Getting paid by a foundation
- 12 Jul 2023
- Edited 3 Feb 2023
- 2 min
- Managing and growing
- Finance, Rules and laws
There are many types of foundations. One important characteristic of a foundation is that it has no members, but it does have a board. A foundation has a goal it wants to achieve, such as collecting money for research into the treatment of an illness. This goal is described in the articles of association. The goal: 'collecting money for the founders or board members' is not allowed. A foundation is only allowed to pay money to persons or organisations if these payments serve the defined goal.
So, as board member of a foundation, can you receive an allowance or a salary? Read what the options are in this article.
The role determines the reward
There are different roles you can have as a foundation board member:
- as a director under the articles of association - you receive wages, but do not have an employment contract with the foundation.
- as a titular director – you receive wages, and you have an employment contract with the foundation.
- as a director who receives an allowance for travel costs or attending meetings, or a volunteer's fee.
- as the director of a public benefit organisation. There are 2 types in the Netherlands: the Algemeen Nut Beogende Instelling (ANBI) and the Sociaal Belang Behartigende Instelling (SBBI) – you can find the rules for rewarding directors of PBOs on the Dutch Tax Administration website.
A director under the articles of association is a board member whose function is described in the articles of association. For example, a secretary or a treasurer. It is possible for directors under the articles of association to receive payment for the work they do. You are not under contract from the foundation board, however. The foundation board is not your boss, as you yourself are a member of the board. This means that the foundation does have to pay payroll tax over your wages, but no social security premiums. If the payment amounts are small, the foundation often does not have to pay payroll tax or social security premiums. The Tax Administration is the judge of whether the foundation has to pay payroll tax or not.
The amount of money you receive for the work you do for the foundation has to be reasonable. This means, you cannot receive a lot of money for almost no work - or hardly any money for a lot of work. If the foundation pays a director too much, it is in fact rewarding a director with money that should be spent on the foundation's goal. This is illegal. If a foundation makes such a large payment anyway, the court can decide to dissolve the foundation. The court can also decide to dissolve the foundation at the request of a stakeholder or the Public Prosecution Department ('Openbaar Ministerie').
If the foundation board has appointed you as an executive director, you are what is known as a titular director. Your job title may be General Manager, for example. Titular directors usually have an employment contract with the foundation and receive wages for the work they do. The foundation board is the 'boss' of the titular director.
Usually, the articles of association contain a clause on how directors should be rewarded. For example, they may not be entitled to wages, but only to an allowance to cover costs or attend meetings. This is called 'vacatiegeld' in Dutch. Board members receive it for preparing and attending meetings. If you have received 'vacatiegeld', you have to file this under "Other income" on your income tax return.
Funds not to be used for wages
Some sponsors and grant givers will only give money on the condition that it is not used to pay a director's wages. If you do so anyway, you will lose the right to that money.
Supervisory board ('Raad van Toezicht')
A foundation may have a board and a supervisory board, called a 'Raad van Toezicht' or RvT. The RvT checks up on what the foundation does. That includes your activities as a board member. This means they have authority over you. When there is authority, and a wage is paid, you are effectively in employment. The foundation has to pay payroll taxes and social security contributions for board members who are in employment.
Payments to volunteers
The work of volunteers is vital for many foundations. The foundation is allowed to reimburse volunteers for expenses they have made, as well as pay them a volunteer's fee (in Dutch). This fee is exempt from tax, as long as it is no higher than the maximum set by the Tax Administration (in 2023, for volunteers over 21, the maximum is €1,900 per year). If it is higher, the foundation has to withhold tax.