DAFT Visa and Dutch Taxes: What American Entrepreneurs Need to Know Before Moving
Moving to the Netherlands under the Dutch-American Friendship Treaty (DAFT) is an exciting step for American entrepreneurs.
But before you land, there are tax obligations on both sides of the Atlantic that deserve careful attention. Understanding your Dutch tax position and how it interacts with your ongoing US filing obligations, before you move, can prevent costly surprises in year one.
| Key Takeaways: – You become a Dutch tax resident from the moment you take up residence in the Netherlands with the intention of making it your home, in principle, regardless of the date of your registration as a resident or the date you set up your business. Dutch income tax applies from the date you become a resident. – The Netherlands taxes income in three ‘boxes’: work/business income (Box 1), substantial shareholdings (Box 2), and savings/investments (Box 3). – As a US citizen, you remain subject to US federal income tax on your worldwide income, regardless of where you live. – A tax treaty between the US and the Netherlands helps prevent double taxation — but it does not remove your US filing obligation. – Your choice of business structure (ZZP, BV, or EOR) has direct tax consequences and should be decided before you register. |
What are the Dutch tax obligations for DAFT entrepreneurs?
Once you take up residence in the Netherlands with the intention of making it your home, you become a Dutch tax resident. From that point, you are subject to Dutch income tax on your worldwide income. This date may not be the same as the date you registered with your municipality (gemeente) and registered your business with the Chamber of Commerce (KvK).
The Netherlands uses a ‘box’ system:
- Box 1: income from work and your home, including business profits if you operate as a ZZP (sole trader), or salary if you pay yourself through a BV.
- Box 2: income from a substantial shareholding (generally, if you own 5% or more of a company).
- Box 3: wealth from savings and investments.
The rates applicable to each box are set annually and published by the Dutch Tax Authority (Belastingdienst). They usually also show at www.belastingdienst.nl. We recommend always checking the current rates, as these are updated each tax year.
Important: your DAFT permit does not confer any special Dutch tax status. Once you are a Dutch tax resident, you are taxed in the same way as other Dutch residents. However, depending on your choice of business, you may be able to make use of the 30% ruling (or “expat ruling”). In 2027, it may be called the 27% ruling.
DAFT, Tax Residency, and the US Tax Obligation
How DAFT works
The Dutch-American Friendship Treaty (DAFT) allows US citizens to obtain Dutch residency by starting or investing in a Dutch business. The key requirements set by the IND include: a minimum capital investment of €4,500 in your business for most forms of business that you can show via an opening balance sheet signed off by a professional firm like ours, registration with the Chamber of Commerce (KvK), and it makes sense to include a viable business plan. Your initial DAFT residence permit is valid for up to 2 years. Extension requires demonstrating that your business has been active during that period.
The US tax obligation: your filing requirement does not disappear
The United States taxes its citizens on their worldwide income, regardless of where they live. Moving to the Netherlands under DAFT does not remove your obligation to file a US federal income tax return (Form 1040) each year. You will report your Dutch business income, Dutch bank account interest, and any other worldwide income to the IRS.
The good news: a comprehensive tax treaty between the United States and the Kingdom of the Netherlands — the Convention for the Avoidance of Double Taxation — is in place to prevent the same income from being taxed twice. However, the treaty reduces double taxation; it does not eliminate the US filing requirement.
FBAR: A reporting requirement many DAFT entrepreneurs miss
If the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the calendar year, you are required to file an FBAR (Foreign Bank Account Report, FinCEN Form 114) with the US Treasury. As a DAFT entrepreneur with Dutch business and personal bank accounts, you can easily reach this threshold. Failure to file carries significant penalties.
Business structure choices and their tax impact
ZZP, BV, or EOR: the decision that shapes your tax position
Your choice of business structure is one of the most important tax decisions you will make before moving under DAFT:
- ZZP (sole trader / eenmanszaak): Simple to set up and low cost. Your business profit is taxed in Box 1 as personal income. There is no legal separation between personal and business liabilities, meaning unlimited personal liability. Not eligible for the 30% ruling.
- BV (besloten vennootschap / private limited company): A Dutch private limited company, a separate legal entity. The BV pays corporate income tax (vennootschapsbelasting) on its profits. You pay income tax on the salary the BV pays to you. A BV structure can potentially open the door to the 30% ruling if you meet the conditions (see below).
- EOR (Employer of Record): You are legally employed by an Employer of Record that assigns you to work for another company rather than running your own business. So you can, for example, work for a U.S. company this way. This is not a DAFT business structure per se, but it is a relevant option for certain situations if you can qualify as a Highly Skilled Migrant. It typically provides employee benefits such as payroll administration, social security coverage, and statutory employment protections. The 30% ruling can also apply (see below). Our group company, Rock Payroll, specialises in EOR arrangements.
The 30% ruling: can DAFT entrepreneurs benefit?
The 30% ruling allows an employer to pay up to 30% of an employee’s salary as a tax-free allowance for extraterritorial expenses. It applies to employees, not self-employed entrepreneurs. If you operate as a ZZP under DAFT, you are not eligible.
However, if you work via an EOR or incorporate a BV and employ yourself through it, paying yourself a salary, you may qualify for the 30% ruling, provided you meet the conditions, including:
- You were recruited from abroad (i.e., you moved to the Netherlands to take the employment).
- For at least 16 of the 24 months before your first Dutch workday, your primary residence was more than 150 km from the Dutch border.
- You meet the minimum salary requirement (after applying the ruling).
Note: The 30% ruling has undergone significant legislative changes since 2024, including changes to its duration, salary threshold, and partial non-residency regime. The partial non-resident status — which previously allowed 30% ruling holders to exclude foreign assets from Dutch tax — was abolished for new applications as of 1 January 2025. Given the ongoing changes, we strongly recommend seeking specific advice before structuring your business around 30% ruling eligibility.
Practical steps: what to arrange before you move
- Decide on your business structure before registering with the KvK. ZZP, BV, or EOR each have different Dutch income tax consequences, VAT implications, and compliance requirements. A decision made before you register is far easier than restructuring after the fact. A wrong choice may cost. In 2027, it may be called the 27% ruling) you your 30% ruling.
- Engage both a US tax specialist and a Dutch tax specialist before you move. Your US tax advisor and your Dutch tax advisor need to work in alignment. The move year, when you transition from full US residency to Dutch tax residency, requires careful planning to ensure income is correctly reported on both returns. Wanting to use your own BV to secure the 30% ruling also requires careful planning and help from a firm like ours.
- Set up your FBAR reporting from the start. If the aggregate value of your Dutch and other foreign bank accounts exceeds $10,000, you must file an FBAR annually. This is a common obligation for DAFT entrepreneurs that is often overlooked.
- Understand your Dutch filing deadlines. As a Dutch tax resident, you will be required to file a Dutch personal income tax return (aangifte inkomstenbelasting) annually. If your business is VAT-registered, you will also file periodic VAT returns (BTW-aangifte). The frequency depends on your revenue but is normally quarterly.
- Keep clean business records from your first day. When you apply to renew your DAFT permit after the initial two-year period, the IND will review evidence that your business has been active and that your investment capital remains in the business. Clear financial records kept by a professional from day one make this process straightforward.
Frequently Asked Questions
Do I pay Dutch income tax as soon as I arrive under DAFT?
Yes. Dutch tax residency begins on the day you register with your municipality and establish your presence in the Netherlands. From that point, you are taxable in the Netherlands on your worldwide income.
Can I benefit from the 30% ruling if I move under DAFT?
Only if you incorporate a BV and employ yourself through it, and only if you meet the eligibility conditions, are ZZP entrepreneurs not eligible. Given the careful planning required for this, please contact us for guidance.
Do I still need to file a US tax return after moving to the Netherlands?
Yes. The US taxes its citizens on worldwide income regardless of residence. You must file a US federal income tax return (Form 1040) every year. The US-Netherlands tax treaty helps avoid double taxation, but it does not remove the filing obligation.
What is the FBAR, and does it apply to me?
The FBAR (FinCEN Form 114) is required if the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the calendar year. With Dutch business and personal bank accounts, most DAFT entrepreneurs reach this threshold.
When does my Dutch DAFT permit need to be renewed, and what is checked?
Your initial DAFT permit is valid for up to two years. The IND will review your business accounts, bank statements, and proof of KvK registration to confirm your business has been active and your investment capital has remained in the business. You will need a professional to sign off on your accounts. For the businesses we help with their administration on an ongoing basis, this is, of course, not an issue.
Get expert guidance on your DAFT tax position.
Whether you are still planning your move or have already arrived, structuring your Dutch and US tax position correctly from the start makes a significant difference. Our team at Dutch Tax Advice guides American entrepreneurs through every stage of the DAFT process — from IND application and business setup to ongoing Dutch and US tax compliance.
About the Author
Mark Bastiaans is the Managing Director of Dutch Tax Advice. He graduated from Tilburg University in 2006 and previously worked at Big Four advisory firms and multinational enterprises. He specialises in international tax for expats and entrepreneurs in the Netherlands.
Comments are closed.