Dutch American Friendship Treaty

US entrepreneurs and business proprietors benefit from a preferential immigration scheme, based on the Dutch American Friendship Treaty.

According to article II of the Friendship Treaty, US nationals are allowed to remain in the Netherlands:

a. for the purpose of carrying on trade between the USA and the Netherlands and engaging in related commercial activities, or:

b. for the purpose of developing and directing the operations of an enterprise in which they have invested, or in which they are actively investing a substantial amount of capital.

An US national has to invest the ‘substantial amount’ of EUR 4,500 in the Dutch enterprise. Applicants are considered independent entrepreneurs if they own at least 25% of (the shares of) the company. The company itself has to be registered with the Dutch Chamber of Commerce. The applicant will have to submit an opening balance for the Dutch company and a business bank account with the residence permit application. The opening balance documents must be prepared by a Dutch bookkeeper with a BECON number.

Spouses and underage children are allowed to join the entrepreneur. The spouse can work in the Netherlands for any company without a work permit, or also start to work as an entrepreneur.

Your first DAFT permit

Since April 2024, the IND has implemented a pilot policy for processing applications for self-employment permits under the Dutch American Friendship Treaty (DAFT):  first time applications for a permit for self-employment under the DAFT are granted within 4-6 weeks of the application’s submission and while the IND checks to see if the applicant has any antecedents, there is currently no review of whether the applicant meets the specific requirements for the residence permit.

Renewing your DAFT permit

However, come time to renew the residence permit, the IND checks if the applicant retroactively met the requirements for the residence permit within the 6 months after the residence permit card was issued. As a result of the pilot policy, the IND is now more closely monitoring and assessing renewal applications. If the criteria for the permit have not been met within the first 6 months, the IND can retroactively withdraw the residence permit with the consequence that the applicant loses the accrued rights of residence over that period of time.

Criteria for Renewal

To meet the criteria for renewing a residence permit for self-employment under the DAFT, aside from

• maintaining the required registrations such as the registration in the population register, BRP, and Chamber of Commerce,

the sole-proprietor/business entity must show

• that they have maintained the minimum required investment of capital in their business and
• that there has been some business activity.

Many entrepreneurs assume that keeping a business bank balance of €4,500 satisfies this requirement. This is unfortunately not the case.

Maintaining Equity

For sole-proprietors, the amount of the invested capital is the amount of equity or assets invested in the business.  For a limited liability (B.V.) the amount of capital invested is equivalent to the amount of the (paid-up) shares and the accrued revenue minus dividends or reserves.

Equity refers to an entrepreneur’s stake in the company and represents the residual value of a company after all its debts and liabilities have been settled.  The equity in the business equals the assets minus the liabilities and/or losses. When the company, whether it is a sole proprietor or a BV (LLC) incurs more expenses than revenue, the equity will be affected and may become less than what is required by the IND.

Furthermore, when a sole proprietor withdraws cash of personal use, this will also affect the equity.

A simple example is, a B.V. has €5,000 in assets but has a tax debt of €1,000, then the remaining invested capital is only €4,000. The equity is below the IND required threshold of €4,500 at which point the criteria for the residence permit are no longer being met.

To offset the equity from falling below the required minimum threshold, the sole proprietor can transfer personal capital into their business. For entrepreneurs with a B.V., an increase in equity can be achieved by making a share premium contribution. This is an additional payment from the shareholder to their company above the nominal value of shares. It enables the company to receive equity funding without making formal share capital changes. Please do however note that there are tax consequences involved in share premium contributions.

When renewing your residence permit for self-employment under the Dutch American Friendship Treaty (DAFT), the IND asks for a recent balance and profit /loss statement. When starting your business under the DAFT, it’s therefore advisable to invest more than the required IND threshold to mitigate the impact of expenditure and debts on the equity of your business. Timely assessment and review of financial statements can influence the outcome of your renewal application.

If you need advice or assistance with your renewal application, give us a call. We work with experienced financial professionals who can also support you with this process.