Advantages of establishing a Dutch business
Holland is famous all over the world for the advantages it offers to entrepreneurs. Numerous global entrepreneurs and investors have considered to start businesses in the country. The present guide explores Holland as an environment for setting up a company. The advantages of starting a business include:
- 20 percent corporate tax, one of the lowest rates in Europe;
- VAT is not charged for transactions with EU member states;
- According to Forbes (2018) Holland is the fourth best country for business worldwide;
- Holland has the highest number of double taxation treaties worldwide;
- Holland is a founding member of the European Union;
- Local businesses enjoy a good reputation in world commerce. Holland is a huge advantage in terms of representation;
- 93 percent of the locals speak good English; many also speak French and German;
- Highly qualified workforce (third worldwide for level of education);
- Excellent atmosphere for international businesses;
- The Netherlands ranks 4th in WEF’s Global Report and leads the European list for most competitive and innovative economies;
- A recent analysis performed by Thorton shows that setting up a Dutch business is among the best options for international investors;
- Holland welcomes foreign investors and entrepreneurs: from small and medium enterprises to Fortune 500 multinational corporations;
- Holland attracts foreign companies active in any economic sector with its political stability, firm legislation and outstanding international relations.
The Dutch limited company (BV)
The private limited liability company (BV or besloten venootschap) issues privately registered shares that cannot be freely transferred. This legal form is frequently chosen by international investors.
The private limited company must be set up by one or more incorporators, either legal entities or individuals. The individual or entity, foreign or resident, can be both the incorporator and the full management board of the newly opened company. The law does not require the appointment of a secretary. In case there is just one shareholder, he/she does not automatically carry personal liability. Nevertheless, his/her name will be included in the certificates for company registration issued by the Trade Register. The company office must maintain a shareholders register where shareholdings are documented.
Deed of Incorporation (DoI)
To set up a company in Holland, a DoI is prepared before a notary public and filed at the Trade Register at the Chamber of Commerce and at the Tax Administration. The official DoI must be drafted in Dutch (we will assist you by also drafting a version in English). It needs to include the personal details of all incorporators and original board members, the amounts of their participations and the payments transferred to the initial capital. The DoI should also include the Association Articles that contain at least the following information: name and purpose of company, registered office address, authorized capital (amount in EUR), division of shares and conditions for share transfer.
Before setting up your business, our agents will check whether your preferred trade name is free to use in the country, as it may already belong to another registered business. Your company name must either begin or end on “BV”. Additionally BVs are entitled to one or more trade names labeling the entire business or certain parts thereof.
The equity financing is decided by the incorporators. The amount can even be 1 Euro. The minimum requirement is to issue one share with voting rights. Shares may have voting and/or profit rights.
The capital tax for issuing shares was waived on 1 January, 2006.
The procedure for business incorporation in Holland takes 2 – 5 days, depending on the complexity of the structure and the timely provision of documents by the incorporator.
Remote formation option
Companies can be incorporated remotely.
Corporate directors and shareholders
Dutch BVs can have corporate shareholders and directors.
Benefits of setting up a Dutch PLC
The shareholders are not personally liable for the company’s debts. Typically the risk is limited to the investments they have made in the company.
Minimum share capital
The minimal initial equity necessary for BV establishment was 18 000 Euro, but since October, 2012 it is just 1 cent. Currently it is quite easy to start a business.
Holland offers different subsidies for entrepreneurs, for example a special regime called Innovation Box and WBSO (tax credit for research and development activities).
No tax on dividends, royalties and interest
Holland has established a broad treaty network to avoid double taxation. Therefore international companies can take advantage of reduced withholding tax rates with respect to dividends, royalties and interest transferred to businesses registered in Holland and minimum taxes on capital gains generated from sales of shares in their source countries (treaties with nearly 100 jurisdictions).
The PLC Holding Structure represents a cost-effective and secure way to establish a Dutch business. Holdings are legal entities established for the purpose of holding assets, for example shares of trade companies. Therefore their operation is not associated with any liabilities or risks.
Subsidiaries are entities involved in trade or provision of services. They perform business activities, hence carry liability for their operations. Therefore other parties, e.g. suppliers and creditors, can bring claims against subsidiaries. In contrast, holding entities and their assets cannot be subject to claims.
The term “holding structure” signifies the association between a holding and a subsidiary. BV holding structures have the following main characteristics:
- i) they include two separate BVs (PLCs);
- ii) one company, the subsidiary, performs business activities;
iii) the other company, the holding, does not carry out any business activities;
- iv) the entrepreneur/investor owns the holding company’s shares, and
- v) the holding owns the shares of the subsidiary.
Purposes for the incorporation of a Holding Structure
Most investors and entrepreneurs set up their Dutch businesses using holding structures because of two main reasons: tax and risk
First, holding structures provide options for tax benefits, the most significant of which is the participation exemption. According to its principle the owner can sell his/her active business and then transfer the received amount free of profit tax to the respective holding BV.
Second, operating through a Dutch holding structure reduces risk. The holding company provides a protective layer between the individual owner of the business and the actual activity. Private limited companies can be structured so as to provide protection of the operating company’s capital. In this way collected profits and pension provisions are shielded from the risks inherent to the business.
When to consider the establishment of a Dutch holding structure
- if your company is most likely be sold at some point. Then, thanks to the participation exemption, the profits from the transaction can be transferred tax free to the holding’s account.
- if you want to protect your capital from risks.
- if you plan to set up a financially flexible structure for your Dutch business.
Tax liabilities and advantages
After incorporation BVs go through registration with the tax authorities to obtain the necessary tax numbers. Dutch companies may have different obligations and are required to submit tax returns. More information is given below.
Corporate income tax (CIT)
The CIT rate in Holland is comparatively low for the EU: 20 percent for income up to 200 000 Euro and 25 percent for amounts above this threshold. The same conditions are valid for public (NVs) and private limited companies (BVs). The government plans to reduce the maximum and minimum tax rates in the coming years.
This exemption is one of the most frequently used tax advantages. According to the law a holding that owns 5% or more of a given subsidiary is exempt from tax when transferring dividends. This piece of legislation is called the Parent-Subsidiary Directive.
Let us consider a holding that owns 100 percent of a subsidiary’s shares. The subsidiary earns 100 000 Euro profit and pays 20 percent corporate income tax (20 000 Euro). The remaining profit (80 000 Euro after tax) represents a dividend acquired by the holding. Dividend transfer is tax free and the tax payable by the entire structure amounts to 20 percent of the income. This exemption has been introduced to preclude double income taxation.
If the parent company of the subsidiary is profitable, the participation exemption provides a significant advantage. Also, a substantial amount can be saved in case the parent company sells the subsidiary. Then the parent company will receive the total profit from the transaction tax free as the CIT due prior to the sale would have already been covered by the subsidiary. Should the profit be taxed again after the sale, then this would be double taxation.
Tax exemptions for international businesses
The participation exemption provides additional advantages to international businesses if their subsidiaries are located in other countries. The profit of the international subsidiary is taxed at the location where it has been incorporated. Then the income can be acquired by the Dutch parent company. The acquired amount is NOT subject to CIT in the Netherlands.
The VAT system in Holland is similar to that in other members of the EU. The tax administration usually charges VAT and only particular types of transactions are exempt from it. The normal 21 percent rate is charged for almost all goods and services provided by local businesses.
The same rate may also be applicable to imports from countries outside of the EU. Holland also has a lower 6 percent VAT rate for specific goods and services, such as medicines, artworks, foods, antiques, books, tickets for sport events, theaters, zoos and museums. The government intends to introduce a 3 percent increase of the lower rate in 2019. Still the low VAT rate is a significant benefit to Dutch businesses.
VAT charges of international entrepreneurs
If a company is incorporated abroad, but also operates in the Netherlands it needs to follow the national laws. In most cases, when a company is offering services or products in Holland, it needs to pay VAT there. Nevertheless this tax is often reversely charged to the purchaser of the service or product which adds up to 0 percent rate for the provider.
Charging in reverse is possible when the clients are entrepreneurs or legal entities incorporated in Holland. In such cases the VAT on the invoice can be replaced with a note for reverse charging. Otherwise the tax is payable in the Netherlands. Starting a Dutch company will give your business the full benefit of the local VAT regulations.
Thirty percent tax reimbursement
Foreign workers hired in Holland can benefit from an exemption dubbed “the 30% ruling”. If the employee meets particular requirements, the employer can pay to him/her 30 percent of the wages tax free. The purpose of the allowance is to compensate any extra expenses of the employees made in connection to their work away from home.
Conditions for eligibility
Candidates qualifying for 30% tax reimbursement meet the requirements listed below:
- the employer must be registered for tax in Holland and cover payroll tax;
- an agreement in writing has been concluded between the employer and the employee to apply the 30% ruling;
- the employee needs to be recruited abroad or transferred from abroad
- at the time of hiring the individual has not resided within 150 km from the Dutch border for 18 or more months during the past 2 years;
- the employee’s wages amount to at least 37 000 Euro per year;
- the employee’s expert skills are not readily available on the labour market in Holland.
Intercompany Solutions is your trusted partner for setting up a company in the Netherlands
Our company opened in 2013 and since then we have assisted hundreds of entrepreneurs from more than thirty countries to start a business in Holland. While accumulating extensive experience in this field of work, we have adjusted our procedures to guarantee the incorporation of your business. Your success is sure with the services that we provide.
Our fields of expertise:
- Starting a Dutch business, full package;
- Help with meeting the local regulations;
- Requesting the issue of a VAT or EORI number;
- Bank account opening for foreign citizens;
- Secretarial services: premium support package.
Memberships and associations
We are always striving to improve our quality standards to provide excellent services.
FAQ for Dutch businesses
- Can I set up a company in the Netherlands if I live in another country?
Yes, you can establish a business in the Netherlands, regardless of your residency. To facilitate this process we offer procedures for remote business incorporation.
- Do I need to register my company at a Dutch address?
Yes, the registered office of your company must be in the Netherlands. You can also choose to open a representative marketing office or branch of a foreign company.
- What company types are available in the Netherlands?
Most international investors prefer to establish private limited companies (BVs). Other frequently used types include public limited company (NV) and foundation (Stichting). You also have the option to incorporate a sole proprietorship, a partnership or a collaborative legal entity.
- How much time does the procedure for opening a Dutch business take?
The procedure for incorporation takes 3 – 5 work days on average.
- How can I start a Dutch business?
The establishment of a Dutch company includes 4 compulsory steps: 1) Filing of the Incorporation Deed; 2) Filing of the Articles of Association; 3) Registration for tax; 4) Opening a bank account.
- Is there a minimum requirement for share capital?
Private companies are no longer obliged to provide a minimum share capital. Public limited companies must have at least 45 000 Euro in shares.
- What documents are necessary in order to start a business in the Netherlands?
The most important document that you need to prepare for the establishment of your company is the Memorandum and Articles of Association.
- How can I register a trademark or a brand in Holland?
The common way is to incorporate a Dutch company first and then to register your trademark locally. You may have the option to register your brand/trademark in the country without setting up a local company.
- Is there a possibility to operate a business involved in international trade via a Dutch company?
Yes, this is possible. Foreign traders open Dutch companies quite often, as local incorporation offers many advantages.
- How are companies taxed in the Netherlands?
Companies pay twenty percent corporate income tax for annual profits below or equal to 200 000 Euros. Other taxes are also collected, for instance for transfer of property and for real estate ownership.
- Can I receive more information on BVs?
Certainly. We have published a detailed brochure with information on Dutch BVs. Should you have more questions, please, do not hesitate to contact us.
- How can I obtain Dutch citizenship?
In principle one can become a Dutch citizen through naturalization, marriage, business immigration or option procedure. Children to Dutch parents may claim citizenship. The qualified agents at Intercompany Solutions can give you more information on the relevant procedures and assist you in following them.
- What are the employment requirements in the Netherlands?
The Dutch Employment Law regulates the relationship between employers and their staff. International employees need to obtain work permits prior to their arrival in the Netherlands (this rule does not apply to Swiss and EEA nationals). The parties must prepare and sign a written agreement for employment, which specifies the term of the relationship: with defined duration or open term, depending on the type of business.
- Do I need a visa to enter the Netherlands? How can I obtain it?
Residents of the European Union can enter Holland freely and are not required to apply for specific documents. Citizens of countries outside of the EU may stay in Holland with a short-term Schengen Visa for up to 90 days. If you plan to stay longer, you need to file a visa application at the Embassy of the Netherlands in your home country.
- Once my Dutch company is incorporated, do I need any special permits or licenses to start my business?
There may be specific requirements, depending on the type and scope of your business activities. You may have to apply for a business permit in order to legally trade, sell and store goods, and perform financial activities. Most companies do not need special permissions or licenses.
- What are the major legal requirements for establishing a company in the Holland?
You must consider three important aspects:
- the name of your company has to meet the regulatory requirements and be available for use;
- you must have an office in the Netherlands;
- you must meet the registration requirements and apply for any necessary business permits.
- What are the general legal requirements for foreign entrepreneurs planning to invest in Holland?
When it comes to establishing a business, the rights of international investors are the same as those of Dutch residents. Foreign entrepreneurs must follow the national legislation as regards investments, applications for licenses, minimum initial equity and business operations.
Do you intend to open a company in Holland? Would you like to receive further information on investment, incorporation or taxation in Holland? Please, call our Dutch experts in incorporation.