Dutch-American Friendship Treaty
The Dutch-American Friendship Treaty (DAFT) is an agreement between the United States and the Netherlands that allows US entrepreneurs and freelancers to acquire Dutch residency to start businesses.
History
The roots of the friendship between the United States and the Netherlands go way back to the American Revolution. Formal ties were officially knotted in 1782 when both countries established official diplomatic relations. Those relations and friendships have stood the test of time and are still strong today.
In March 1956, the two countries further fortified their alliance by establishing the Treaty of Friendship, Commerce, and Navigation, now known as the Dutch-American Friendship Treaty (DAFT).
Under the provisions of the DAFT treaty, entrepreneurial-minded individuals and freelancers from the U.S. are granted a unique opportunity to obtain Dutch residency by starting a business in the Netherlands. This visa arrangement makes it easier for Americans looking to move to the Netherlands and obtain residency, as well as giving them a clear path to chase their entrepreneurial dreams.
Visa details
The DAFT treaty-based visa application can be used by entrepreneurs of various backgrounds.
To qualify for the DAFT visa, a business does not necessarily need to engage in trade between the two countries. However, a “substantial investment” must be made in a Dutch business. The form of the business can vary. In other words, one can choose to start a sole proprietorship (Eenmanszaak), a Private Limited Liability company (B.V. in Dutch), or even a Partnership and utilize the DAFT visa. When the treaty was first signed, a substantial investment was considered 10,000 Dutch guilders. Nowadays, an investment of at least €4,500 is considered substantial for visa purposes. As long as this equity can be maintained in the business and sufficient engagement with the business can be demonstrated, one is eligible to reside in the Netherlands using the DAFT visa.
Requirements and Conditions of the Dutch-American Treaty of Friendship
The requirements extend beyond having an active business. Below, we have outlined all the requirements.
General terms and conditions that apply to everyone:
- You have a valid passport or other travel document.
- You are not a danger to public order or national security.
- You have American nationality.
You are in one of the following situations:
- You specialize in the trade of goods between the Netherlands and America
- You develop and manage the business operations of a company in the Netherlands. This means that one of the following situations applies to you:
- You represent an American company and have a key position at that company;
- You have a liberal profession. This does not apply if you work for or on behalf of the government or in healthcare.
- You invest significant capital in your business. The amount you invest depends on your company’s form. For most forms, the IND requires a minimum investment of €4,500.
Starting your business operations in the Netherlands
The two most common choices for setting up a business are a sole proprietorship (Eenmanszaak) and a Private Limited Liability company (B.V. in Dutch). Below, we outline the basics of each form so that you are able to make an educated decision moving forward.
Sole proprietorship (Eenmanszaak in Dutch)
In the Netherlands, a sole proprietorship is a legal structure without a legal personality. The person who starts a sole proprietorship bears the sole responsibility and liability for the business.
To successfully register as a sole proprietor, you must make an appointment with the Chamber of Commerce online and prepare the necessary forms. Note that the Chamber of Commerce will charge administrative costs for the successful registration of the business.
Private Limited liability company (B.V. in Dutch)
Incorporating a B.V. is a bit more complex and it involves using a notary for the incorporation.
A private limited liability company, known in Dutch as a “besloten vennootschap” (B.V.), is a business entity endowed with legal personality. This distinction implies that, generally speaking, the B.V. bears liability for its debts, relieving individuals of personal liability.
A B.V. requires that a Director is appointed to lead the company. You have the option to establish a Dutch B.V. with yourself as the sole director and major shareholder (DGA), or you can involve other individuals and/or legal entities in the setup. The equity of a private limited company is divided into shares owned by shareholders, who wield ultimate authority. However, it’s the company directors who oversee daily operations.
It is important that each shareholder applying for the DAFT visa holds at least 25% of the shares in the company in order to be considered an entrepreneur in the eyes of the immigration authorities. This is often overlooked when using a B.V. for the DAFT visa application.
Making the right choice
While the most common reason for making this decision is your expected annual income, other factors should be considered which can significantly impact your future.
When operating a B.V., one of the more important points to consider is that a director-shareholder must pay himself/herself a yearly salary of at least €56,000 (minimum amount for 2024).
Further, while the income from the sole proprietorship is declarable via the owner’s personal income tax return, B.V. compliance is more multifaceted and has different obligations, including compiling Annual Accounts for the business, preparing a Corporate Income Tax declaration, holding the Annual General Meeting of Shareholders, and publishing a shortened Balance sheet to the Chamber of Commerce.
But let’s not forget that one of the unique benefits of setting up a B.V. is the possibility of enjoying the 30% ruling (if the requirements are met). It involves quite a few extra benefits, especially for people with U.S. nationality. For your convenience, you can read our blog about the 30% ruling here: https://www.dutchtaxadvice.nl/30-percent-ruling/.
While the BV might seem like the more complex choice, it comes with its own advantages.
If you are still unsure what approach to take, let us help you make the right decision. Book a meeting with us, online or in person, and we can discuss your situation in detail and determine together the best form of business for you.
Compliance
It must be noted that with both forms of business, it’s a legal requirement to maintain records of your business, which must adhere to specific standards. Good financial records, in particular, are crucial, serving as the foundation for your yearly financial statements. Most importantly, for us as tax advisors, the financial statements serve as the groundwork for your tax returns.
Once the business is set up, we can guide you through the compliance and administrative aspects of your new journey and help you focus on what you do best so that you will not have to stress about your tax-related obligations.
In conclusion
The Dutch-American Friendship Treaty is a great solution for U.S. nationals and entrepreneurs who are considering relocating to the Netherlands. It facilitates seamless relocation for business owners and benefits the country’s economic development.
When starting the process, every entrepreneur must acquaint themselves with the necessary points of compliance and the costs associated with maintaining their business to make the best of their situation. That is why picking the right form of entity is crucial.
Application
An application for the DAFT visa must be submitted to the Dutch Immigration and Naturalisation Services. As explained above, there is more than one approach to obtaining the DAFT visa.
At Dutchtaxadvice B.V. we focus on supporting American nationals in choosing the best business form and structure, supporting you throughout the application process
In order to have a successful application, an opening balance statement is necessary to show that a capital of €4,500 has indeed been contributed. As a registered Dutch tax advisor, we are equipped to prepare this for you as part of the application process. This is a crucial element in the application and one we have a lot of experience with as we know precisely what the Immigration and Naturalisation Office expects. We understand the importance of having a successful application and a seamless start to your life in the Netherlands, and that is why our experienced team is happy to support you in this new journey.
We are available to help throughout the application process and afterwards. To discuss this further, email us at info@dutchtaxadvice.nl or call us at +31 (0)23 – 303 7444.
Once everything is in place, the application can be submitted. Usually, it takes a few months for the application to be granted, however, in most cases, a temporary sticker can be obtained (while waiting for the verdict) allowing you to stay and work in the Netherlands.
We created a FREE guide that explains how to apply and acquire Dutch residency to start your business. You can download it from here.
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