Income Taxes and Small Business in the NL

7 thoughts on “Income Taxes and Small Business in the NL”

  1. Hi, great info on the blog pertaining to US income earned abroad. I’m a US Military Veteran and I receive $37k a year in Disability payments (which is tax exempt in the US), would NL tax me under DAFT as I am using that income to live and operate in NL, as per their requirements for long term sufficient income. Thanks so much!

    1. Hi Nickolaus,
      Thank you for the kind words. I believe the first issue you would need to address is that DAFT requires that you are actually running a business that is engaged in commerce. Income from disability is not a business, so you would need to either find a different type of residence permit that permitted having an income without a business or start a business with your income. I suppose that starting a business would be problematic, though if you are on disability. I don’t think the Netherlands has any type of residence permit that allows someone with a set income to get a residence permit, but I’m not an expert. If you have any more questions, just let me know, and I’ll try to help.

  2. Hi! Does a portion of your taxes go to social security/pension, ensuring you receive payments when you’re older? I saw that you mentioned freelancers are “responsible for their own pensions,” but I wasn’t sure how it worked. Thanks!

    1. All persons must pay into the AOW Dutch pension scheme until they reach retirement age. For each year worked, you receive 2% of the pension amount, so you must work for 50 years while paying into the system to receive the full benefit. However, the pension amount is smaller than an average pension in the US, so most people also invest in their own pension plan.

  3. Sorry…one more question!

    I’ve been an expat before and my income was always taxed in my country of residence, and then I filed a tax return in the US (as well as the FATCA and whatnot), but I didn’t have to pay the IRS anything because my salary was under the threshold.

    So, if I did DAFT and had a US client, do you know if that would make the money earned liable to taxation in America? Would it matter if they deposited payment into a US account, as opposed to a Dutch one?

    Thank you! 🙂

    1. Hi Hallie,
      It works the same way here. When you file your US taxes, you can claim the FEIE (Foreign Earned Income Exclusion) for your earnings up to $102,100 (2017). That allows you to avoid paying US income tax on your earnings. Of course there are rules for whether you qualify for the exclusion, but if you are living and working here, it is easy to qualify.

      The source of the funds doesn’t matter. The Netherlands generally taxes all income earned. There are some exceptions, of course. The earnings must be claimed in the Netherlands and taxes paid, then excluded on your US return.

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