The customary wage scheme for director-major shareholders

salary director shareholder dutch limited company

How does the customary wage scheme work and when does it apply?

In the Netherlands we have the so called customary wage scheme, in Dutch called “gebruikelijkloonregeling” which applies to director-major shareholders of a company. Background of this measure is that a director-major shareholder can determine his own salary and that it (often) happened that director-major shareholders awarded themselves little salary in order to pay little tax or at least only pay this later when a salary or dividend payment was made. The tax authorities do not like that.

An employee who performs work for a company in which he or his partner has a substantial interest must receive a salary from this company that is set at least at the highest of the following amounts:

The customary wage must be at least the higher of the following amounts:

  • the salary from the most comparable employment;
  • the salary of the highest-earning employee at the company or of the highest-earning employee of an affiliated company of the employer;
  • at least € 56,000 in 2024 (€ 51,000 in 2023 and € 48,000 in 2022).

It follows from the Guidance of the tax authorities that if the director-major shareholder (dga) can plausibly demonstrate that the salary from the most similar employment is lower than € 56,000, the salary will be set at 100% of this lower amount. The salary is also set at this lower amount if there is an employee within the company with a higher salary. Conversely, if the salary of the most comparable employment is higher than the salary of the most deserving employee, the salary will also be set at that higher amount and not at the salary of the most deserving employee.

It also follows from the Guidance that if there is no highest earning employee and neither the director-major shareholder nor the tax authorities provide evidence for a lower or higher salary, the minimum of € 56,000 applies.

A lower customary wage applies to innovative business start-ups. If the entity has an R&D statement for start-up companies, the customary wage is at least the statutory minimum wage. This start-up arrangement may be applied for a maximum of 3 years. After that the main rule applies again. From 2023, this exception expired for new cases. Are you using this exception for the first time before the year 2021 or 2022? Then you may continue to do so for up to 3 years. You must then continue to meet the conditions in 2024 (if starting in 2022).

When does the customary wage scheme apply?

The customary wage scheme applies when the employee performs work for an entity in which he or his partner has a substantial interest.

In short, a substantial interest exists if the employee holds an interest of at least 5% directly or indirectly in the entity.

In addition to a substantial interest, there must also be the performance of work. If the substantial interest holder does not perform work, the customary wage scheme does not apply. But beware: if someone is appointed as a statutory director, he is always expected to perform some work for the company. This is because a statutory director always has duties to perform. The District Court of Noord-Nederland therefore ruled that managing a company always entails work of some size. In view of the limited scope, the court set the customary salary at € 10,000 per year. A statutory director will therefore always have to receive a customary salary for his work.

In situations of a statutory director it is also known that the tax authorities will be satisfied with a customary salary of € 5,000 per year.

How does one determine the amount of the customary wage?

The law states that the customary wage is 100% of the wage from the most comparable employment. A most comparable employment’ should always be present.


If the salary is too low, you run the risk of a correction by the tax authorities. The ‘customary wage’ is therefore high in the inspection top-10 of the tax authorities. If the tax authorities can subsequently assume that too little salary has been withdrawn, the tax authorities can impose an omission penalty on the insufficiently withdrawn salary. Case law shows that this is usually 10%.

These undesirable consequences can be avoided by properly determining and substantiating the amount of the salary in advance.

Special situations

Working part-time

It is not immediately clear that working part-time means that you can apply the part-time percentage to the minimum of € 48,000. Research what the salary is in the most comparable position and apply the part-time percentage to that.

The Court of The Hague ruled that the circumstance that a director-major shareholder only works a few hours a month for the BV is in itself not a reason to take a lower customary salary into account. You will therefore have to present more arguments if you want to include a salary lower than € 48,000 for part-time work for the BV. In this case the director-major shareholder who suffered from increasing eye complaints had rightly determined his customary salary by taking a part-time factor into account.

In another case the director-major shareholder had been working for the company for four months, but still had to calculate the full customary wage. The director-major shareholder argued that the company in which he held a substantial interest had been inactive for a large part of the year. But the court in The Hague attached little value to this argument. In this case, the inspector had taken into account a customary wage of €30,000 for the year 2015, while the standard amount in that year was €44,000. Since the salary was already below the standard amount, the court held that it was up to the director and major shareholder to make it plausible that the salary should be even lower. According to the Court, he failed to do so.

Group structures

Does a director-major shareholder hold a substantial interest in several companies and do those companies belong to one group? In principle, the customary wage rules apply to all companies. After all, the DGA is employed by all companies where he holds a substantial interest. The amount of the customary salary must therefore be assessed for each company, and each company is subject to the withholding obligation. By applying the passthrough-payment of wages scheme, the companies can pass on the withholding obligation to the holding company. If the DGA has a substantial interest within all companies, the companies do not need to request a decision from the tax authorities for the application of the passthrough-payment of wages scheme. According to the Guidance Note on customary wages, the application of the passthrough-payment scheme means that the customary wage rules only apply to the main employment. However, The Hague Court of Appeals determines the amount of the total customary wages of the director-major shareholder for each separate employment relationship. Remuneration does take place at the level of the holding company on the basis of the passthrough-payment scheme.

Recording that salary also relates to work elsewhere within the group

Another possibility is that the employment contract between the holding company and the DGA stipulates that the salary he receives from the holding company also relates to work elsewhere in the group. The Supreme Court applies the customary wage scheme in group situations per employment relationship. Does the salary of the substantial shareholder in a company belonging to a group also serve as remuneration for work carried out for another group company? Then the employment contract with the holding company must be taken into account when determining the customary wage for that other company.

Loss situation

Director-major shareholders whose company is in a loss situation often want to set the customary wage lower. The Supreme Court also grants a lower customary wage in loss situations if the continuity of the business would otherwise be at risk. This concerns a structural loss situation where losses are incurred several years in a row and there is not enough equity to pay the normal salary.

In a judgment dated 6 September 2002, the Supreme Court did not grant a reduction of the customary wage, because the director and major shareholder reduced the salary and at the same time withdrew substantial amounts in current account. Because of these withdrawals, it was not plausible that the reduction of salary was a direct result of safeguarding the continuity of the business. If that had been the purpose of reducing the salary, the director and principal would not have withdrawn the cash from the company.

Therefore, in the event of an incidental loss, the salary of the director-major shareholder cannot immediately be reduced below the applicable limit.


  • the loss is not incidental;
  • if there is sufficient equity, a lower salary is difficult;
  • the survival of the company would be at risk if the salary must be paid.

Start-up phase

In start-ups, the customary wage is often a problem because in the start-up phase there is no liquidity to pay a customary wage. Start-ups will have to make agreements with the tax authorities about this in advance.

In practice, it happens often that director-major shareholders of start-up companies nevertheless choose to submit a 0 declaration monthly, in order to subsequently pay out the remaining balance as salary in December. The reason is then that the objectivity of this wage is proven because a higher wage would jeopardize the continuity and would therefore be un-businesslike. However, as the above shows, one cannot assume this in advance. The mere fact that a business is in the start-up phase is, according to the Supreme Court, not enough to speak of ‘structural loss-making’. And failing that, in principle the ordinary minimums apply.

A request can be sent to the tax authorities in which is made plausible that the salary is lower than € 56,000. The performance of the company in the start-up phase can be a handle. As mentioned above a relevant factor is the continuity of the company would be at risk with a higher salary. A structural loss may in fact be a reason to adopt a mitigating judgement on the level of the salary. After all, it would be unusual to offer a wage that the company’s cash flow cannot bear. But, beware! The mere fact that the company is in the start-up phase is not yet sufficient ground to establish that there is such a ‘structurally loss-making’ company. Substantiate that the nature of the current development work in a comparable independent position in the market would not yield € 56,000 either, but a lower wage. Especially when is emphasized in the request that if the company does have the space to pay out more than the lower wage at the end of the year, the company will do this instead of paying it out as a dividend, the tax inspector may agree to a lower wage for the time being. In this, however, the inspector does not have infinite freedom.

The inspector however also has to comply with the general minimum wage law. Therefore, the inspector may not agree to a salary lower than the general minimum wage per FTE, such as EUR 0, if activities are carried out for the BV. Do not assume in advance that the zero declaration-with-end-of-year payment tactic will work. After all, with a good request, a realistic bandwidth is somewhere between minimum wage and € 56,000 based on 1 FTE.

What else can be done then to ensure that the director-major shareholder is only taxed on the actual result? Don’t ‘convert’ to a BV just yet, but keep a transparant company such as a VOF or sole proprietorship. This may however not be the right option if the 30% ruling ruling is used by the director-major shareholder. The 30% ruling is only applicable in employment situations and not in case of a VOF or sole proprietorship. In this situation also be aware that for the 30% ruling a minimum required salary applies.

If the entity has an R&D statement for innovative start-up companies, the customary wage is at least the statutory minimum wage. This start-up arrangement may be applied for a maximum of 3 years. After that the main rule applies again. From 2023, this exception expired for new cases. Are you using this exception for the first time before the year 2021 or 2022? Then you may continue to do so for up to 3 years. You must then continue to meet the conditions in 2024 (if starting in 2022).

Does the customary wage scheme apply in an international context?

The customary wage scheme also applies in cross-border situations. A Dutch taxpayer who holds a substantial interest in a company established outside the Netherlands will, in principle, have to comply with the customary wage scheme. The same applies to the situation where a non-resident taxpayer holds a substantial interest in a company established in the Netherlands. Based on national legislation, the customary wage scheme will then apply. However, under the various treaties for the avoidance of double taxation, the Netherlands must have the right to levy taxes. A number of important judgments have been rendered on the question whether the Netherlands may also apply the customary wage scheme under the double taxation treaty (the ‘treaty’).

The Supreme Court rendered two important judgments on September 5, 2003. In these judgments, the Supreme Court ruled that the Netherlands could not invoke the customary wage scheme under the old treaty with Belgium (1970). This was because the customary wage scheme ensured that income from the company would not be taxed under the article pertaining to capital gains in the treaty with Belgium, but as income from dependent employment, through the operation of a fiction. As a result of this shift, it would not be Belgium that would be allowed to levy, but the Netherlands. This leads to a unilateral amendment of the treaty and a shift in the taxing rights as established in the treaty, which the treaty partner could not have taken into account when entering into the treaty. The Supreme Court found this to be contrary to good treaty faith between treaty partners. Incidentally, the Supreme Court ruled that under the current treaty with Belgium (from 2001), the Netherlands can apply the customary wage scheme, because in the joint explanatory notes to the articles by Belgium, Belgium has expressly accepted the consequences of applying the customary wage scheme.

From the 2003 rulings, the conclusion was drawn that the Supreme Court attached importance to the date of conclusion of the treaty. However, this turned out not to be the case. The Supreme Court stated that good treaty faith is only taken into account if the other contracting state has accepted the effect of a national law (fiction) provision to the treaty in question. Thus, it is not so important that the other state was aware of the domestic law provision of the other state. Nor is it important that the treaty was concluded after the national law (fiction) provision had entered into force. What is important is that the other state accepted the consequences.

The Supreme Court confirmed the above line in a judgment of November 18, 2016. This judgment dealt with the customary wage rule under the treaty with Portugal. The treaty with Portugal is of a later date than the customary wage scheme (1999 versus 1997). However, this did not lead to the outcome that the Netherlands had the right to levy taxes based on the application of the customary wage scheme. The Supreme Court ruled that a national law (fiction) provision in the absence of an equivalent regulation in the legislation of the other contracting party only applies in exceptional situations under a treaty. This (fiction) provision can only continue to apply under a treaty if it is known from the history of the treaty concerned or from other sources that the other contracting state accepts that the amendment or introduction of the national rule results in a different allocation of the taxing rights than that which follows from the treaty.

In the history surrounding the creation of the treaty with Portugal, this acceptance of the application of the customary wage rule was missing. Therefore, the customary wage scheme did not have any effect under the treaty with Portugal.


It follows from the above that the customary wage scheme will apply sooner than many director-major shareholders suspect. It is therefore important to determine very carefully whether:

  • There is a substantial interest, either your own or that of your partner.
  • The amount of the salary has been correctly determined. Properly document how the salary has been determined, which comparable employment situations have been taken into account, etc.
  • The amount of the customary salary is regularly reassessed, especially if the facts and circumstances change.
  • The management agreement and the employment contract have been properly drawn up? Are the intentions of the parties indeed reflected in these? Are the activities of the entrepreneur properly explained? A good record of the agreements can prevent unpleasant discussions with the tax authorities at a later date.

The customary wage scheme may also play a role in cross-border situations. However, it is then very much the question whether the Dutch tax authorities can actually exercise its taxing rights.

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