A sole proprietorship is also called a one-man business or sole trader. Registering such a business guarantees your full independence as its owner and founder. The proprietorship can have more members working for it and employ staff, but its owner is only one.
Establish a Sole Proprietorship in the Netherlands
A sole proprietorship can be established without a deed prepared by a notary. It is mandatory, however, to register the business at the Trade Registry. Each private individual can establish only one sole proprietorship, but the proprietorship can have several trade names and perform various activities using the different names. These business operations can be performed at the registered address or at a branch of the sole proprietorship located elsewhere.
Company liability
The owner of a sole proprietorship carries the responsibility for everything relevant to the enterprise, i.e. all its legal acts, liabilities and assets. The law makes no distinction between business and private property. Therefore business creditors are free to require the recovery of any debts from personal property and vice versa – private creditors can require recovery from business property. In case the proprietorship faces bankruptcy its owner goes bankrupt as well. In case the owner is married under a regime of common property, the creditors are also eligible to claim the spouse’s property. Spouse liability may be avoided through an agreement prepared by a Latin notary and concluded before or after the marriage. Spouses, however, are generally asked to co-sign loan-related documents and the mentioned agreement may fail to provide the expected protection. Our agents in company incorporation can help you with further details regarding liability.
In order to decrease liability risk, many sole traders change their company type to a limited liability company, also known as B.V. Read our article: Establishing a Dutch company: Sole Proprietorship or B.V.
Tax & social security
For taxation purposes, the profit of sole proprietorships is considered as income. If the Tax Service considers the owner an entrepreneur, then he is entitled to investment, entrepreneurship and retirement allowances. The owner is not entitled to benefits for sickness, income and work, and unemployment insurance. It is best to cover such risks by taking out insurances. Sole proprietorship owners can use any of the national schemes for insurance listed below:
Tax & social security
With sole proprietorship, the law makes no distinction between business and private property. If the owner of the sole proprietorship dies, both his/her private and business property will be inherited by the heirs. It is advisable to ensure the continuity of your business in advance. Our tax experts can give you more information on the matter. Our experienced incorporation agents can consult you on company formation Netherlands.
The Dutch government obtains its revenue mostly by taxation. The Financial Ministry implements the national legislation on taxes and the Belastingdienst deals with its actual execution. You must pay taxes if you generate income while staying in Holland.
A brief history of taxation in Holland
Dutch people started paying taxes centuries ago. In the 1800’s the government guaranteed its income through taxation of indispensable goods like soap, firewood, salt, meat, grain, wine, coal, wool and peat. Back then all people were taxed equally regardless of their actual earnings.
In 1806 the Financial Minister at the time, Alexander Gogel introduced a general system for taxation. Income tax, or “inkomstenbelasting”, was adopted only in 1914. Its purpose is to tax everyone proportionally to their respective income, following the principle: “The more you earn, the more you pay.”
Twenty years later, in 1934, a tax on sales (omzetbelasting) was introduced. In 1968 it was substituted by the value-added tax on sales. In 1964 the government adopted the payroll tax, or “loonbelasting”.
The Belastingdienst (Dutch tax office)
The Dutch office for collection of taxes and customs is called Belastingdienst and it is within the structure of the Financial Ministry. Its responsibilities include:
- goods export, import and transit;
- fraud detection (economic, fiscal and financial);
- levying and collection of taxes;
- payment of income-related benefits for health care, rent and childcare.
The tax system in Holland
What common types of taxes will you encounter while working and living in Holland? Is it compulsory for you to submit a yearly return for income tax? This article will give you the necessary information about the tax system in the country.
Dutch tax advisors
It is not easy to calculate your taxes. This even applies to the majority of Dutch citizens and the tax requirements can be especially confusing for internationals. The revenue service acknowledges these difficulties in its own slogan: “There is no way to make it enjoyable, but with us, it’s easier.”
In case you need assistance with calculating your taxes and submitting the necessary documents, please, feel free to contact our advisors. They will be happy to help you out.
The 30% reimbursement ruling
Migrants with high professional qualifications who work in Holland might be eligible for 30% tax advantage. Check whether you meet the criteria for reimbursement ruling in this article.
Below are the answers to the most common questions regarding the 30% reimbursement ruling in the Netherlands:
When should I apply for the 30% reimbursement ruling?
Expats may apply for this tax advantage within 4 months after the conclusion of their employment contracts. For those applying after the 4-month interval, the ruling becomes effective on the month after the submission of the application. People who have been hired in the Netherlands for some time can also take advantage of the 30% reimbursement ruling but it will not apply to any previous years. The application processing period is case-dependent and may take from 1 to 6 months.
Is there a maximum duration for the 30% reimbursement ruling?
In the beginning of 2012, this period was set at 8 years. For applications approved before 2012, the period remains ten years. After 5 years the applicants may be requested to provide proof that they continue to fulfil the requirements of the ruling. Previous employment and stay in the country reduce the duration period of the reimbursement ruling.
In October 2017 the Dutch government announced its plans to reduce the duration of the 30% ruling from 8 to 5 years. Read more on the latest developments.
How can I maintain the 30% reimbursement rule when changing jobs?
It is not difficult to maintain this tax advantage, as long as the new employment starts no longer than 3 months after the termination of the previous one. The procedure for application must be repeated within 4 months from the beginning of the new job. The new employer has to provide a statement that the applicant possesses rare qualifications and expert knowledge.
What can I do if my application for the 30% reimbursement ruling is denied?
If the competent authorities deny your application, you can submit an objection within 6 weeks. If the decision remains the same, you can lodge an appeal.
How is the 30% reimbursement ruling applied to my salary?
The reimbursement is relevant to the gross salary agreed with the employer. Pension premiums are subject to different regulations. The rest of the benefits (bonuses, holiday allowances, etc.) are included in the ruling if they are considered as severance pay. This salary requirement is waved for researchers and other scientists working in the field of education, such as medical interns.
What is the definition of an “incoming employee”?
In the Netherlands, an incoming employee is a person who, before the beginning of his/her employment, has spent at least two-thirds of the past two years at least 150 kilometres away from the country’s borders.
How can I prove I possess valuable qualifications and expert knowledge on the background of the Dutch labour market?
University education and/or ample work experience can justify the high value of your skills in the labour market. Furthermore, your employer has to provide reasonable grounds (in written) for hiring you by stating your rare qualifications. Have in mind that since the beginning of 2012 the requirement for minimum salary has virtually replaced the skill requirement. However, for particular positions, you might still be asked to prove your qualifications.
Are there any negative consequences to the 30% reimbursement ruling?
The 30% tax reduction with respect to the gross salary leads to a significant decrease in unemployment and disability benefits, tax refunds (mortgage loans), pension, social security, etc, as these are mostly or even exclusively based on the taxable salary.
Characteristics of the Dutch Professional Partnership
In the context of the Dutch law, the “maatschap” or professional partnership is different from the other forms of partnership (general and limited) as it represents a cooperation of professionals, e.g. accountants, physicians, lawyers, dentists or accountants, and its main goal is not the joint performance of business activities. The partners in this form of cooperation are called “maten”. Each “maat” participates in the partnership by contributing personal assets, effort and/or capital. The aim of the cooperation is sharing both the earned income and the incurred expenses.
Establishing a Professional Partnership in the Netherlands
For the establishment of professional partnerships, the law does not require the conclusion of a contract between the partners. However, it is in the partners’ best interests to draft an agreement. The partnership agreement can include provisions related to:
- the contributions made by each partner;
- the profit distribution proportionally to the contributions (it is not possible to transfer all profits to a single partner);
- the distribution of powers: all partners can act as managers unless agreed otherwise. Since July, 2008, professional partnerships need to be listed in the Commercial Registry. This requirement is not relevant to internally acting partnerships, e.g. where expenditures are pooled together.
Partnership liability
Authorized partners can sign contracts binding the whole partnership. Each of the partners may be held equally responsible. Generally, if a partner acts beyond his authority, the remaining partners are not liable for his actions. Only the responsible partner is held liable. Professional partnerships do not have a capital that is separate from the partners’ personal assets. Creditors with claims towards the partnership may seek recovery of a proportionate part from each partner; such creditors are not ranked above ones with claims on the personal assets of any partner. Married professional partners are in the same position as general partners in VOFs or CVs. It is in their interest to conclude pre- or postnuptial agreements. Read more on Dutch bankruptcy law.
Social security and tax
Each partner is liable for income tax with respect to his/her share of the profit. If a partner is considered an entrepreneur by the Tax Service, then he/she can receive allowances for entrepreneurship, investment and retirement with deferred taxes. With respect to social security payments the rules for partners – entrepreneurs are the same as the ones for owners of sole proprietorships.
In case you would like to read on the Dutch general partnership click here.
Every Dutch company is required to subscribe at the Trade Registry of the Chamber of Commerce. This is a necessary prerequisite for VAT registration and fulfillment of other financial duties. The procedure is mandatory for all types of legal entities, including private limited companies, companies with limited liability, foundations and associations. Registration at the Chamber of Commerce is also mandatory for partnerships (e.g. general partnerships) and sole proprietors. The procedure for subscription at the Trade Registry involves the payment of a registration fee amounting to 50 Euros.
After the completion of the registration process, the Chamber of Commerce issues a registration number. Legal entities and associations also obtain an additional Identification Number (RSIN). Furthermore, company branches receive unique 12-digit establishment numbers.
After successful inclusion in the Trade Registry, the Chamber of Commerce transfers automatically the information of the company to the taxation system.
Meanwhile, your entity is also registered for Value Added Tax in the country. The VAT number is issued at the time of registration at the Commercial Chamber for sole proprietors and within several weeks for all other business forms: corporations, companies with limited liability, partnerships. Unless there are additional questions by the tax office to determine your VAT status.
The Netherlands VAT number
Once you have obtained your Netherlands VAT number registration, consider the following information about the Value Added Tax number you have received: it consists of fourteen characters starting with NL (the code of the country), continuing with the Identification Number or the Civic Service Number and ending with a three-digit code from B01 to B99. Your Dutch VAT number will be stated by the local tax authorities on the forms and letters they send you. In some of the forms, the authorities will use your general tax number. It is almost identical to the Value Added Tax number but lacks the country code.
VAT in the Netherlands
VAT rates in the Netherlands can be 0, 9 or 21%, depending on the case. If you are conducting business in a foreign country, the 0% rate might apply. For many services and goods, the country applies the reduced 9% rate (e.g. medicines, foods, housing reconstruction – paint and plaster). For all other services or goods, the authorities charge VAT at the general 21% rate. Some activities within the scope of certain industries are not subject to VAT, i.e. an exemption has been granted. These include journalists, writers, composers and cartoonists, collective interests, insurance and financial services, healthcare, fund-raising, gambling, education, childcare, television and radio, sports clubs and organizations.
If you need more detailed information and help with VAT registration in Holland, please, contact our local team of lawyers. You can also read more on taxation in the Netherlands.
Updated: 6 February 2024
Franchising is a contractual mechanism through which an entity (franchisor) issues a paid license for use of its business practices and systems and/or its commercial name to another entity (franchisee).
Dutch laws on franchise agreements
The Dutch legislation does not address franchise agreements specifically, so the general provisions of the law on contracts and competition applies. Franchising agreements are usually complex and are therefore concluded in writing. One should consider the following common principles when preparing a franchise agreement under the laws of the Netherlands:
1. Franchise contracts are not a subject to specific national regulations.
2. The general Dutch law on agreements stipulates the guiding principle of fairness and reasonableness (“billijkheid en redelijkheid” in Dutch).
3. The party from the Netherlands has to provide information about its business to the Trade Registry (also known as the Commercial Chamber of Commerce).
Obligations and rights of the franchisee / franchisor
The franchisor carries specific obligations of care under the agreement because of the peculiar nature of the franchising mechanism. These obligations include the provision of some assistance and advice to the franchisee. The Dutch legislation does not require mandatory disclosure of pre-contractual information. The principles of fairness and reasonableness, however, still apply. As a consequence, the parties are required to take all reasonable measures to prevent the other contracting party to conclude an agreement on the basis of misleading information.
Furthermore, the franchisor does not have to provide exploitation forecasts to the franchisee. Please, keep in mind, that once provided, any information is deemed truthful by the other party. Thus the provision of exploitation forecasts that are overly optimistic or not substantiated by a thorough research of the market may result in franchisor liability.
The law in the Netherlands does not include specific provisions with respect to franchise fees, royalties, clauses to prevent competition, advertising and reporting obligations, so the contracting parties have the freedom to determine the extent of the franchisee’s obligations.
Example case study: Franchise
Some very well known examples of famous franchise chains include big names, such as Starbucks, Mcdonalds, KFC, Subway and Hertz. The big names have been featured in many media, articles, movies and are famous succes stories.
However, how often do we hear about the smaller franchises? The ones that fail, or the ones that never really take off?
One such example is Taxexpertz. Which was a small franchise chain for tax preparation that started in 2014 in the United States. The cost for startup of one branch was around 50.000 USD. Taxpertz is not an active franchise anymore, and halted its operations.
To start a Taxexpertz is a fraction of the cost of opening a McDonalds, which is between 1.000.000 USD and 2.200.000 USD for the initial investment (2019). As well as a franchise fee of 45.000 USD per year, and a service fee of 4% of the sales turnover.
What is the difference between these two concepts? Why did McDonalds conquer the globe? Despite much higher investments?
Learning curve
The learning curve of managing a McDonald is arguably much lower than that of a Taxexpert. The relevant tax legislation in each state, country and year has to be known by the franchisees.
Quality management
Because of the specific knowledge required for each Taxexpertz branch, the managements task to create some uniform quality level, and build an expert name is much more difficult.
In the accounting and tax branch, we have seen that all multinationals in the big 4 are partnerships, not franchises.
Perhaps this indicates that it is much easier to work with a central structure in expert branches.
Brand name
With Mcdonalds, you are investing currently in a well known concept, a brand name that every household in (at least) the Western World knows. You are guaranteed to have a steady amount of customers. You profit from the collective marketing budget of McDonalds.
Succes rate
You can reliably predict beforehand how the franchise will perform. The franchise organisation will have market research statistics, branding, supply contracts and branding in place. Your succes with opening a Mcdonalds is nearly guaranteed before you even install the first grill.
Keep in mind before starting a franchise, what does the franchise bring to the table. And does it provide enough value for your business to succeed.
Agreement termination under the Dutch law
The contracting parties are free to determine the grounds on which agreement termination is allowed. If they have not drafted any rules for termination, fixed-term agreements cannot be cancelled unless unforeseen circumstances arise. Agreements concluded for indefinite periods can, in principle, be terminated with reasonable advanced notice. The period considered reasonable for advanced notification may vary depending on the particular circumstances.
Annulment is another way to terminate a contract. Art. 6:265 in the National Civil Code states that default by one of the parties gives the other the option to cancel the agreement if the nature of the default justifies annulment. Art. 6:228 of the same Code also gives the option to declare the contract void on the grounds of an error (“dwaling” in Dutch).
It should be noted that even when an agreement is legally terminated some losses may be considered outside of the margins of the franchisee’s acceptable business risk and may require compensation.
In case you have questions regarding franchise agreements under the law of the Netherlands, please, feel free to contact our Dutch law firm. We can assist you with company incorporation, tax preparation and drafting your franchise agreements.
You can also check our article on use and protection of intellectual property in the Netherlands. In the article, you will find information on patents, trademarks, trade names and copyrights in the Netherlands.
The Venootschap Onder Firma (VOF) or General Partnership is a company established by a minimum of 2 members through an agreement registered with the Commercial Chamber (Trade Registry). This entity is commonly translated as “company with partners”. The General Partnership should not be confused with the Professional Partnership which represents cooperations of professionals where the main goal is not the joint performance of business activities.
Main features of the Dutch VOF (General Partnership)
Each of the partners must make a contribution to the common business, e.g. goods, money, labour or knowledge. In contrast to other entities in the country, the VOF is not required to have a minimum capital to operate.
Another important feature of the Dutch General Partnership is connected with the liability of its members. Each involved partner is liable for the company’s debts even when they are created by another partner in the VOF. For this reason, the partnership contract needs to be drafted and concluded in the presence of a notary.
As regards taxes, the contract needs to be submitted to the Commercial Chamber. Each of the partners has to pay income tax with respect to their profit share much like an independent entity. Therefore each partner has separate tax deductions and allowances.
The VOF agreement must state the authority, contributions, shares and resignation arrangements with respect to the profits. It also needs to include a formula for profit allocation. Such contracts can be drafted by a notary or the members of the partnership with the help of a model agreement.
Dutch VOF: Company Liability
The partners in a VOF carry joint and several liability with respect to the debts of the company. If the partnership’s assets are insufficient to cover the debts, creditors have the right to claim its members’ personal assets.
If the partners are spouses with no marriage settlement, creditors have the right to claim the assets of both spouses. If a settlement exists, only the assets of the spouse in debt are considered to fall in the scope of the business. In a business partnership between a husband and wife, both spouses can claim allowances if they undertake to perform equal shares of the tasks.
If you would like to receive further details regarding the Dutch General Partnership, please, contact our local company advisors.
Dutch VOF: Records and accounts
With respect to records and accounts, the Dutch law states that all persons involved in business or exercising independent professions are obliged to keep financial records and accounts and to store documents, books and other information carriers connected to those records and accounts. In a VOF, each partner has to prepare a yearly balance table and a statement of income.
Read here if you would like to explore other company types, such as the sole proprietorship and the private limited company in the Netherlands.
The Netherlands uses a value-added tax system (short: VAT). This system is very similar to the system that is used in other states of the European Union. Not all transactions are subject to VAT, but in Holland, it is very common to charge this value-added tax. The regular tax rate is 21%, and this rate is charged on (almost) all goods and services by businesses within Holland.
If products are imported from outside of the EU, this VAT rate may also apply. Holland also has a lower rate. This rate was 6% until 2019. The rate has been increased to 9% as of 2019 and it applies to specific goods and services, for instance, food products, medicine, art, antiques, books, entry to museums, zoos, theatres, and sports.
Read here for more information on the Dutch tax system.
VAT exemptions Netherlands
Of course, the Netherlands also has a number of exemptions. Visible exports are among those. These are zero-rated. There are also some exemptions for special goods and services, mainly medical, cultural, and educational services. If VAT exemptions apply, you don't have to pay the tax, and you cannot deduct it.
It is not possible to claim a refund of the VAT that is charged over the costs and investments that are related to the goods and services that fall under the VAT exemptions. Goods and services that are exempted from VAT are: letting or selling immovable property (provided that it is > 2 years old), healthcare services, childcare, care services and home care and others.
Are there any other tax exemptions in the Netherlands?
These aren't the only tax exemptions in Holland. Other tax exemptions are sports organisations and sports clubs, services supplied by sociocultural institutions, financial services and insurances, services supplied by composers, writers, and journalists, education, and fundraising activities.
There is also an agricultural scheme in place, which applies to agricultural and livestock farmers, foresters, and market gardeners. All the goods and services that are provided by these entrepreneurs are also exempted from VAT. This scheme is called 'Landbouwregeling'. All other tax exemptions in Holland can be requested from the Dutch tax office.
VAT rate for foreign entrepreneurs
If you are doing business in Holland, but your business is established outside the Netherlands, you will have to deal with the Dutch regulations. If the service or product you provide is supplied in the Netherlands, you usually have to pay value added tax here. However, in reality, the tax is often reverse-charged to the person who receives the service or product.
If this is not a possibility, you have to pay the value added tax in Holland. Reverse-charging VAT is possible if your client is an entrepreneur of legal entity, established in the Netherlands. In that case, you can exclude the tax from your invoice and state 'VAT reverse-charged'. You are allowed to deduct the tax charged over any costs related to this transaction.
More information about the Holland VAT rate
The value-added tax rate in the Netherlands is rather straightforward. However, there are some exceptions that can make it harder to understand every little detail. If you want to be sure you are doing everything right, it would be best to hire a consultant who can guide you through the process. Intercompany Solutions, for example. We can help to set up your business in Holland.
We provide corporate solutions for investors and companies worldwide and serve international clients who are interested in company formations and corporate services. We help entrepreneurs with all aspects of their company setup. Read more on setting up a business in the Netherlands.
