Your US LLC was perfect back home. Pass-through taxation, liability protection, simple Schedule C filing. Your accountant loved it. So you kept it when you moved to the Netherlands, figured you'd sort out the "international stuff" later. Then your first Dutch tax return came back, and the number made your stomach drop.
The mismatch that creates the trap
The problem is not your LLC. The problem is that two countries look at the same entity and see two completely different things.
How the US sees your LLC
The IRS treats a single-member LLC as a "disregarded entity." It doesn't exist for tax purposes. Your LLC's income flows directly to your personal return on Schedule C. You pay self-employment tax (15.3% up to the wage base) plus your marginal income tax rate. One level of taxation. Simple.
How the Netherlands sees your LLC
Since January 1, 2025, the Netherlands applies new entity classification rules. Under these rules, a US LLC — including a single-member LLC — is classified as equivalent to a Dutch BV(private limited company — like a corporation). The Dutch tax authority treats it as a non-transparent, corporate entity.
If you live in the Netherlands and manage that LLC from your Amsterdam apartment, the place of effective management is the Netherlands. Your LLC becomes a Dutch tax resident.
That means your LLC owes Dutch corporate income tax (vennootschapsbelasting(corporate income tax — like a corporate tax)):
Then comes the second layer
When you take money out of the LLC — which you must, to live — the Netherlands treats that as a distribution from a corporation you control. That triggers Box 2 taxation:
And the US still wants its share
Here's where it gets painful. The IRS still sees your LLC as pass-through. The US doesn't care that the Netherlands charged corporate tax. Your LLC income still appears on your personal US tax return. You still owe US income tax on it.
The US foreign tax credit partially offsets this — you can credit Dutch taxes paid against your US liability. But the mismatch between corporate tax (paid by the LLC in NL) and personal tax (owed by you in the US) means the credits don't align cleanly. You often can't use all of them, and excess credits carry forward into a bureaucratic holding pattern.
The actual cost
For an LLC earning EUR 80,000 in profit, the combined tax burden under this mismatch structure can run EUR 2,000-5,000+ higher per year than if you'd structured correctly from the start. The exact amount depends on your total income, filing status, and how much you distribute — but the trap is structural, not situational. It hits every American who brings a single-member LLC to the Netherlands.
Why people don't catch it in time
This trap only surfaces at tax filing time — often 12-15 months after you moved. Your Dutch accountant sees a corporate entity. Your US accountant sees a pass-through entity. Unless one of them has cross-border expertise (most don't), neither flags the conflict. By the time you file, you've already operated under the wrong structure for an entire tax year, and restructuring mid-year creates its own complications.
What to do about it
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Before you move: Talk to a cross-border tax specialist (someone who holds credentials in both the US and NL). Do this before your move date, not after. The entity decision must be made before you establish Dutch tax residency.
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Evaluate your options: For most DAFT entrepreneurs, the cleanest structures are either a Dutch eenmanszaak(sole proprietorship — like a sole proprietorship) (ZZP) or a Dutch BV. Both avoid the classification mismatch. Your US LLC can be dissolved or restructured, but the timing matters.
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If you've already moved with an LLC: Don't panic, but act quickly. A cross-border tax specialist can evaluate whether to restructure now or wait for the next tax year. The cost of professional advice (EUR 1,000-2,000) is far less than the annual tax leakage.
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Never assume your US accountant "handles international." Cross-border US-NL tax work is a genuine specialty. Your CPA in Portland and your boekhouder in Amsterdam are both competent professionals who likely have no experience with this specific mismatch.
The entity question isn't just about the LLC trap — it's about choosing the right Dutch structure for your income level, growth plans, and tax situation. The ZZP vs BV briefing gives you the decision framework.