Here are the pro’s and con’s.
It can be a challenge to decide between using a payroll solution and setting up a one-man company as a freelancer. And if you have made the decision to set up a one-man company, what type of company should you go for? Can you use your foreign registered company?
To increase the challenge further: the benefits for invoicing with your own company and for using a payroll solution can be different for Dutch nationals, EU nationals and non-EU nationals.
This article will provide your with information that can help you select the best option for your personal situation.
Are you a Dutch national or permanent Dutch resident?
The best choice for you is highly influenced by personal preferences. People who are keen to ensure the highest netto retention of the hourly rate, usually select to set up their own Dutch registered company. People who put most value in comfort and reliable income usually select the payroll option.
When you are considering to set up a Dutch registered company, in many cases the legal form ‘Eenmanszaak’ is the most attractive choice for IT Experts due to fiscal advantages. The ‘Eenmanszaak’ may be converted into a different legal entity later on. The most common alternative legal form would be the private limited company (in Dutch “Besloten Vennootschap” or “BV”).
| One-man company ‘eenmanszaak’ | One-man company ‘BV’ | Payroll solution |
| You are responsible for a correct (financial) administration | You are responsible for a correct (financial) administration | Hardly any administrative tasks- you receive a net salary |
| Sick days are not payed | Sick days are not payed | (Partial) continued payments on sick days |
| You are only payed for days/hours worked | You are only payed for days/hours worked | (Partial) continued payments by UWV if your project terminated at the client’s initiative. |
| Highest netto retention from your rate | Average in netto retention from your rate | Lowest neto retenion from your hourly rate |
| You are personally accountable | In most cases, you are not personally accountable | X |
| Payment term varies and can be max 60 days | Payment term varies and can be max 60 days | Generally a short payment term |
Are you an EU national?
In our experience, EU nationals normally only consider using a payroll solution, which has the 30% ruling tax benefit, or using their foreign registered company.
Be aware: Unless you apply for 30% facility in the first months of your stay in The Netherlands, you won’t be able to apply for it anymore until you have been outside the country for more than 16 out of 24 months.
Using foreign registered company
For anyone keen to ensure the highest netto retention of the hourly rate, the best option may be to use your foreign registered company – depending on the tax laws applicable in the specific foreign country. If you operate from your foreign registered company, you will invoice the agreed rate (without VAT). You only pay income taxes outside The Netherlands and VAT obligations are transferred to by stating this on your invoice.
The following conditions must be met:
Using payroll services
People who put the most value in comfort and reliable income usually select the payroll option.
Using Dutch registered company
If you come from abroad and you wish to contract through a Dutch registered company, the “BV” is the preferred legal form, because it enables you to apply for the 30% facility.
| EU one-man company | NL One-man company ‘eenmanszaak’ | NL One-man company ‘BV’ | Payroll solution |
| You are responsible for a correct (financial) administration | You are responsible for a correct (financial) administration | You are responsible for a correct (financial) administration | Hardly any administrative tasks – you receive a net salary |
| Sick days are not payed | Sick days are not payed | Sick days are not payed | (Partial) continued payments on sick days |
| You are only payed for days/hours worked | You are only payed for days/hours worked | You are only payed for days/hours worked | (Partial) continued payments by UWV if your project is terminated at the client’s initiative. |
| You only pay income taxes outside The Netherlands and VAT obligations are transferred | Lowest netto retention due to lack of 30% ruling tax benefit | You may be eligible for the 30% ruling tax benefit – increasing your netto retention | You may be eligible for the 30% ruling tax benefit – increasing your netto retention |
| Accountability depends on legislation in foreign country | You are personally accountable | In most cases, you are not personally accountable | X |
| Payment term varies and can be max 60 days | Payment term varies and can be max 60 days | Payment term varies and can be max 60 days | Generally a short payment term |
Are you a non-EU national?
In case you are a non-EU national needing a sponsor for your residence/work visa, your only option is to select the payroll solution so that the payroll company can act as a sponsor for your residence and work permit application.
In case you have a residence/work visa in the Netherlands that does not require your employer to act as your sponsor, for instance, a spouse or family visa, and you meet a number of conditions, you will also be able to select setting up a NL registered one-man company. If you wish to contract through a Dutch-registered company, the “BV” is the preferred legal form, because it enables you to apply for the 30% facility.
| NL One-man company ‘eenmanszaak’ | NL One-man company ‘BV’ | Payroll solution |
| You are responsible for a correct (financial) administration | You are responsible for a correct (financial) administration | Hardly any administrative tasks – you receive a net salary |
| Sick days are not payed | Sick days are not payed | (Partial) continued payments on sick days |
| You are only payed for days worked | You are only payed for days worked | (Partial) continued payments your project is terminated at the client’s initiative. |
| X | You may be eligible for the 30% ruling tax benefit – increasing your netto retention | You may be eligible for the 30% ruling tax benefit – increasing your netto retention |
| You are personally accountable | In most cases, you are not personally accountable | X |
| Payment term varies and can be max 60 days | Payment term varies and can be max 60 days | Generally a short payment term |