On the first of January, a new law went into effect: the Dutch ‘Trust Law 2018’. This law will be supervised by De Nederlandsche Bank (The Dutch Central Bank) and has far-reaching consequences for anyone working in the advisory sector, as well as providers of registration addresses. In short: it is now illegal for parties that offer advisory services to refer their clients to a party that offers a registration address. How and why? We will explain everything in this article.
The old vs. the new trust law
According to the old trust law, any party offering legal assistance, accounting or tax advice, cannot offer a registration address to clients as well. However, the new trust law states that any party offering accounting, legal assistance or tax advice services (in short: all professions that can be appointed as ‘advisors’) may not make introductions to any provider of a registration address without holding a trust license. A provider of a registration address is officially named a ‘domicilieverlener’ in Dutch.
The new law also states that any party may not introduce any person to both a provider of a registration address and an advisor, without holding a trust license. This addition in the law is meant to serve as an anti-avoidance principle. Therefore, it is illegal for any party to introduce a person to BOTH a provider of a registration address AND an advisor. Trust licenses are granted by The Dutch Central Bank.
What is the purpose of this law and what are the consequences for business owners?
The idea behind the regulation is the fact that virtual offices are more difficult to supervise, which makes them mostly unwanted. The Dutch authorities prefer foreign entrepreneurs to have a physical office, where the authorities will be able to locate these parties whenever needed. Obviously, the aim of the new trust law is to prevent situations such as fraud and tax evasion.
Clients of advisors who are new to starting a company in the Netherlands are now left without assistance on the matter of obtaining a registration address, as it is no longer allowed for advisors to refer their clients to virtual office providers. And providers of a registration address are no longer allowed to accept clients referred by advisory parties, or by parties who are assisting the clients in starting a company in the Netherlands. In general, the clients of these advisors are required to find their own solution.
So what is the new solution?
The advisors are left with two possible choices as far as the law is concerned:
- Refer the clients to a third party offering a physical office space to the clients. Be it in the form of office units, or interesting properties in a certain neighborhood.
Pro: It is a realistic possibility.
Con: It will generally be much more expensive to hire a physical office than a registration address.
- The clients are recommended to search the internet independently for a registration address. This could be an actual office, a unit in a business center (own room), a registration address or a virtual office solution.
Pro: It might be a cheaper solution for clients who do not need a physical office.
Con: It is no longer possible for advisors to provide the same service as before.
What options does your client have in terms of a Dutch business address?
As mentioned above, clients have several options when acquiring an address to register their business. Obviously, some options will be more expensive than others:
- A physical office space
- An office unit
- A virtual office address
A virtual office address may also be referred to as a ‘business registration address’ in the Netherlands. There are numerous providers of registration addresses, which can easily be found, for example on Google.
The most popular jurisdiction in the Netherlands for foreign businesses to register is Amsterdam. Amsterdam is not only considered interesting as the capital of the Netherlands, it is also the biggest city and the primary economic hub. Amsterdam has centuries of experience in international trade, a very multicultural culture and many foreign residents.
Amsterdam offers the advantage that its tax inspectors are generally used to dealing with a lot of foreign businesses. Furthermore, they offer their services in the English language as well. Smaller cities in the Netherlands do not offer this advantage often and can severely delay the operations of a startup.
Therefore, it is important to consider the location for your business, as this might prove to be an important factor in obtaining a VAT number.