Moving to the USA from the Netherlands: tax, social security, your company, pensions and visas

A move from the Netherlands to the United States touches your Dutch tax residence, your pension rights, your shareholdings and your visa all at once. This page sets out the Dutch and US rules that matter, from the conservatory assessment and the tax treaty to the totalization agreement and E-2 treaty status. Mount Bonnell Advisors helps Dutch founders, families and professionals settle in Texas and across America.

How your Dutch tax residence ends when you move to the US

Dutch income tax rests on residence or Dutch-source income. Residents are taxed as resident taxpayers; once you are non-resident, the Netherlands taxes you only on your Dutch income. One exception follows nationality: a Dutch national employed by the State and posted abroad is always deemed to live in the Netherlands.

Where you live is judged on the circumstances. The Belastingdienst says you emigrate when you go to live permanently in another country, and it looks at factors such as where you spend most of your time, where your partner or family lives, where you work and where you are insured for medical costs. If you are in doubt, you can write to your tax office and ask it to assess your situation.

Two time limits deserve attention. If you return within one year without having lived in another state in the meantime, you are deemed to have lived in the Netherlands during your absence. For inheritance and gift tax, a Dutch national who dies or makes a gift within ten years after leaving is deemed to have lived in the Netherlands, and anyone who makes a gift within one year after leaving is treated the same way.

• Notice of departure: if you expect to stay abroad at least two thirds of a year, you must give written notice of departure, starting on the fifth day before you leave. The municipality then registers you in the RNI.
• DigiD: apply for DigiD before you deregister.
• Emigration-year return: file it online or with the paper M form.
• Health insurance: Wlz insurance applies to residents, and only Wlz-insured persons must take out a Zvw health insurance. The Zvw policy ends by law the day after the obligation ends, and you must inform your insurer. If you cannot keep Dutch insurance, take out health insurance in your country of residence.

Dutch exit tax: the conservatory assessment on pensions, annuities and shareholdings

When you cease to be a Dutch resident taxpayer, including when the treaty makes you non-resident, three items of income are conserved in a protective assessment (conserverende aanslag):

• Pension rights: the fair market value of your accrued pension rights is treated as wages.
• Annuity premiums: annuity premiums you deducted are treated as negative expenses.
• Substantial interest: leaving is a deemed disposal of a substantial interest, generally a holding of at least 5% of the issued capital.

The assessment can be issued once the return for the emigration year is filed, and the conserved income falls in the highest rate. It usually runs for 10 years, and without a time limit for a substantial interest.

For pensions and annuities, you pay nothing for up to 10 years if you comply with the conditions; the deferral runs at most to the start of the tenth year after the assessment year, and the outstanding amount can then be remitted on request. Commuting the pension or annuity makes the assessment payable. For a substantial interest, a deregistration after 15 September 2015 at 15:15 brings lifelong deferral and no remission after 10 years; a sale, dividends or the company stopping make the assessment payable in whole or in part.

Deferral is automatic only for moves to EU/EEA countries. For a move to a non-EU country such as the United States, security is required for a substantial interest and for pension schemes not placed with a recognised EU, Norwegian, Liechtenstein, Icelandic or Swiss insurer. Arrange this before you deregister.

The Netherlands-United States income tax treaty

The treaty was signed on 18 December 1992 and has been in force since 31 December 1993, with protocols signed on 13 October 1993 (in force 30 December 1993) and 8 March 2004 (in force 28 December 2004). The IRS gives the treaty a general effective date of 1 January 1994 and the 2004 protocol 1 January 2005.

Tie-breaker. If both countries treat you as resident, you are resident where you have a permanent home; if you have one in both, where your centre of vital interests lies. Habitual abode, nationality and mutual agreement follow. Keep the saving clause in mind: each state may tax its own residents and nationals as if the treaty had not come into effect, except as Article 24(2) provides.

Pensions. Pensions for past employment and annuities are taxable only in the state where the beneficial owner resides, subject to the government service article. If you were resident in the other state at any time in the five years before payment, that state may tax non-periodic remuneration for employment exercised there, or a lump sum paid in lieu of an annuity. Public social security pensions paid to a resident of the other state are taxable only in the paying state, and the 2004 protocol makes this rule apply regardless of the saving clause.

Dividend and interest income of an exempt pension trust resident in one state is exempt from tax in the other, except income from a trade or business or from a related person.

Social security: the Netherlands-US totalization agreement

The agreement was signed at The Hague on 8 December 1987 and amended by a protocol of 7 December 1989, both in force from 1 November 1990. A second protocol signed on 30 August 2001 entered into force on 1 May 2003.

• Posted workers: if an employer with a place of business in one country sends you to work in the other for a period not expected to exceed 5 years, you stay subject only to the sending country's laws. On request, the institution of the country whose laws apply issues a certificate proving you are exempt from the other country's compulsory coverage.
• Self-employed: you are subject only to the laws of the country where you reside.
• Dutch residents: a Dutch resident employed or self-employed in the Netherlands is subject only to Dutch law for work in either country, unless the posting rule applies.
• Benefits abroad: rules that restrict invalidity, old-age or survivors cash benefits because you live abroad do not apply to people living in the other country.
• Adding up periods: the US counts Dutch periods of coverage towards US entitlement if you have at least six US quarters of coverage, but not Dutch periods credited solely on the basis of residence in the Netherlands.

Keeping your Dutch company with a US subsidiary

Many Dutch entrepreneurs keep their company in the Netherlands and open a US subsidiary. The Dutch CFC rule adds the tainted income of a controlled entity to the parent's profit, pro rata to its interest. Tainted income covers interest, royalties, dividends and share disposal gains, financial leasing, insurance, banking and other financial income, and low-value invoicing income.

A controlled entity is one in which you, with related parties, hold more than 50%, and only if it is established in a state designated because it levies no profit tax or a rate below 9%, or because it appears on the EU list of non-cooperative jurisdictions. The United States is on neither list; the US federal corporate income tax is 21% of taxable income, above the 9% threshold. US Virgin Islands, American Samoa and Guam do appear on the non-cooperative list. Even for a controlled entity, there is no inclusion where its income mainly consists of other income or where it carries on a substantial economic activity, and only positive tainted income not distributed before year-end is included.

Dividends to the Dutch parent. Benefits from a participation, and the costs of acquiring or disposing of it, are left out of taxable profit. A participation exists from 5% of the nominal paid-up capital. A participation held as an investment is excluded unless it qualifies, for example because the entity is subject to a profit tax resulting in a realistic levy by Dutch standards.

US withholding. Under the treaty, US tax on dividends to a Dutch parent holding directly at least 10% of the voting power is capped at 5%. Dividends are exempt where the parent has owned directly 80% or more of the voting power for 12 months ending on the declaration date and also held 80% before 1 October 1998, is a listed-company qualified person, is entitled under Article 26(3) or has a competent authority determination. A company is a listed-company qualified person if its principal class of shares is listed on a recognised stock exchange and regularly traded, unless it has no substantial presence in its state of residence.

Your AOW and pension when you move to the US

AOW. Residents are insured for the AOW, and the gross pension is reduced by 2% for each uninsured calendar year. If you moved abroad less than a year ago, you may still insure voluntarily. The AOW cannot be commuted. The SVB pays the AOW to pensioners in the United States in the local currency rather than in euros, and in some countries it asks for a life certificate. Once you live abroad, the SVB no longer receives changes from the municipality, so you report changes yourself.

Tax on the AOW. The tax treaty decides whether the SVB withholds wage tax on the AOW. The Belastingdienst places AOW, Anw, WAO, WIA, Waz and Wajong benefits paid to US residents under Article 19(4), in the Dutch column, and public social security payments are taxable only in the paying state. For non-residents, Dutch income includes pension and annuity payments for which premiums were deducted and periodic public-law payments.

Occupational pensions and annuities. On emigration, the fair market value of accrued pension rights counts as wages and goes into the conservatory assessment. Apart from emigration, the same happens if the pension obligations are placed, wholly or partly, with a body other than those listed in article 19a(1)(a), (b) and (d) of the Wage Tax Act 1964. Commuting a pension or annuity during the deferral makes the assessment payable.

Contributions while working in the US. Contributions you pay to a Dutch exempt pension trust while working in the US are deductible in the US within the limits it allows its own residents, provided you made contributions before the US work began and the US competent authority agrees that the trust generally corresponds to its own exempt pension trusts.

Visas: E-1 and E-2 treaty status, reciprocity and the Visa Waiver Program

The Netherlands is a treaty country for both the E-1 treaty trader and the E-2 treaty investor visa. The State Department lists both treaties as entered into force on 5 December 1957.

The reciprocity fee is charged in addition to the MRV application fee.

The Netherlands is a Visa Waiver Program country, with VWP travel since 29 July 1989. Passports of the former Netherlands Antilles do not qualify.

To see how these rules fit your own move, book a consultation with Mount Bonnell Advisors or ask the firm for the free potential analysis.