Emigration tax: what founders should take into account

Why emigration can have so much tax impact

When emigrating, the tax authorities do not only look at what has already been sold, paid out or received. At least as important is the value that has already been built up but has not yet been formally realized. Think of stocks that have increased in value, pension rights that have been accrued in the Netherlands, or silent reserves in a company.

That is immediately the point of tension. The Netherlands wants to prevent value that has arisen during Dutch tax liability from falling out of reach of the tax as soon as someone or a company moves abroad. Therefore, for tax purposes, emigration can be treated as a time when certain assets are deemed to have been disposed of at their economic value.

This is extra relevant for startups and scale-ups. In young growth companies, the value is often already in the company, even though there is still little free cash in return. A founder can have an interest in a BV that has increased significantly in value, while sales are not an issue at all. Within the company, value may also have arisen in technology, intellectual property, goodwill or other assets that do not directly lead to liquidity. That's when a tax bill can come in hard.

When private emigration can lead to a tax claim

In income tax, there are various situations in which emigration can have tax consequences. An important distinction is that between a direct final bill and a preservative assessment. In the event of a preservative assessment, the tax claim is established, but payment does not always have to be made immediately. In practice, that difference is essential, because it matters a lot for liquidity pressure.

A first category concerns pensions and other income provisions. In the event of emigration, the value of accrued pension claims can be included in the tax. Previously deducted expenses for income provisions and contributions for a professional pension scheme can also still become fiscally relevant, including the return that has been achieved on them. For founders, directors and other key figures who want to move internationally, this is therefore not a detail. Retirement provisions do not automatically remain out of the picture when moving.

In addition, capital insurance for your own home can also play a role. The interest component in a fictitious benefit can then become part of income from work and home. For entrepreneurs who combine emigration with restructuring their private situation, for example around a home in the Netherlands, this is a point that is quickly overlooked.

For many founders, the significant importance stands out. Those who have a significant interest and emigrate may be confronted with a fictitious disposal of the shares at their fair value. So there does not have to be a real sale for a tax claim to arise. This makes this arrangement particularly relevant for shareholders of fast-growing companies, where paper value may have risen sharply while an exit is still far away.

The position of the company itself can also affect the private sphere. If the actual management of a company is transferred abroad, this may have consequences for shareholders with a significant interest. Emigration is therefore far from always just a personal choice. The location of the company and the shareholder's tax position can be closely related.

Final income tax bill: not just for stocks

In addition to situations with conservable income, there are also cases where a real final settlement takes place in income tax. This is especially true when business assets or specific rights leave the Dutch tax area.

This starts with the entrepreneur who moves his company abroad. In such a case, the company's assets may be deemed to have been disposed of at their fair value. For entrepreneurs who do not yet operate through a BV, or who have private business activities in addition to their BV, this is a fundamental point of attention. The international step then affects not only the person, but also the company itself.

Even if not the entire company, but assets or an independent part thereof, are transferred abroad, a final settlement can come into view. This is relevant for growth companies that tackle internationalization in phases. First, for example, part of the activities are moved, followed by the team or the actual place of residence. From a tax point of view, such steps are not always assessed separately. It is precisely the coherence that can determine when to pay.

A special category concerns authors and inventors. In the event of emigration, the capitalized value of copyrights or a patent as a result of other activities may be taken into account. This is interesting for tech companies, because value often lies in software, technical inventions, models, content or other immaterial rights. Not every form of innovation falls into the same tax category, but it is clear that intellectual property is its own risk zone when emigrating.

Foreign taxpayers may also have to deal with a final bill. As soon as someone ceases to enjoy taxable profits in the Netherlands, a checkout moment can occur. This shows that this problem is not only relevant for Dutch founders who are moving, but also for international structures that have built up profits in the Netherlands.

What happens if the BV emigrates itself?

For scale-ups and group structures, corporate tax is at least as important as income tax. This is because when the BV emigrates itself, a final settlement can also arise at the company level.

This is especially true when a body incorporated under Dutch law is no longer considered a domestic taxpayer because the actual management is transferred abroad. Assets that therefore leave the Dutch tax sphere can be considered to have been disposed of at their economic value. The same can apply to bodies under foreign law that are first tax residents in the Netherlands and then move back abroad.

This is an important signal for the practice of startups and scale-ups. Internationalization is often approached from a commercial perspective: closer to investors, access to talent, a better ecosystem or a more international governance structure. However, from a tax point of view, actual management is not a formality. As soon as that leadership shifts, this can have immediate consequences for the company's tax position.

In addition, group structures are also extra sensitive. Within a fiscal entity, the transfer of assets abroad and the subsequent termination of the fiscal unit can lead to a partial final settlement. For scale-ups with multiple entities, foreign holdings or internal reorganizations, this is therefore a point to consider in advance. An internally logical restructuring can be far less fiscally neutral than expected.

Furthermore, corporate tax does not only look at tangible assets. Especially in tech companies, value often lies in intangible assets, accumulated know-how and other hidden reserves. This makes emigration from a BV or group extra sensitive. Anyone who thinks that a tax problem will only arise when selling the company is looking too limited.

Deferring payment is not a detail, but a key point

A tax claim is one thing, collecting it is quite another. In emigration situations, this distinction is of great practical importance. Especially in a startup or scale-up environment, a lot of value can exist on paper without sufficient liquidity available to pay an assessment immediately.

There is a deferral of payment scheme for certain forms of income that can be preserved. This applies, among other things, to situations involving pension claims, income provisions, home capital insurance and substantial interest. The claim will not disappear, but the direct payment pressure can be arranged differently.

Delay in payment can also play a major role in the final settlement of income tax. This includes whether there is emigration to a member state of the European Union or a state within the EEA. In such cases, payment can be made under certain conditions in annual instalments. For founders and finance teams, this is often at least as relevant as whether a legally and technically taxable moment occurs.

In practice, we regularly see that entrepreneurs mainly focus on material tax analysis. Is there a tax, yes or no? But just as important is the question of how to pay a claim, at what time, under what conditions and with what administrative obligations. Especially for companies that are growing rapidly and need capital for product development or international expansion, that recovery side can be decisive.

Emigration affects more than just the tax on income and profit

Moving abroad does not only have consequences for the tax on income, shares or business profits. The position within national insurance is also changing. Because the insurance obligation is linked to residency, emigration can affect, for example, the accrual of state pension rights.

In practice, this topic often receives less attention than the tax exit claim, but it does deserve a place in the preparation. For founders, international employees and directors who are going to live outside the Netherlands for a longer period of time, it is relevant to understand that emigration can also have social security consequences. An international step is therefore not only a corporate or tax issue, but also affects the personal legal position.

What this means for startups and scale-ups

For startups and scale-ups, the most important lesson is that emigration is never just a question of moving. It is a time when private assets, business assets, governance, shareholder structure and tax residence come together. As a result, the consequences can be much greater than meets the eye.

For founders, it usually starts with a few simple questions. Is only the founder moving, or is the tax reality of the BV also changing? Is the accrued value mainly in stocks, intellectual property, business assets or retirement benefits? And is there sufficient liquidity available when a claim arises?

For management teams and investors, there is something more. A founder's move or a shift in actual management can affect the group's structure, shareholders' tax position and future flexibility in investments or exits. Emigration should therefore not be analysed afterwards as an administrative consequence of a strategic choice. It should be part of the decision-making process beforehand.

At Startup-Recht, we regularly see that international growth goes hand in hand with phased journeys. First, part of the business is built abroad, followed by a layer of governance, then the founder himself. Especially in these types of processes, there is a high risk that the tax effects will be underestimated, because each step separately still seems limited. Fiscally, however, the combination of these steps can be exactly what leads to a checkout moment.

Conclusion

Emigration is seldom fiscally neutral. Upon departure, the Netherlands can claim the value that has been built up here, even if that value has not actually been realized yet. This can play a role in pension rights, income provisions, a significant interest, business assets and a BV whose actual management is shifting abroad.

For founders, entrepreneurs and scale-ups, the core is therefore clear: when emigrating, look not only at the move itself, but especially at where the value is and what taxable moment this may result. Anyone who only assesses that after the step has been taken sometimes discovers too late that international growth also has a fiscal exit price.

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