The Dutch newspaper “Het Financiële Dagblad” (The Financial Daily) has recently conducted research showing that the average amount large EU enterprises spend on corporate tax equals 23.3 percent of their profit. The authors analyzed the tax liabilities of 25 companies - the biggest on the Stock Exchange in Amsterdam - including Unilever, Heineken, ING Group and Philips, and reviewed the corporate taxes they pay in various European countries.

The analysis showed that the rates of corporate tax differ significantly among the EU countries. While Maltese, French and Belgian companies pay between 33 and 35 percent tax on their corporate income, the liabilities of Bulgarian, Lithuanian, Latvian and Irish businesses amount to 10 to 15 percent. Some countries outside the European Union, e.g. the United Aram Emirates, Guernsey and the Cayman Islands do not collect taxes on corporate income. According to the newspaper the highest rate of corporate tax (55 percent) applies to companies involved in the gas and oil industry in the United Arab Emirates.

Top 5 of the tax-friendly countries in the EU

The research results show that the top five low-tax destinations for large companies in the European Union are as follows:

1. Bulgaria

For quite some time the country has been popular with its convenient fiscal policies. The corporate income tax flat rate is the lowest in the European Union and is fixed at 10 percent. Personal income is taxed at the same rate. Furthermore, Bulgaria attracts entrepreneurs with its strategic location, developed business infrastructure and low costs for labour. Read here on Bulgarian company types.

2. Ireland

The normal rate of the corporate tax in the country is 12.5 percent on income from trade and 25 percent on income from other sources. The local taxation system is a good example of encouraging competition and boosting of investments. The tax on personal income is progressive in the margins of 20 to 40 percent.

3. The Netherlands - The Western European alternative with a solid reputation

The Netherlands comes in on a respectable 6th place with a corporate tax of 19 percent. (The Dutch corporate tax rate has been lowered in 2021). The Netherlands is known as a global trading hub with an international workforce that is 93% fluent in English. The reputation of the country, combined with its tax treaties, have lead to the biggest firms in the world to establish their headquarters in the Netherlands. Amongst such companies are Apple, Starbucks, Google and many other fortune 500 companies.

The Netherlands is lowering the corporate tax rate in the coming years.

Read more on corporate income tax in the Netherlands.

4. Latvia

The country collects corporate income tax at 15 percent flat rate. In January, 2017 it introduced a lower rate of 12 percent for micro enterprises to support companies with low turnover that meet particular requirements. Latvia also attracts investors with its skilled workforce and developed transport infrastructure. The most popular fields for investment are logistics, transport, IT, life sciences, renewable energy and woodworking. The tax on personal income is 23 percent.

5. Lithuana

A flat tax rate of 15 percent applies for both corporate and personal income generated in the country. Lithuania is considered the second most favourable European state for investors. Also, its economy is rated in the European top 5 for fast growth. Lithuania is popular with its R&D sector, outstanding digital infrastructure, low labour costs and qualified specialists.

Any foreign entrepreneur is welcome to start a business in the Netherlands, if they come with new ideas, innovative business concepts and a straightforward approach to implementing these goals. The Netherlands is famous for its ability to actively promote healthy diversity by giving everyone a chance to achieve success in some way or another.

At Intercompany Solutions, we aim to assist starting and already existing entrepreneurs with their ambitions to do business in Holland. We can establish a Dutch company for you, a subsidiary or a branch office, depending on your specific preferences. We can also provide a variety of extra services, such as opening a Dutch bank account, applying for a VAT and EORI number, and numerous permits and visas.

Our package deals are tailor-made for you specifically, we work with clear rates that we communicate to you beforehand. Currently, we can offer a remote BV company formation deal for €1499 with no hidden fees whatsoever. If you're unsure on what you need in order to start a Dutch company, you can request a free consultation.

Please read on if you would like to know the difference between a Dutch sole proprietorship and a public limited liability company, or contact us directly for a personalized quote and advice.

What is a sole proprietorship in the Netherlands?

Many people in the Netherlands register a Dutch sole proprietorship (one-man company, or “eenmanszaak” in Dutch), whilst others choose to incorporate a BV (private limited liability company, or “besloten vennootschap” in Dutch). These two company types are by far the most popular choices, but which one is better for foreign entrepreneurs? It’s important to be aware of the fact that only Dutch tax residents can open a sole proprietorship. Therefore, this option is not recommended for foreign residents who are not planning on moving to the Netherlands. The Dutch BV, however, can be opened by a foreign resident entirely remotely and doesn’t require you to be a Dutch (tax) resident.

The Dutch company types explained in detail

It’s important to know the various available company types in the Netherlands, because this will make it easier for you to make an informed decision about the best-fitting option for your goals and ambitions. It’s important to note that some companies are considered legal entities, while others are not. This is also important for tax purposes, as you will have to pay different taxes. Next to that, registering a legal entity is different from registering an unincorporated entity.

You can read all about how to register a Dutch BV in this article.

Unincorporated entities

Incorporated entities

More about the sole proprietorship

If you want to start a company without business partners and operate mostly independently, then starting a sole proprietorship can be the easiest and fastest way. Keep in mind that you do run a private risk for your company's debts. A sole proprietorship is a business type in which you, as a natural person, are solely responsible for the management of your company. You are privately responsible for your business debts. For example, a freelancer or self-employed person is not an official legal form. If you consider yourself to be a freelancer or self-employed person, then you are usually registered as a sole proprietorship. Every natural person in the Netherlands can set up a maximum of one sole proprietorship. However, it is entirely possible to have multiple trade names, activities and branches, as there is no limit in this regard. Many entrepreneurs opt for a sole proprietorship because it is a relatively easy and cheap option. To start a sole proprietorship, you do not need to see a lawyer or notary, as the company type is an unincorporated one. You can literally start immediately from any place. You do need to be seen as a Dutch tax resident, so you will have to physically move to the Netherlands to start a sole proprietorship. This might prove to be difficult for many foreign investors.

Keep in mind that with a sole proprietorship, you are privately liable for all actions and debts. There is no distinction between your private and business assets and debts. This also means that if you are married in a community of property, then your partner is also financially liable for any debts. If you draw up a prenuptial agreement, you can limit this risk. Nonetheless, even despite a prenuptial agreement, separated assets can still be involved in a bankruptcy. Did you own a company before January 1, 2018, and did you subsequently marry or enter into a partnership in a limited community of property? Then the company falls outside this community, and your partner is not liable. If you start a business during your marriage or partnership in a limited community of property, then the company will become part of the community, and your partner will be liable. Keep that in mind when you want to establish a sole proprietorship.

What is the tax rate for the sole proprietorship in the Netherlands, and who is the considered to be the owner?

As the owner of a sole proprietorship, you are always authorized to sign any contractual agreement that you want to enter with the company. You are the sole owner and therefore the only one who is authorized to sign, with the only exception of giving someone else power of attorney in your name. This means that you may sign contracts on behalf of the company or carry out certain legal acts, such as reporting a change in the Dutch trade register. Sometimes it can be useful for your partner, a staff member or someone else to sign on your behalf. For example, if you are abroad on business. This can be done via the power of attorney that we mentioned earlier. In such a power of attorney, you can also elaborate on what the attorney may or may not do. You can then register the authorized representative in the trade register, which isn’t mandatory, but can be useful. This way, your business partners and all other third parties know for sure who is allowed to trade on behalf of the company.

As we have already discussed, you are personally liable for the debts of your sole proprietorship. In the case of debts, be aware of the fact that creditors can claim your private property, such as your house, car and savings. If your company goes bankrupt, you are basically also bankrupt. Inform yourself whether this is a risk that you are willing to take. A Dutch BV is much safer in this regard, as your personal assets are generally safe. Next to that, you pay income tax on the profit you make with your sole proprietorship. You have to keep all the financial data in your personal administration. If the tax authorities view you as an entrepreneur for income tax purposes, and you meet the hours' criterion, you are entitled to tax benefits, such as the self-employed person's deduction and SME profit exemption. As a startup, you can also take advantage of the starters' deduction for the first 3 years. These benefits can amount to several thousand euros per year. For VAT purposes, you are an entrepreneur if you independently carry out a business or profession. Another term for VAT is sales tax. Whether you pay or receive VAT back depends on the activities and size of your company.

What is the difference between a sole proprietorship and a BV in the Netherlands?

When choosing a company type. The best solution is the one that fits the aims of the business. The Dutch BV is a company with limited liability. This option is attractive since, in theory, the responsibility of the company members is restricted. But is this really the case in practice? Is it possible to operate a business without taking private responsibility for its outcomes? Not according to us. The general conditions with respect to liability insurance may actually even out the differences between the BV and the sole proprietorship. Having registered as a BV, you show your clients and partners that you own a reliable business, even if you are still operating alone. The sole proprietorship in the Netherlands is frequently associated with a business operated by a single person, but this perception is incorrect. The business’ capital is indeed owned by a single person, but the entity may have numerous employees. The BV has a series of fiscal rules involving the shareholder(s) and managing director(s). They regulate the distribution of salaries, the use of funds, and other matters that can significantly impact the final tax liabilities.

The sole proprietorship has few rules. The whole profit of the company is subject to tax, but significant credits are available. Therefore, an entrepreneur can generate a taxable profit of approximately 22,000 euros per year and be exempt from income tax for the first 3 years after the company’s establishment. Subsequently, the threshold drops to 18,000 euros. With BVs, every earned euro is subject to tax. The BV offers more options than the Dutch sole proprietorship. For example, there is the possibility of share transfers to another party if the business is sold. No tax on sales is due immediately for holding structures. Loan contracts can be concluded, internal pension obligations can be drafted, and so on. An entrepreneur can always switch from a sole proprietorship to a BV in order to sell the company or take advantage of other opportunities.

Let Intercompany Solutions establish your Dutch business for you

After reading this article, we suspect that the Dutch BV will have your preference out of all the company types. The BV offers many benefits, such as a relatively low corporate income tax, some clever tax exemptions and advantages, and the fact that you can establish a holding structure. If you want to open multiple companies, the holding structure is the best option for you.

We can establish a Dutch BV in just a few business days for you, making it possible to start your business activities almost immediately. You will gain your registration number immediately after the process. We work at clear rates, which we will discuss with you before we start. You can also opt for extra services such as opening a Dutch bank account, helping you with your administration, filing tax returns or sending applications for permits and visas whenever necessary. Look around on our website to discover the full palette of services that we have to offer, or contact our specialized team directly for professional advice.