What is the DGA customary wage regulation?

If you are a director and major shareholder (DGA) of a Dutch private limited company (BV), you are required by law to pay yourself a salary. This is known as the gebruikelijk loonregeling, or customary wage regulation. The purpose of this rule is to prevent DGAs from minimising their salary in order to receive higher (lower-taxed) dividends instead.

Many BV owners understandably want to keep their salary as low as possible, but the Dutch Tax Authority sets clear boundaries. Understanding these boundaries is essential to avoid unexpected assessments.

How is the customary wage determined?

The customary wage is based on the highest of three reference points. First, there is the statutory minimum norm amount. Second, the salary must reflect what someone in a comparable position within the company would earn. Third, the DGA’s salary should not be lower than the salary of the highest-earning employee within the company.

The DGA may deviate from these reference points only if there is a demonstrable and justifiable reason. In practice, the burden of proof lies with the DGA, which means it is important to document your reasoning carefully.

Why does this matter for BV owners?

The customary wage regulation has a direct impact on your overall tax burden. A higher salary means more income tax and social security contributions, while a lower salary allows for more dividend distribution — but only within the limits of what the Tax Authority considers reasonable.

Getting this balance right is especially important for entrepreneurs in the early stages of their BV, or for those whose company has a fluctuating income. In certain cases, a lower salary may be justified, for example when the BV is making losses or when the DGA can demonstrate that comparable positions command a lower wage.

Common pitfalls

One frequent mistake is simply maintaining the same salary year after year without reviewing whether it still meets the criteria. The norm amount is adjusted annually, and changes in your company’s structure or staffing can also affect your obligations.

Another common issue is failing to consider the salary of the highest-paid employee. If you hire a senior manager or specialist who earns more than your own DGA salary, you may need to adjust your compensation accordingly.

Practical tips for DGAs

Review your DGA salary at the start of each fiscal year to ensure it meets the current norm amount. If your BV is in a start-up phase or experiencing financial difficulties, discuss the possibility of a lower salary with your tax advisor. Keep documentation of comparable positions and salaries in your industry, as this can be crucial if the Tax Authority questions your wage level.

It is also worth considering the interplay between salary and dividend. While dividends are taxed in Box 2, the combined tax burden of salary (Box 1) and dividend should be evaluated together with your advisor to find the most tax-efficient approach for your personal situation.

Seek professional advice

The customary wage regulation may seem straightforward, but its application often involves nuances that require professional guidance. Every DGA’s situation is different, and the optimal salary depends on factors such as company profitability, industry benchmarks, and personal financial planning.

At Taxboutiq, we help DGAs and BV owners navigate these complexities. Whether you are setting up a new BV or reviewing your current salary structure, our team is ready to assist you with tailored advice.