Relocating to the Netherlands as a US Citizen: A Tax and Immigration Guide

Moving from the United States to the Netherlands can be an exciting “gateway to Europe” opportunity for both individuals and business owners. The Netherlands offers a definite high quality of life, great infrastructure, and a fixed home to explore the entire EU. However, US expats in the Netherlands face their own unique tax and immigration challenges. 

This article aims to provide you with the ‘101’ on moving to the Netherlands as a US citizen, exploring visa options, the 30% ruling and how the Dutch and US tax systems interact – and where to tweak to avoid disadvantages.

Visa and Immigration: The Dutch-American Friendship Treaty (DAFT)

The highway for Americans relocating to the Netherlands is via the “Dutch-American Friendship Treaty” (DAFT). This treaty (from 1956) allows US citizens to obtain a Dutch residence permit specifically for starting a business. In essence, DAFT simplifies the self-employment visa process for Americans:

• Lower Investment Requirement: Under DAFT, the minimum capital investment required to start a business in the Netherlands is only €4,500, a steep reduction from the standard. This makes it much more accessible for small business owners and entrepreneurs to qualify.
• No Points-Based Test: Normally, self-employed visa applicants must prove their business will serve an “essential interest” to the Dutch economy through a points system (assessing personal experience, business plan, innovation, etc.). DAFT waives this points-based test, simplifying the application greatly.
• Quick Residency and Renewal: A residence permit obtained via DAFT is valid for 2 years initially and can be renewed for up to 5 years. This gives Americans a long-term possibility of claiming a permanent residence permit (after 5 years of legal residence) and to establish their business indefinitely. The permit is available whether you set up a Dutch BV (corporation) or operate as a sole proprietor.
• Expedited Processing: As of 2024, the Dutch Immigration and Naturalisation Service (IND) introduced an expedited DAFT application process, often issuing the DAFT residence permit within 4–6 weeks of submission. (Random checks are done after approval, rather than front-loading the paperwork at the IND.)

To qualify for the DAFT VISA, you must be a US citizen (or a company representative) opening a business in the Netherlands and register with the Dutch Chamber of Commerce (KvK). You’ll need to demonstrate the €4,500 capital is invested in your Dutch business account and comply with basic requirements (like having a business plan and not having a criminal record). Unlike many other visa routes, there’s no Dutch language or integration test required upfront for DAFT.

Other visa options: If you are moving to the Netherlands as an employee of a company or an intra-company transferee, you might come on a highly skilled migrant permit (which requires a job offer and salary threshold) or other work visas. But for entrepreneurs and independent business owners, DAFT is the obvious entry ticket available to Americans.

Dutch Tax System vs US Tax System: Navigating double taxation

When relocating to the Netherlands, US citizens must contend with two tax systems: the Dutch and the US-system. The United States is one of the few countries that taxes based on citizenship, meaning Americans abroad still have to file annual US tax returns on worldwide income. Meanwhile, the Netherlands only taxes its ‘tax residents’ on their worldwide income. This creates a potential overlap (tax residency versus citizenship) – but fortunately there are mechanisms to avoid true double taxation.

Key points to understand:

• Annual Filing in Both Countries: As a US citizen residing in the Netherlands, you are required to file a Dutch income tax return each year (since you’ll be a Dutch tax resident) and continue filing US tax returns to the IRS. Failing to file US taxes just because you moved would be a mistake – the obligation persists regardless of residence.
• Tax Treaty and Foreign Tax Credits: A tax treaty has been concluded between the Netherlands and the US to prevent double- or non-taxation of income. In practice, the taxes you pay in the Netherlands can typically be credited against your US tax liability on that income. For example, if you work in the Netherlands for a Dutch employer, you might have to report the income in the US as well, but it would only be taxable in the Netherlands as the treaty obliges the US to exempt foreign earned employment income from US tax.

Overall, while you will be filing two sets of taxes, coordinated planning ensures you won’t be paying taxes twice. It’s wise to consult a tax advisor familiar with expat and cross-border planning. Failing to claim a credit or treaty benefit could result in paying unnecessary tax or even penalties.

Business Owners: LLCs, S-Corps and Dutch Tax Treatment

If you’re a business owner moving to the Netherlands, special care is needed in how your business entities are treated by each country’s tax system. U.S. entrepreneurs often use structures like LLCs (Limited Liability Companies) or S-Corporations. These have flexible or pass-through taxation in the US, but the Netherlands views them differently, which can lead to complex situations or even double taxation if not addressed properly.

• U.S. LLCs: An LLC is a hybrid entity in the U.S. – it can be treated as a “disregarded entity” for U.S. taxes (meaning profits flow to the owners’ personal tax returns) unless it elects corporate status.
  
  The Netherlands, however, does not recognize the pass-through nature of an LLC. For Dutch tax purposes, most US LLCs are considered non-transparent, taxable entities (similar to a corporation). If you move to the Netherlands and manage your US LLC from there, the LLC could be seen as Dutch tax resident (due to “effective management” being in the Netherlands) and thus subject to Dutch corporate income tax (up to 25,8% on profits).
  
  Meanwhile, the US still intends to tax you personally on those same LLC profits (since it sees the LLC as pass-through). The result is a mismatch: Dutch corporate tax on the company’s income and US personal income tax on the owner for the same income. These taxes aren’t automatically credited against each other because one is corporate-level and the other individual-level – a scenario that effectively creates double taxation if the set-up is not restructured.
• S-Corporations: An S-Corp is a corporation under U.S. corporate law that elects a special status to pass its income through to shareholders’ personal taxes (avoiding corporate tax in the US). The Netherlands, however, typically treats an S-Corp as just a regular corporation (non-flow through entity) for Dutch tax purposes.
  
  From the Dutch perspective, an S-Corp can be considered a “hybrid entity” – taxable as a company in NL, even though the US taxes it like a flow-through to individuals. This means if you are a shareholder of an S-Corp and move to the Netherlands, you might face Dutch taxes on any distributions or dividends the S-Corp pays you, while the US taxes the underlying profits on your personal return.
  
  Timing differences can occur as well: the US taxes S-Corp earnings annually to you, whereas the Netherlands might only tax you when the S-Corp actually distributes income to you as dividends. Careful structuring is needed to avoid income being taxed twice in different years or ways. 
• Dutch BV (Besloten Vennootschap): Many expat entrepreneurs choose to establish a Dutch BV (comparable to a US corp) for their operations in the Netherlands, especially if they plan to hire staff or seek the 30% ruling for themselves as an employee of their own company.
  
  A Dutch BV is taxed in the Netherlands on its profits (19% corporate tax on the first €200k and 25.8% on the rest in 2025, for example). If you hold the BV’s shares personally, dividends you take would be taxed under Dutch Box 2 (24,5% tax on dividends up to € 67.804 and 31% for the amount above that, for substantial shareholders).
  
  For a US person, dividends from a Dutch BV would also be regarded as foreign income for US tax, but the tax treaty generally allows the US to credit the Dutch tax paid on that dividend. The BV route can thus be made tax-efficient with proper planning. Moreover, if you maintain an S-Corp or LLC back in the US, you might consider a reorganization or a holding structure to prevent adverse tax interactions between the two countries.
  
  The salary earned from a BV for work performed in the Netherlands is generally only taxable in the Netherlands.

The 30% Ruling: A Tax Break for Highly Skilled Expats

One of the most well-known perks for expats in the Netherlands is the 30% ruling (also called the expat ruling). This is a tax incentive designed to attract foreign talent by offsetting the extra costs of living abroad. For eligible employees, 30% of their gross salary can be paid out as a tax-free allowance for up to five years.

How the 30% ruling works: If you are hired from abroad to work in the Netherlands and meet certain criteria, your employer can apply for this ruling. Once approved, you essentially only pay normal income tax on 70% of your salary, while the other 30% is tax-free. For example, if your gross salary is €100,000, you would be taxed as if it were €70,000 – the remaining €30,000 is a tax-free reimbursement for “extraterritorial expenses” (costs of relocating, higher living expenses, etc.). This provides a substantial boost to your net income each month.

Criteria to qualify: The 30% facility is intended for highly skilled workers with expertise scarce in the Dutch labor market. Key requirements include:

• You were recruited or transferred from outside the Netherlands. (Specifically, you must have lived at least 150 km outside the Dutch border for at least 16 of the 24 months before starting the job.)
• You have an employer/sponsor in the Netherlands who will pay your salary and apply the ruling (it must be a Dutch payroll for the tax break to apply).
• You possess specialist skills or knowledge not readily available in the Netherlands. In practice, this is often evidenced by your income level – the tax law sets a minimum salary threshold which is indexed annually. For 2025, the minimum taxable salary to qualify is €46.660.
• The application for the 30% ruling must be submitted to the tax authorities within 4 months of your start date in the Netherlands to ensure retro-active application of the 30% facility from the moment of arrival.

If approved, the ruling can be used for a maximum of 5 years from your start date. Note that if you change employers during this period, you can continue the ruling with the new employer as long as there’s no gap longer than 3 months between jobs and the new role also qualifies.

Recent changes: The Dutch government has introduced a few changes to the 30% ruling in recent years to tighten the scheme:

• Income Cap: Starting 2024, the 30% tax-free allowance is capped at the salary equivalent of the government’s “WNT norm” (public sector executive pay cap). For 2025, this means the 30% ruling can only be applied to the first €246,000 of salary. Salary above that won’t get the 30% tax-free treatment.
• Reduction to 27%: In 2027, the tax-free portion will be lowered from 30% to 27% for new arrivals.
• End of Partial Non-Resident Status: Perhaps most importantly for US expats, as of 1 January 2025 the Netherlands abolished the option for 30% ruling holders to be treated as “partial non-resident” for tax purposes.

Education and Family Considerations: Dutch Public University Costs

Beyond visas and taxes, relocating families often consider education opportunities. One surprising advantage for US nationals moving to the Netherlands is the affordability of higher education. Dutch public universities are world-class and significantly cheaper than typical U.S. colleges.

• Cost Comparison: In the United States, annual tuition can easily exceed $40,000 at private universities (the average was around $41k in 2020) and $11–27k at public universities (in-state vs out-of-state). In contrast, tuition fees in the Netherlands are a fraction of that. Dutch and EU students pay a statutory fee set by the government – roughly €2,200 per year for most bachelor’s programs (as of 2020-2021). International students from outside the EU (including Americans) pay “institutional fees” which are higher, but still moderate compared to U.S. tuition. For example, one Amsterdam university charges about €9,450 per year for a Bachelor’s in Business Administration for non-EU students, and around €17,295 for a Master’s in Accountancy. These figures, even on the high end, convert to roughly $10k–$18k – far below what an equivalent degree might cost in the States.
• Quality and Language: The Netherlands has many English-taught programs (particularly at the Master’s level, but also increasing offerings at Bachelor’s level), making it feasible for American students to enroll without needing fluent Dutch. Schools like the University of Amsterdam, Leiden University, Delft University of Technology, and others are highly ranked globally.
• Resident Benefits: If you as an American expat become a long-term resident or obtain Dutch/EU citizenship over time, your children (or even you, if you pursue further studies) could potentially become eligible for the lower statutory tuition fee. There are specific rules – generally, non-EU citizens pay institutional fees unless they have certain resident statuses. But even at institutional rates, the costs are manageable. Additionally, as a resident, you could access Dutch student financing or scholarships in some cases.

In short, for families moving to the Netherlands, the prospect of affordable university education is a noteworthy benefit. It’s another aspect of the “gateway to Europe” appeal – accessing excellent education for a fraction of U.S. prices. Planning ahead, an expat family might save significant money on college costs by residing in the Netherlands through the teenage years.

Taxation of U.S. Retirement Plans and Investments (401(k), IRAs, and Box 3)

One of the more complex areas of moving from the US to the Netherlands is understanding how your U.S. retirement accounts and investments will be taxed in your new home. The Dutch tax system has three “boxes” of income, and Box 3 covers income from savings and investments – essentially a wealth tax on your net assets. Meanwhile, the U.S. has tax-deferred retirement vehicles like 401(k)s and IRAs, and as an American you may also maintain investment portfolios or real estate back home.

• 401(k) Plans: The good news is that the Netherlands generally treats a traditional 401(k) as a pension, not as immediately taxable wealth. According to tax experts, the entire value of your 401(k) account is not counted as a taxable asset in Box 3. You won’t pay annual Dutch wealth tax on the accrued balance of your 401(k). However, when you eventually take distributions from the 401(k) (typically after reaching retirement age), those payouts will be taxable in the Netherlands as regular income (Box 1) at progressive rates. Note that this treatment differs based on the specific plan conditions and need to be reviewed to confirm the tax treatment.
• Traditional IRA: A traditional IRA is treated very similarly to a 401(k) by the Dutch. The account balance is not taxed in Box 3 annually, and distributions in retirement are taxed as income (Box 1) in the Netherlands. So you get a deferment on Dutch taxes while the funds remain in the account.
• Roth IRA: A Roth IRA has opposite treatment. Because contributions to a Roth are made with after-tax dollars and withdrawals are tax-free in the US, the Netherlands does not consider Roth payouts as taxable income (since you’ve essentially already paid tax upfront in the US). However, the trade-off is that the Netherlands views a Roth IRA as an investment asset. The account value of a Roth IRA is subject to Dutch Box 3 wealth tax annually. In other words, each year you’ll include the Roth’s value in your assets when calculating the Dutch deemed income from savings/investments. For Americans moving to NL, this is important: a Roth’s growth won’t be taxed by NL as income later, but it will incrementally increase your annual wealth tax bill. Depending on your balance, this could slightly erode the Roth advantage.
• Other Investment Accounts: Brokerage accounts, stocks, mutual funds, cash savings, and other non-retirement investment assets that you hold will generally fall under Dutch Box 3 taxation once you’re a tax resident. The Netherlands doesn’t tax actual dividends or capital gains annually in Box 3; instead it uses a deemed return method (though reforms are underway). For 2025, roughly the first €57,684 of net assets per person is tax-free, and anything above is taxed on a fictitious yield (with effective tax rates around 0.5% to 1.7% of the asset value, depending on composition).
• U.S. Social Security (and other pensions): The U.S. Social Security retirement benefit is covered by the treaty such that it’s taxable only by the United States, not by the Netherlands. So if you receive U.S. Social Security while living in NL, the Dutch will exempt that from their income tax (though you still report it for information). Private U.S. pensions and annuities can vary – many fall under the same treatment as 401k/IRA (taxed by NL, exempt in US under treaty). The nuances can be complex, so personalized advice is key when you’re drawing retirement income.

Conclusion: Plan Ahead

Relocating to the Netherlands as a U.S. citizen is a complex journey, but with the right planning, it can be very rewarding. The Netherlands offers a welcoming expat environment, a strategic gateway to Europe’s markets, and benefits like the 30% ruling and affordable education.

At the same time, U.S. nationals must carefully navigate dual tax filings, treaty provisions, and the interplay of business structures to avoid pitfalls. Critical areas such as how your LLC or S-Corp is structured, whether you qualify for DAFT or the 30% ruling, and how your 401(k) or investments are treated can have significant financial consequences.

Ready to make the move? Proper preparation will save you money and headaches down the road. Consider reaching out to professionals (like our team at Port Sight Tax) who specialize in U.S.–Netherlands tax matters and expat relocation. We can provide personalized advice to ensure you meet all requirements, optimize your tax situation, and fully enjoy your Dutch adventure without unpleasant surprises from the tax authorities.

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