S&O declaration and other relevant subsidies

• Company car, pension or other salary arrangements

• Management fee structure and intended dividend policy

Frequently asked questions about determining DGA salary

How do I calculate my optimal salary as a DGA?

Start with the three statutory tests and then determine your optimal mix of salary and dividend. Test market conformity, check internal ratios and create a cash-flow plan. Have scenarios calculated for net income and total tax burden. With solid substantiation, you can aim for a lower salary if the facts allow.

What percentage of the management fee should be salary?

There is no fixed percentage. The fee must cover the costs - including your customary salary. The salary is determined under the customary-salary rules; the management fee follows financial reality and substantiation. We align fee and salary.

What is a good salary for a DGA?

A good salary is defensible, market-conform and appropriate to your responsibilities and profit capacity. It meets the highest outcome of the three tests and fits your liquidity and growth plans. A mix with dividends can be more favorable fiscally and economically.

What must a director of a BV earn at minimum?

The Dutch Tax Administration publishes a minimum standard for the customary salary each year. If you earn more internally or according to the market, that higher outcome applies. In exceptional situations, a lower or nil salary is possible, provided it is well substantiated and coordinated in advance.

Schedule your free DGA salary scan now

Want to be sure that determining your DGA salary is optimal and defensible? Schedule a free intake. Profinancials delivers personal, tailor-made advice, works transparently and fully digitally, and arranges coordination with the Dutch Tax Administration where needed. This saves you time and prevents surprises. We also adjust your provisional assessment in time; read more about optimizing the provisional assessment based on DGA salary.