Start-up companies setting up their business in the Netherlands often face difficulties obtaining visas for non-EU nationals. They would typically prefer to use the Knowledge Migrant scheme, but the conditions of this scheme (e.g., the high salary threshold for employees) are often difficult to meet for start-ups. The Dutch government has acknowledged this, and now intends to relax the rules for start-ups by introducing a new pilot procedure specifically intended for these companies.

1. Conditions

  1. The start-up is allowed up to 15 employees, a maximum of five of which may be non-EU employees. Companies with more employees are considered sufficiently successful, therefore are not allowed to avail of the pilot procedure.

  2. The financial capacity of the start-up will be reviewed, and should evidence that the start-up is not (yet) able to bear the salary levels required for a Knowledge Migrant employee. Salary levels applied to the start-up's employees in the Netherlands will be assessed and whether any investments have been made in the start-up that would enable it to pay higher wages will be reviewed.

  3. A salary threshold of EUR 2,364 gross per month, increased with 8% holiday allowance will apply. Note that this threshold is to be indexed every year.

  4. Non-EU employee(s) must participate in the share capital of the start-up (e.g., through stock options, depositary receipts of shares or non-voting shares).

There will be no specific education requirements to be able to benefit from the pilot procedure.

2. Duration and evaluation

The pilot is intended to start in the summer of 2020. It will last three years and will be evaluated periodically. If the pilot is sufficiently successful, it will be implemented in law thereafter.

3. Connected wage tax rules on equity incentives

This pilot is part of a larger initiative by the Dutch government to create an attractive environment for start-up and scale-up companies in the Netherlands. It is especially interesting that the new visa rules require non-EU employee(s) to participate in the start-up's share capital. This part of the pilot ties in with two recent initiatives under Dutch wage tax law, which are focused specifically on providing equity incentives to employees of start-ups:

  1. As of 1 January 2018, only 75% of a taxable gain of up to EUR 50,000, which an employee of a so-called innovative start-up generates from the exercise of his/her stock options, is considered Dutch taxable wages. The remaining gain (i.e., maximum of EUR 12,500) is tax-free, provided the following conditions are met:

    a. The start-up company has been granted a valid "R&D declaration" in the year in which the options are granted.
    b. The participant must exercise the stock option no earlier than 12 months, and no later than five years from the grant date.
    c. The EU-legislated "de-minimis ceiling" for state-aid is not exceeded on an case-by-case basis.

  2. On 27 May 2019, the Dutch State Secretary of Finance announced an initiative to make it even more attractive for start-ups and scale-ups to pay their employees in the form of stock options. Under the current rules, Dutch wage tax is due at the exercise of employee stock options. However, employees are then confronted with a tax levy at a time (especially in the case of start- and scale-ups) when they often cannot sell the shares, and do not have sufficient funds to cover the tax through their private means either. In the coming period, the Dutch government will therefore investigate the possibility of drafting legislation whereby these employees may defer taxation to the moment of sale of the underlying shares (i.e., when the funds are available to pay the tax). The state secretary aims to send a bill containing this proposal to the Dutch House of Representatives on Budget Day of 2020.

4. Conclusion

The Dutch government is hard at work to create an attractive environment for start-up and scale-up companies in the Netherlands. Both immigration and (wage) tax laws are in the process of being tailored to fit the specific needs of employees working for this type of enterprise.

If you or your company feel that you could benefit from the new rules, please reach out to us so that we may investigate the possibilities in your individual case.

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