Customary wage arrangement Director-major shareholder

The director-major shareholder has a special position within the company. The fiscal rules regarding the director-major shareholder differ from the other ‘usual’ employees. This can cause confusion. That is why we will clarify what the Customary wage arrangement means with this article.

Customary wage arragement Director-major shareholder

What is a director-major shareholder? 


You are a director-major shareholder when you own shares in a private company(bv) and at the same time are also the CEO or director of the private company. You are only the director-major shareholder when you have shares in the private company of a significant importance.

When do you have a significant importance? 


A significant importance is a fiscal term. According to art. 4.6 of the Dutch income tax legislation, you have a significant importance when you (potentially with your tax partner) own direct or indirectly:

1) at least 5% of the placed share capital of a private company or a public limited company OR

2) have purchase options on 5% or more of the share capital of a public company or public limited company OR

3) have profit certificated that entitle you to at least 5% of the annual or liquidity profit OR

4) have voting right that entitle you to at least 5% of the votes within the company.

The OR in the list means that at least one of these conditions is sufficient to have a significant importance in the company.

Fictitious wage


Previously, director-major shareholders often paid themselves little to no salary. This way they could give themselves a lot of profit, and because of the low labour income, they could profit from many fiscal benefits. The Tax Authorities have therefore, years ago, implemented a mandatory fictitious wage for the director-major shareholder.

Since then, a private company is obligated to give the director-major shareholder a salary. This supposed salary is a fictitious amount that is determined by the tax inspector.

The usual wage has to be, at the minimum the highest amount of the following amounts:

  • 75% of the wage from the most comparable employment 
  • the wages of the highest earning employee of the partnership or the highest earning employee of a connected partnership of the employer
  • At least 48,000 (in 2022, in 2021 that was €47,000 and in 2020 € 46,000)

Guidelines Customary wage arrangement


The guidelines for the Customary wage arrangement, therefore, determine that on an annual basis, the ‘full-time’ employment is €48.000,- (2022). Of course, not every case is equal, and that is why the Tax Authorities have come up with guidelines that determine the amount the director-major shareholder wage.

When the wages of a comparable person with a comparable function without a significant importance has a lower or higher salary: You can use 75% of the market conform wage. Furthermore, you can never earn less than the highest paid employee in your own private company, when that employee does similar work. When the employee has specific skills and is doing work you cannot do, then the employee can earn more money than you.

Skimming method


The Dutch Supreme Court has ruled the following in September 2004; When the revenue can be entirely or almost entirely be attributed to the work of the director-major shareholder, their wage can be determined based on the revenue of the private company. The revenue then will have to be decreased with the expenses and deductions other than the labour reward of the director-major shareholder. 70% of the remaining net revenue amount will need to be paid out as salary to the director-major shareholder.

Exceptions Customary wage arrangement


Because starting entrepreneurs often have lower income (in Dutch), they can request to lower or even lapse the director-major shareholder wage with the tax inspector for a period of two to three years. Even when structural loss is made, you can still be entitled to this. It is possible that you are the director-major shareholder of several private companies. In that case, you will only need to receive the director-major shareholder wage for one of those private companies.

It is also possible that in addition to your employment, you also have an enterprise. It is then also allowed to deviate from the usual director-major shareholder requirement. The tax inspector will then look at the determination of the wages of comparable parttime functions. With this in mind, the wage of the director-major shareholder is determined.

Further information

You can read more about the Customary wage arrangement and significant importance on the Tax Authorities website (in Dutch). The so-called ‘ondernemersplein’ (in Dutch) of the Chamber of Commerce, will help you when you want to know more about the founding, obligations, and taxes of a private company. In this article, we list the tax benefits for entrepreneurs in the partnership tax. Please feel free to contact us when you have any questions.