The clock is ticking toward 2028, and for self-employed professionals in the Netherlands, the approaching Box 3 (wealth tax) reforms are triggering more than just grumbling at tax time. They’re forcing a fundamental recalculation of a question that’s been settled wisdom for years: at what income level does forming a BV (private limited company) actually make financial sense?
The traditional answer, around €150,000 in annual profit, was based on a straightforward comparison between personal income tax (inkomstenbelasting) and corporate tax (vennootschapsbelasting, VPB). But the new rules, which will tax unrealized investment gains annually, have turned that calculation on its head. Suddenly, the debate isn’t just about income tax rates. It’s about whether your investment portfolio will be slowly eroded by taxes on paper profits you haven’t actually cashed in yet.
The Box 3 Time Bomb: Paying Tax on Money You Don’t Have
Starting in 2028, the Dutch tax authority (Belastingdienst) will shift from taxing a fictitious return on your assets to taxing your actual unrealized gains each year. This means if your ETF portfolio jumps 15% in value, you owe tax on that gain, even if you don’t sell a single share. If the market crashes the following year, well, you can carry forward losses, but you’ve already handed over cash for gains that evaporated.
Many international residents find this system baffling. As one business owner put it, the prospect of paying wealth tax on unrealized gains feels particularly painful when you’re investing for your family’s distant future, potentially paying taxes for decades before ever seeing actual returns. The frustration compounds when you consider that the government will eventually take another 20% in inheritance tax (erfbelasting) on whatever remains.
For a freelancer with €150k profit, the math gets uncomfortable quickly. After paying income tax at rates up to 49.5%, you invest the remainder. Under the new Box 3 system, you’ll pay additional tax each year on those investments’ growth. This creates a compounding drag on your wealth that simply didn’t exist under the old fictitious-return system.
The Traditional BV Threshold: Why €150k Mattered
The conventional wisdom emerged from a simple tax arbitrage. Above roughly €150k profit, the top personal income tax rate of 49.5% makes the corporate tax rate of 19-25.8% look attractive. By keeping profits inside a BV, you could reinvest them at lower tax rates, letting compound interest work on a larger base.
The classic structure involves two BVs: an operating company and a holding company (holding BV). The operating BV pays corporate tax, then transfers remaining profits tax-free to your holding BV. You pay yourself a minimal director-major shareholder salary (DGA salaris) of €56,000 (2025 rate) and leave the rest to grow. Decades later, you’d withdraw funds via dividend payments, paying 26.9% dividend tax, but overall still coming out ahead thanks to tax deferral.
This strategy worked because you postponed the high personal tax bill for years, sometimes decades. The key was time, letting the tax-deferred growth compound long enough to outweigh the eventual double taxation.
The New Calculation: When Deferral Becomes a Trap
Here’s where the Box 3 changes rewrite the rules. If you operate as an individual (eenmanszaak), your investment portfolio sits in your personal name, fully exposed to the new wealth tax on unrealized gains. But if you move your business into a BV, your investments sit inside the company, shielded from Box 3 entirely.
The corporate tax rate on investment returns inside a BV? Also 25.8% on realized gains. The crucial difference: you’re only taxed when you sell, not annually on paper value. For a buy-and-hold investor, this is a massive advantage.
But, and this is a Rotterdam-sized but, you face double taxation when extracting money. First VPB on corporate profits, then dividend tax on distributions. Combined, this can exceed 45%, depending on your strategy. The BV only wins if you can leave money compounding inside the company for a very long time.
The Administrative Reality Check
Before you rush to the notaris, consider the administrative burden. A BV requires:
– Annual financial statements (jaarrekening) prepared by an accountant
– Corporate tax returns (VPB aangifte)
– Payroll administration (loonadministratie) if you pay yourself a salary
– Quarterly VAT returns (BTW aangifte)
– Notary fees for formation and any capital changes
Many freelancers report spending thousands annually on compliance. One entrepreneur noted that running two BVs means two sets of everything, double the paperwork, double the costs. Compared to a simple eenmanszaak with basic bookkeeping, this is a significant overhead.
The DGA salary requirement adds another constraint. You must pay yourself at least €56,000 annually, unless you can prove that equivalent work would command a lower salary. For passive investment activities, you might argue this, but the Belastingdienst scrutinizes these claims closely. Fail to meet the requirement, and they’ll impute the salary anyway, triggering back taxes and penalties.
The Agio Strategy: A Tax-Free Escape Hatch
Savvy BV owners use an advanced technique called agio (additional paid-in capital). Here’s how it works: when you form your BV, you don’t just pay the nominal share value (say, €1 per share). You inject additional capital above that nominal value. This creates an agio reserve on the balance sheet.
Later, you can withdraw this agio money tax-free, as it’s considered return of capital, not profit distribution. This bypasses dividend tax entirely. However, you’ll need a notary to formalize the capital structure, and you can’t withdraw more than you originally contributed. It’s a powerful but complex tool that requires professional setup.
The Inheritance Tax Problem Nobody Talks About
This is where many BV strategies fall apart. If you die holding a BV with large deferred tax liabilities, your heirs face a perfect storm. They must immediately settle all deferred corporate taxes and dividend taxes, pushing them into high tax brackets instantly. Then inheritance tax hits on whatever’s left.
For someone whose primary goal is wealth transfer to family, a BV can backfire spectacularly. The combination of accelerated corporate tax, dividend tax, and inheritance tax can consume over 60% of the value. In contrast, assets held personally benefit from a more favorable inheritance tax treatment and step-up in basis rules.
When a BV Actually Makes Sense Under the New Rules
The math works in specific scenarios:
- 1. Very Long Time Horizon: You’re under 40 and can leave profits compounding for 20+ years. The power of tax deferral eventually outweighs double taxation.
- 2. High Income, Low Expenses: You can comfortably live on the €56k DGA salary and don’t need to withdraw profits for personal use. This maximizes the amount left to compound.
- 3. Already Maxed Out Box 3: You’ve already built substantial personal wealth and are paying significant Box 3 tax. Moving new profits into a BV shelters them from this annual levy.
- 4. Risk Management: You want legal separation between business and personal assets. A BV provides limited liability that an eenmanszaak doesn’t.
For our 36-year-old freelancer with €150k profit, the decision hinges on timeline. If they plan to work 15 more years and don’t need the money immediately, a BV could save significant Box 3 tax. But if they want to buy a house in five years or need liquidity, the double taxation penalty likely makes it a poor choice.
The Counterintuitive Truth: Individual Might Still Win
Here’s what surprises many: for moderate profit levels, the old eenmanszaak structure sometimes still wins, even with the new Box 3 rules. The key is the box 3 exemption (heffingsvrij vermogen), which shelters roughly €57,000 per person (2025 figure, though this may change).
A couple can shield over €100k from Box 3 tax entirely. If your investments stay below this threshold, you pay no wealth tax. The double taxation inside a BV, by contrast, is unavoidable.
Additionally, the self-employed tax deduction (zelfstandigenaftrek) reduces taxable income by €1,200 in 2026, making the eenmanszaak more attractive for moderate earners. The BV offers no equivalent deduction.
Practical Steps Before You Decide
- Calculate Your Box 3 Exposure: Project your investment portfolio value in 2028. Will you exceed the exemption? By how much?
- Model the BV Scenario: Factor in €3,000-5,000 annual administrative costs, DGA salary requirements, and double taxation on withdrawals. Use a 20-year timeline.
- Consider the Spaar BV: A dedicated holding company purely for investments might make more sense than converting your entire operating business. This is the "spaar BV" (savings BV) structure that Pearl Capital discusses.
- Get Professional Advice: The agio strategy and inheritance planning require a specialized belastingadviseur and notaris. The few thousand euros in fees pale compared to the cost of getting it wrong.
- Wait and See: The new Box 3 system faces political headwinds. Several parties have already signaled they want to revert to a realized-gains system. The law could change before 2028.
The Bottom Line
The 2028 Box 3 reforms don’t automatically make a BV the smart choice. They simply change the variables in a complex equation. For high-earning freelancers who can leave profits compounding for decades, the BV becomes more attractive. For those needing liquidity or with shorter timelines, the traditional eenmanszaak often remains superior.
The real advantage of a BV under the new rules isn’t tax savings, it’s tax deferral. And deferral only works if you have time. Lots of it.
Before you spend €2,000 with a notary, spend €200 with a tax advisor who can model your specific numbers. In the Netherlands, as in life, the devil isn’t in the details. He’s in the Excel formulas.
