If you want to start a company in the Netherlands as a foreigner, there are different sets of rules you will have to comply to. When you are a resident of the European Union (EU), you can generally set up a business without any permits or visa. If you come from a different country, however, there are extra steps you need to take in order to be able to legally start a company in an EU country. Since Turkey still hasn’t joined the EU fully, this also applies to you, if you are a Turkish resident who wants to own a Dutch business. Nonetheless, it’s actually not so complicated to achieve this. You will have to obtain the proper visa and prepare the necessary documentation. Once you have this, the business registration process only takes a few business days to complete. We will describe the steps you will need to take in this article, and how Intercompany Solutions can support you with your endeavor.
What is the Ankara Agreement exactly?
In 1959, Turkey applied for a membership of association with the European Economic Community. This agreement, the Ankara Agreement, was signed on the 12th of September 1963. The agreement stipulates that Turkey may eventually accede to the Community. The Ankara Agreement also laid the foundations for a toll union. The first financial protocol was signed in 1963 and the second followed in 1970. It was agreed that in time all tariffs and quotas between Turkey and the European Economic Community would be abolished. It was not until 1995 that the treaty was concluded and a customs union was established between Turkey and the European Union. The Ankara Agreement of 1963 between Turkey and the EU and the Additional Protocol contain, among other things, some rights in favor of Turkish entrepreneurs, highly educated employees as well as their family members.
Although these rights in favor of Turkish citizens exist, it can still be a bit difficult to organize everything in a country that is foreign to you, and has a bureaucracy very different from the Turkish system. Having someone guide you through the procedure will not only ease your burden, but you can also avoid unnecessary mistakes and wasted time. Please keep in mind, that starting a foreign business always comes with certain responsibilities and risks. For example, you should become acquainted with the national tax system of the country you would like to establish a business in. You will be required to pay Dutch taxes when you operate within the Netherlands. The upside is, that you will be able to profit from the European Single Market and thus, can transport goods and offer services freely within the borders of the EU.
What kind of business can you start in the Netherlands?
If you have been thinking about owning a business in the EU, then you probably already have a basic idea about the type of company you would like to start. The possibilities are actually very broad, as Holland thrives in many ways. The Dutch continually strive for innovation and advancement throughout various sectors, which will make it possible for you to benefit from the healthy and stable corporate climate. Next to that, the corporate tax rates are beneficial compared to many neighboring countries. Furthermore, you will find a highly educated and mostly bilingual workforce in the Netherlands, This means you will find high quality employees easily, certainly now the job market has opened up. Next to contracting people, you can also choose to hire freelancers to do some extra work for you. Since the Netherlands are extremely well-connected to the rest of the world, it will be very easy to start a logistics company or other type of import and export company. You have the port of Rotterdam and Schiphol airport within a maximum of two hours travel within your vicinity, which enables you to swiftly transport goods all over the world.
Some company ideas that you might consider:
- Logistics
- Import and export
- Small businesses such as shops and restaurants
- Catering services
- An online company offering services
- Tech companies are also highly sought after
- A pharmaceutical company
- A company focused on health and well-being
- A legal or consultancy firm
- A webstore / Ecommerce
- A drop-shipping company
- An artistic endeavor such as graphic design or music label
These are just a few suggestions, but the possibilities are nearly limitless. The main requirement is that you are ambitious and willing to work hard, since you need to take into account that you might have a lot of competition. We strongly advise creating a good business plan, in which you do some marketing research and include a financial plan. That way, chances are greater you can find a third party to finance you, if you need extra funds to start your business.
Benefits of owning a Dutch business
As we already discussed above, there is a lot of potential to start a successful company in Holland. Next to being a trade country, the infrastructure in the Netherlands is considered to be one of the best in the world. Not just the physical roads, which are excellent, but also the digital infrastructure. The Dutch have invested a lot of time and effort into connecting every household to a fast internet connection, so you won’t ever have connection problems. The country is economically and politically stable, plus the cities are considered to be very safe compared to many other countries. The Dutch also have many bi- and multilateral agreements with other countries, which prevent double taxation and other issues that might negatively impact your business. This allows you to focus on your main objectives, as opposed to being worried about certain problems that might arise. Lastly, the Dutch are ambitious and like to work alongside foreigners. You will feel welcome and able to meet many like minded entrepreneurs to potentially do business with.
The visa and permits you might need
If you want to start a business as a Turkish resident, there are two things you will need:
- A 'start-up' residence permit
- A long stay visa (mvv). There are some exemptions to this last requirement, which you can find here.
The general requirements for the permits you need are as follows:
Requirements
- You meet the general requirements that apply to everyone.
- You work together with a reliable mentor: a facilitator. This cooperation must be written down in a signed contract between you and the facilitator.
- Your company is innovative in the following situations:
- The product or service is new to the Netherlands.
- The start-up uses new technology in production, distribution and/or marketing.
- The start-up has a new way of working and organizing.
See the website of the Netherlands Enterprise Agency (in Dutch: Rijksdienst voor Ondernemend Nederland or RVO) for more information on innovative entrepreneurship.
- You play an active part in the organization. This means that you must be more than just a shareholder or financier.
- You have a step-by-step plan to go from idea to company. The RVO assesses the start-up and sees whether you meet the requirements for the step-by-step plan. The step-by-step plan sets out the following information:
- The structure of the organization
- The roles and responsibilities
- The legal form
- The personnel
- The company’s goals
- A description of your innovative product or service
- A description of the planning and activities involved in setting up the company
- You and the facilitator are registered in the Trade Register of the Chamber of Commerce (in Dutch: Kamer van Koophandel or KvK).
- You meet the income requirements. This can be proved in 2 different ways:
- You can show a bank statement demonstrating that you have enough money in your account.
- Having another legal entity or natural person, for example the facilitator, finance your stay. The amount of money must be available for your entire stay (1 year at most).
Requirements for facilitators
The RVO keeps a list of facilitators who meet these requirements.
- The facilitator has experience with mentoring innovative start-ups.
- The facilitator is financially healthy.
- The facilitator has not been granted suspension of payment or been put into liquidation and has no negative equity capital.
- The facilitator does not have a majority interest in the start-up company.
- The facilitator is not your child, parent, grandparent, uncle or aunt (family up to and including the third degree).
- The facilitator has a deputy within the organization.[1]
We understand that this can be a bit complicated for someone who has never done business in the Netherlands before. Therefore, Intercompany Solutions can support you with setting up your Dutch business from A to Z. We have a specialized immigration lawyer who can assist you in obtaining the necessary visa and permits, when it turns out you will need these to settle here.
Intercompany Solutions can assist you with the entire business establishment process
Thanks to our experienced team, our company has already successfully established more than 1000 businesses in the Netherlands. All we need from you is the correct documents and information, and we take care of the rest. Once your company is registered at the Dutch Chamber of commerce, you can start your business activities immediately. We can also help you out with extra services, such as opening a Dutch bank account, looking for a suitable location for your offices, your periodical and yearly tax return and any legal issues you might confront along the way. Feel free to contact us for more information about the process, we will gladly share all you need and aid you in your journey towards entrepreneurship.
[1] https://ind.nl/en/residence-permits/work/start-up#requirements
If you want to start a company in the Netherlands as a foreigner, there are different sets of rules you will have to comply to. When you are a resident of the European Union (EU), you can generally set up a business without any permits or visa
There is currently a lot of movement globally, when it comes to doing business. The recent changes in the world and political and economic unrest have resulted in massive company relocations. This doesn’t just entail small businesses, as many well-known multinational corporations have also established headquarters and branch offices in Europe. The Netherlands remains one of the most popular countries to relocate to. We have seen a growing trend in this direction during the past decades, which isn’t going to change anytime soon. This is not entirely without reason, either, since the Netherlands is still one of the most economically and politically stable countries in the world. If you are serious about starting a new business or expanding your current one, then the Netherlands might actually be one of your safest bets. We get many questions from aspiring entrepreneurs regarding the steps they should take when they decide to open a business, or expand overseas. We have collected the most vital information that might benefit you, if you have such aspirations. Read on for helpful tips and tricks to start a business in the Netherlands, including information that will make the transition much easier. If you have any questions about this subject at all, please feel free to contact Intercompany Solutions with your queries.
1. How do I choose an industry to operate in?
One of the main components of success is choosing the right type of business. If you already own a successful business and simply want to expand your company internationally, you can skip this step, as it mostly applies to starting entrepreneurs. If you have plans to start a company, you should think about all the possible options. Some factors you can consider are as follows:
- What is your main field of expertise?
- Which type(s) of education have you successfully completed?
- Do you have any particular fields of interest that you are drawn to?
- Which industries excite you?
- How many languages do you speak?
- Are you able to import, export, and stock goods, or would you rather solely offer services?
- What is the reason that makes you want to do business internationally?
- What can you offer that isn’t already offered in the Netherlands?
It is very important, that you choose a business type that you are already familiar with. If you start something entirely new, you will have to spend a lot of time learning everything about the industry, whilst there will also be a great risk of making mistakes and competitors doing better than you. Even when a certain industry seems like a great possibility for success, always keep in mind that your current knowledge, expertise, and experience play a huge role in the potential success of your future company. Make sure that you know what you are doing, and choose an industry that matches your work and educational history. This way, you solidify your path to owning a stable business.
2. Picking a location for your business
Once you have decided on the type of company you want to start, you will need to figure out where you want to geographically position your company. This is also an important step for already established business owners, who are looking for ways to expand. One of the main factors that plays a large role in this choice is where your business partners and clients are situated currently. For example, if you already have a lot of Dutch clients, or if you have a Dutch supplier that you have worked with for a while, opening a branch office in the Netherlands is a logical step, since this will significantly shorten the duration of transport to your location. This can save you a lot of time and money when buying and selling goods. If you want to open a location that has easy access to modes of transportation, the Netherlands is the perfect country to settle in. The physical infrastructure in Holland is considered one of the best in the entire world, both in terms of regular roads and railways. Also note that the port of Rotterdam and the airport of Schiphol are situated less than 2 hours away from each other. This offers any logistics business plenty of fruitful opportunities. If you also want to hire personnel, you should consider buying or renting a place near a city, such as Amsterdam. It will make it much easier for you to hire experienced and highly-trained staff.
3. Finding solid business partners and other connections
A hugely important factor that will determine the potential success of your business, is the quality of your network and business partners. Setting up a business alone isn’t enough, as you will need clients and suppliers to function on a daily basis. Many entrepreneurs struggle with the question whether they should start a company all by themselves, or team up with others. For example, you can start a franchise business if you have no experience at all. Often successful brands offer the possibility of setting up a new affiliate or branch office, which means that you will be provided with most necessities during the start. You won’t have to fund anything, nor will you be solely responsible for staff and supplies. It might provide you with a solid foundation purely for experience, which you can use to set up your own company later on. Do keep in mind, that starting a franchise might encompass a non-competition clause in the years after. So if you have serious plans that revolve around your own unique ideas, you might benefit more from following those.
Another option is to set up a company with people who are already acquaintances or colleagues. In this scenario, you become business partners and share the profits. If you can all contribute something significant to the company, it will make your daily activities much easier since you share all the burdens. A potential pitfall (as always) is trust: do you trust the people you choose as business partners enough, to delegate certain tasks to them? Of course, you can minimize risks by setting up solid contracts between the partners, but the essential question remains if you haven’t known each other for a long period of time. Consider the benefits and risks, before you make a definite decision. If you already have extensive experience, it is worthwhile to consider starting a business by yourself. There are many helpful sources of information on the internet that you can use to run and advance your company. If the tasks at hand seem too much for one person, you can always hire personnel, or outsource some of the work to other freelancers. Finding clients has also never been easier, due to the ease with which you can find someone online. Be sure to check out any reviews about a company or individual, for example, on Trustpilot. These will tell you everything you need to know, when it comes to trusting someone with your business. Once you have accumulated the necessary people around you, you can move on to further steps to implement your business.
4. The positive effects of a business plan
One of the most important parts of establishing a business is the creation of a business plan. We literally cannot stress enough how important this step is. A business plan is generally created to be able to acquire financing for your company, but it is actually much more valuable than that. When you start making a business plan, you will be forced to look at your business ideas under a microscope. You will have to answer questions such as:
- What is the main goal of my business?
- What kind of education and experience do I have that matches my business aspirations?
- Am I experienced enough to be a business owner?
- How will I be able to carry out my daily business activities?
- Which other companies are already doing what I want to do, and how can I compete against them, or even outshine them?
- How will I market my company and position it?
- How much money will I need to set up the company?
- Do I already have money, or will I need financing?
- Who will I closely work with?
- Where do I see myself in one year, three years, and five years?
These and various other related questions will be answered in full in a business plan. This way, you can create a solid overview of your plans, plus you will find out whether you can actually accomplish everything you want. If there are any discrepancies in your ideas and plans, the business plan will highlight them, so you will need to find alternative solutions if something doesn’t add up. Once you have created a business plan, you can use it to send it to banks and investors, but you can also keep it for yourself and update it every year, to see if your company is doing well. It is also smart to update the plan every three years, for example, with new goals you have set for yourself. This way, you also keep your company up-to-date regarding the latest developments within your field of expertise. We will discuss this in a later paragraph in detail.
5. Keep a solid administration at all times
When you start a company in the Netherlands, it is of the utmost importance that your administration is in order. Starting a business overseas means that you won’t only have to pay taxes in your home country, but also in the country you do business in. This means, that it would be wise to inform yourself about your responsibilities in this regard before you start doing business. For example, you can easily avoid double taxation by knowing your rights and duties towards each country. If you plan to do business internationally, it is also advisable that you look at bilateral and translateral tax agreements. These contain valuable information about who is responsible for paying taxes and where. If you trade within the European Union, you benefit from the European Single Market and, thus, don’t have to pay VAT if you do business within member states. This also saves you plenty of time and money at customs. In the Netherlands, as a business owner, you are obligated to keep an administration at all times, and you also need to keep an archive of the past seven years of business. If you don’t comply with national tax laws and regulations, this can result in hefty fines and, in extreme cases, even incarceration. Most business owners outsource their yearly and quarterly tax returns since this saves them a large amount of time and effort on a structural basis. We also strongly advise, that a trusted and experienced third party handle your administration. If you are looking for a reliable bookkeeper or accountant, feel free to contact Intercompany Solutions. We can take care of many issues for you, or redirect you to one of our partners.
6. The power of connecting with others
Once your company is established, but also in the phase before, you should try to build your professional network as well as you can. In the world of business, knowing people can be the difference between catastrophe and success. You don’t just network to potentially gain projects; you network to meet like-minded individuals, who can help you build your company on firm foundations. One of the main benefits of knowing many people, is that you almost never have to search online for certain companies, goods, or services. People can generally direct you to others they have successfully worked with in the past, limiting the risk you take when you take on new business or suppliers. Furthermore, by expanding your circle of acquaintances, you can also meet people who might have similar ideas. This can enable you to start new business opportunities, or maybe combine forces to establish an entirely new company or foundation. People are generally stronger in larger numbers, so building a solid network is a definite lifesaver. The added plus, is that you actually do often get new projects via your network, especially when people tend to like you. Mouth-to-mouth advertising never died; it is still very much alive and kicking. Once you gain the trust of the people you meet, doors will open that you never knew might exist. A massive benefit of the internet, is that you don’t have to physically attend network events anymore, to be able to meet new people. There are plenty of workshops, talks, and events online that you can join from the comfort of your own office or house.
7. How to stay up-to-date regarding the latest developments
The previously mentioned network will generally also aid you in staying up-to-date regarding important developments within your market or niche. Since digitalization, the pace of doing business has increased, and thus, it’s quite necessary to be able to stay on top of trends if you want to be taken seriously. This will obviously vary depending on the market you operate in, but due to rapidly changing laws, regulations, and digital advancements, you should consider new developments a priority. One way to do this, is to read the news, of course. But there are many other possibilities nowadays, such as online seminars and workshops, newsletters from trusted sources, and education. Even if you are fully trained in your field of expertise, it is always a good idea to invest in new knowledge to make your company future-proof. We also advise looking into the possibilities of working together with other companies, as you might come up with fusion-type solutions to solve current problems. Also, you can try to expand your knowledge to similar markets, which in turn might enable you to expand your business as well. Staying on top of developments is a must for every serious entrepreneur.
Intercompany Solutions can establish your Dutch company in just a few business days
The abovementioned tips are pretty straightforward, as they basically apply to every starting entrepreneur in the Netherlands. Nonetheless, it’s important to follow these tips if you want a smooth and easy start for your business. Of course, there are many other things you should take into account when starting a company, such as the possibility of hiring employees or freelancers, finding a suitable location and office space, and taking care of the actual business registration process in the Netherlands. Intercompany Solutions successfully registers hundreds of companies on a yearly basis, which is why we can arrange the entire process for you in just a few business days. We can also help you out with various other necessary tasks, such as opening a Dutch bank account, taking care of your yearly and quarterly tax returns, providing you with financial and legal advice, and many other services to aid you during the establishment process of your new Dutch business. If you have a specific query, please do not hesitate to reach out to us. We will gladly help you in any way we can.
When you aspire to start a business overseas, you should take into account that you will be subjected to entirely new international laws and regulations, which are often much different than the prevalent ones in your home country. This means, that you should always research the country you would like to establish a new business in, as you will need to adhere to national and international laws if you want to run a successful and legally correct business. There are a few important Dutch laws that apply to (certain) business owners. One such law is the Anti-Money Laundering and Terrorist Financing Act (“Wet ter voorkoming van witwassen en financieren van terrorisme”, Wwft). The nature of this law is quite clear, when you look at its title: it is meant to prevent money laundering and financing terrorist organizations by starting or owning a Dutch business. Unfortunately, there are still criminal organizations around that try to funnel money via dubious ways. This law aims at preventing such activities, since it also ensures that Dutch tax money ends up where it belongs: in the Netherlands. If you are interested in starting a Dutch business (or you already own such a business) that generally deals with cash flows, or with the purchase and sale of (expensive) goods, then the Wwft will also be applicable to you as a business owner.
In this article, we will outline the Wwft, provide you with all necessary details and also provide you with a checklist, to find out whether you are adhering to the law. Due to pressure from the European Union (EU), several Dutch supervisory authorities, such as the DNB, AFM, BFT and Belastingdienst Bureau Wwft) must monitor compliance more strictly by using the Wwft and the Sanctions Act. These Dutch regulations apply not only to large, listed financial institutions and multinationals, but also to small and medium-sized enterprises that provide financial services, such as asset managers or tax advisors. Especially for these smaller companies, the Wwft can seem a bit abstract and hard to follow. Next to that. The regulations might also seem quite intimidating to less experienced entrepreneurs, which is why we aim to clarify all the requirements, so you know where you stand.
What is the Anti-Money Laundering and Terrorist Financing Act and what does it mean for you as an entrepreneur?
The Dutch Anti-Money Laundering and Terrorist Financing Act mainly aims at the prevention of money laundering by criminals, with money earned through illegal activities, via due diligence performed by banks and other financial institutions. This money could have been earned through various nefarious criminal activities, such as human or drug trafficking, scams, and burglaries, amongst others. When criminals then want to put the money into legal circulation, they generally spend it on excessively expensive purchases, such as houses, hotels, yachts, restaurants, and other objects that can ‘launder’ the money. Another goal of the regulations is the prevention of financing of terrorists. In some cases, terrorists receive money from individuals to continue their activities, very much like political campaigns are subsidized by wealthy individuals. Of course, regular political campaigns are legal, whereas terrorists operate illegally. The Wwft thus provides more insight into illegal financial flows, and the risk of money laundering and terrorist financing is limited this way.
The Wwft mainly revolves around customer due diligence and a reporting obligation for businesses when they notice strange activity. This means it’s extremely important to know who you're doing business with and to map out your current relationships. This prevents you from unexpectedly doing business with a company or an individual, who is on a so-called sanctions list (which we will explain in detail later in this article). The law does not literally prescribe how you must conduct this customer due diligence, but it does prescribe the result that the investigation must lead to. Needless to say, you, as a business owner, decide which measures you take in the context of customer due diligence. This will depend on the risk of money laundering or terrorist financing of a particular customer, business relationship, product, or transaction. You estimate this risk yourself by putting a solid due diligence process in place whenever you aspire to attract new customers. Ideally, this process should be both thorough and practical, making it easier for you to scan new clients within a reasonable amount of time.
The types of businesses that deal directly with the Wwft
As we already briefly discussed above, the Wwft doesn’t apply to all businesses in the Netherlands. For example, a baker or thrift store owner will not be at risk of dealing with criminal organizations that want to launder money via his or her company due to the small prices of the products offered. Laundering money that way would imply that the criminal organization would have to buy the entire bakery or store, and this would simply attract too much attention. Therefore, the Wwft principally only applies to businesses and individuals that deal with large financial flows, and/or the purchase and sale of expensive goods. Some clear examples are:
- Banks
- Brokers
- Notaries
- Tax advisors
- Accountants
- Lawyers
- Employees in the public domain
- (Expensive) car salesmen
- Art dealers
- Jewelry stores
- Popular restaurants and hotel chains
- All other businesses and organizations where large sums of cash can flow through without the tax authorities noticing discrepancies.
These service providers and businesses generally have a good view of their customers due to the nature of their work. They also often have to deal with large amounts of money. Therefore, they can actively prevent criminals from using their services to launder money or pay for terrorism, by investigating new clients and making sure they know who they are dealing with. The exact institutions and persons that are covered by this law is set out in Article 1a of the Wwft.
The institutions that supervise the Wwft
There are multiple Dutch institutions that work together, to be able to supervise the correct application of this law. This is divided by sector, to make sure the supervisory organization is acquainted with the work of the businesses and organizations they are supervising. The list is as follows:
- The Ministry of Finance is responsible for creating policies and rules against money laundering and the financing of terrorists. For each sector, a supervisor checks whether all parties comply with the Wwft.
- The Ministry of Justice and Security is jointly responsible for creating policies and rules against money laundering and the financing of terrorists. For each sector, a supervisor checks whether all parties comply with the Wwft.
- The Bureau of Supervision Wwft of the Dutch Tax Authorities supervises brokers, appraisers, traders, pawnshops, and domicile providers. These are parties that make it possible to do business from an address other than your home or business address, or offer a postal address for your business activities. This makes it easier for individuals to stay anonymous, which is why this is checked.
- The Dutch Bank supervises all banks, credit institutions, exchange institutions, electronic money institutions, payment institutions, life insurers, trust offices, and landlords of lockers.
- The Netherlands Authority for Financial Markets supervises investment firms, investment institutions, banks, and financial service providers that take out life insurance.
- The Financial Supervision Office supervises accountants, tax advisers, and notaries.
- The Dutch Bar Association supervises lawyers.
- The Gaming Authority supervises gaming casinos.
As you can see, the supervising institutions are well-matched with the organizations and companies they supervise, allowing for a specialized approach. This also makes it much easier for company owners to contact one of these supervising institutions, since they generally know all about their specific niche and market. If you are in doubt about the steps you need to take, you can always contact one of these institutions for help and advice.
What specific obligations are connected to the Wwft when you are a Dutch business owner?
As we briefly discussed above, when you fall under the categories of businesses specifically mentioned in Article 1a of the Wwft, you are obliged to research your customers, and where their money comes from, through customer due diligence. If you see anything out of the ordinary, you need to report unusual transactions. Of course, to be able to adhere to these regulations, you will need to know what due diligence according to the Wwft actually means. In customer due diligence, institutions that fall under the Wwft always need to investigate the following information:
- Their client’s identity
- The source of their client’s money
- What exactly are the clients spending their money on?
You are not only obliged to research these matters, but you also need to continually monitor your clients' progress on these subjects. This will, amongst other things, provide you as an organization with the necessary insight into unusual payments made by clients. However, the correct way to perform due diligence is entirely up to you, there are no strict standards mentioned. It largely depends on your current processes, how you can implement due diligence to fit these processes, and how many people will be able to perform due diligence. The way you carry this out also depends on the specific client and the potential risks that you, as an institution, see. If the due diligence does not provide sufficient clarity, the service provider may not carry out any work for the customer. So the end result needs to be conclusive at all times, in order to prevent the facilitation of illegal activities via your company.
The definition of unusual transactions explained
To be able to carry out due diligence, it is logically important to know what kind of unusual transactions you are looking for. Not every unusual transaction is illegal, so it is important to know the difference, before you accuse a client of something they potentially never did. This might cost you clients, so try to be balanced about your approach in order to adhere to the law, but still manage to be attractive to potential clients as an institution. You do want to keep making profits, after all. Unusual transactions generally include (large) deposits, withdrawals, or payments that do not fit into the normal process of an account. Whether a payment is unusual, the institution determines on the basis of a list of risks. This list varies by institution. Some common risks that most institutions and companies are on the lookout for are:
- Unusually large cash withdrawals, deposits, and cash payments
- Money exchange transactions of unusually large amounts
- Large transactions that cannot be explained by the ordinary business operations of a customer
- Payments to a high-risk country or a war zone
- Transactions that are aimed at acquiring unusual goods or products, out of the ordinary acquisitions.
This is a rather crude list, as it’s the general basics every company should look out for. If you would like to have a more extensive list, you should contact the supervisory institution that your own organization falls under, as they can probably offer a more extensive summary of unusual client activity to watch.
What can clients expect regarding due diligence due in line with the Wwft?
As we already explained extensively, the Wwft obliges institutions and companies to know and investigate every customer. This means that almost all customers have to deal with standard customer due diligence. This applies whenever you want to become a customer at a bank, or apply for a loan, or make a purchase with a hefty price tag—activities related to money in any case. Banks, and other institutions that offer services that fall under the Wwft, can ask you for a valid form of identification to begin with, so they know your identity. This way, institutions can be sure that you are the person with whom they are potentially doing business. It is up to the institutions to decide which proof of identity they request. For example, sometimes you can provide only a passport, and not a driver's license. In some cases, they ask you to take a picture with your ID and the current date, to know for sure you are the one sending the request, and you didn’t steal someone’s identity. Many cryptocurrency exchanges work this way. Institutions are required by law to handle your information accurately, which means they are not allowed to use the information you provide for other purposes. The government has tips for you, to be able to issue a secure copy of your ID.
An institution or company that falls under the Wwft, can also always ask you for an explanation of a certain payment that they find unusual. The (financial) institution may ask you where your money comes from, or what you are going to use it for. Consider, for example, a large amount that you deposited into your account, whilst that is not a regular or normal activity for you. Therefore, keep in mind that questions from institutions can be very direct and sensitive. Nonetheless, by asking these questions, his particular institution is fulfilling its task of investigating unusual payments. Also note, that any institution may request data more often. For example, to keep their database up to date, or to be able to carry out customer due diligence. It is up to the institution to decide which measures are reasonable for this purpose. Furthermore, if an institution reports your case to the Financial Intelligence Unit (FIU), you will not be notified immediately. Financial institutions and service providers have a duty of confidentiality. This means that they may not inform anyone about the report to the Financial Intelligence Unit. Not even you. This way, institutions prevent clients from knowing in advance that the FIU may be investigating suspicious transactions, which might enable said clients to change transactions or undo certain transactions, in order to try to escape the consequences of their actions.
Can you refuse customers or terminate the business relationship with clients?
A question we get quite often, is whether an institution or organization can refuse a client, or terminate an already existing relationship or contract with a client. If there are any discrepancies, for example, in an application, or in a client’s recent activity dealing with this institution, any financial institution may decide that a business relationship with this client is too risky. There are some standard cases in which this is true, such as when a client does not provide any or insufficient data when asked for, provides incorrect ID data, or states they want to remain anonymous. This makes it very hard to perform any due diligence at all, since there is a minimum amount of data needed to identify someone. Another large red flag is when you are on a sanctions list, for example, the national terrorism sanctions list. This flags you as a potential threat, and this might entail many institutions refusing you from the start, due to the risk you potentially pose to their company. If you have ever been involved in any kind of (financial) criminal activity, please keep in mind that it will be very hard to either become a customer of a financial institution, or set up such an organization for yourself in the Netherlands. In general, only someone with an entirely clean slate can do this.
What to do when an institution or the FIU is not handling your personal data properly
All institutions, including the FIU, must handle personal data accurately, in addition to having the correct reasons to use the data at all. This is stated in the Privacy Act General Data Protection Regulation (GDPR). First, contact your financial service provider if you do not agree with a decision based on the Wwft, or if you have a further question. Are you not satisfied with the answer, and would you like to file a complaint? If you believe that your personal data is being used in a way that is contrary to privacy laws and regulations, you can file a complaint with the Dutch Data Protection Authority. In such a case, the latter can investigate the privacy complaint.
How to adhere to the regulations in the Wwft as a business owner
We can understand that the way to adhere to this law is quite extensive and a lot to take in. If you are currently the owner of a company or institution that falls under the Wwft, it is very important that you stick to the rules. If you don’t, there is a large risk that you may become jointly liable for any criminal activities that happen with the ‘help’ of your institution. You basically have the duty to perform due diligence and know your clients, as ignorance will not be tolerated, due to the fact that by performing due diligence, unusual activities are foreseeable. Therefore, we have created a list of steps you can take, in order to comply with the Dutch Anti-Money Laundering and Terrorist Financing Act. If you follow this, the chances of getting sucked into someone’s illegal activities are close to zero.
1. Determine whether you are subject to the Wwft as an institution
The first step is obviously determining, whether you are one of the institutions that fall under the Wwft. On the basis of the term 'institution', Article 1(a) of the Wwft lists which parties fall under this law. The law applies, amongst others, to banks, insurers, investment institutions, administrative offices, accountants, tax advisers, trust offices, lawyers, and notaries. You can view Article 1a, which states all obliged institutions, on this page. If you are unsure, you can always contact Intercompany Solutions to clarify whether the Wwft applies to your company.
2. Identify your clients and verify the provided data
Whenever you receive a new application from a client, you need to ask them for their identity details before you start to offer your services. You need to capture and save this data too. Determine that the specified identity matches the actual identity before you begin the service. If the client is a natural person, you can ask for a passport, identity card, or driver’s license. In the case of a Dutch company, you should ask for an extract from the Dutch Chamber of Commerce. If it’s a foreign company, see whether they are also established in the Netherlands, because you can also ask for an extract from the Chamber of Commerce. Are they not established in the Netherlands? Then ask for reliable documents, data, or information that is customary in international traffic.
3. Identifying The Ultimate Beneficial Owner (UBO) of a legal entity
Is your client a legal entity? Then you need to identify the UBO and verify their identity as well. The UBO is a natural person who can exercise more than 25% of the shares or voting rights of a company, or is the beneficiary of 25% or more of the assets of a foundation or trust. You can read more about the Ultimate Beneficial Owner in this article. Having "significant influence" is also a point at which someone can be a UBO. In addition, you should investigate the control and ownership structure of your client. What you need to do to determine the UBO depends on the risk you have estimated. In general, the UBO is the person (or persons) who have the most influence in the company and can therefore be held responsible for any criminal or illegal activities, that arise. When you have estimated a low risk, it is generally sufficient to have a statement signed by the client about the correctness of the specified identity of the UBO. In the case of a medium- or high-risk profile, it is wise to carry out further research. You can do this by yourself via the internet, by questioning acquaintances in the client's country of origin, by consulting the Dutch Chamber of Commerce, or by outsourcing the research to a specialized agency.
4. Check whether the client is a Politically Exposed Person (PEP)
Investigate whether your client holds or has held a certain public position abroad now, or until one year ago. Also involve family members and loved ones. Check the internet, the international PEP list, or another reliable source. When someone is classified as a PEP, chances are they have come into contact with particular types of individuals, such as people who offer bribes. It is important to know whether someone is sensitive to bribery, since this might be a potential red flag regarding the risk of criminal and/or illegal activities.
5. Check whether the client is on an international sanctions list
Next to checking someone’s PEP status, it is also necessary to search for clients on international sanctions lists. These lists contain individuals, and/or companies, that have been involved in criminal or terrorist activities in the past. This might give you an idea of someone’s background. In general, it’s wise to refuse anyone who is mentioned on such a list due to their volatile nature and the threat this might pose to your company.
6. (Continuous) risk assessment
After you have identified and checked on a client, it is also extremely important to stay up-to-date on their activities. This means you should continually monitor their transactions, especially when something seems unusual. Form a rational opinion about the purpose and nature of the business relationship, the nature of the transaction, and the origin and destination of resources to make a risk assessment. Also, make sure you get information from your client. What does your client want? Why and how do they want this? Do their actions make sense? Even after the initial risk assessment, you must continue to pay attention to the risk profile of your client. Check whether transactions deviate from your client's normal behavior pattern. Does your client still meet the risk profile you have drawn up?
7. Forwarded clients and how to handle this
If your client is introduced to you by another advisor or colleague within your firm, you can take over identification and verification from that other party. But you do need to check whether identification and verification have been done correctly by other colleagues, so request details about this, because once you take over a client or account, you are the one who is responsible. This means you will have to perform the steps yourself in order to be sure you have carried out the necessary due diligence. The word of a colleague is not enough, make sure you have the proof.
8. What to do when you see an unusual transaction?
In the case of objective indicators, you can consult your list of indicators. If the indicators seem rather subjective, you should rely on your professional judgment, possibly in consultation with colleagues, a supervising professional organization, or a confidential notary. Make sure you record and save your considerations. If you conclude that the transaction is unusual, you need to report the unusual transaction to the FIU without delay. Within the framework of the Wwft, the Financial Intelligence Unit Netherlands is the authority where you must report suspicious transactions or clients. An institution shall notify the Financial Information Unit of any unusual transaction made or planned to be made immediately after the unusual nature of the transaction has become known. You can easily do this through a web portal.
Intercompany Solutions can assist you with setting up a due diligence policy
By far, the most important aspect of the Wwft is knowing with whom you are doing business. By following the abovementioned steps, you can set up a relatively simple policy that meets the legal requirements set by the Wwft. Insight into the correct information, registering the steps taken, and applying a uniform policy are essential to being able to pick up on risky and unusual behaviors quickly and efficiently. Nonetheless, it still happens too often that compliance officers and compliance employees work manually, so they do a lot of unnecessary work. We advise you to think about the possibility of developing a uniform approach within your organization. If you are currently thinking about starting a business that falls under the legal framework of the Wwft, we can assist you with the entire company registration process in the Netherlands. This only takes a few business days, so you can start doing business almost immediately. We can also handle some extra tasks for you, such as setting up a Dutch bank account, and pointing you to interesting partners. Please feel free to contact us with any inquiries you might have. We will reply to your query as soon as possible, but generally within just a few business days.
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It’s quite well known that the Netherlands has one of the best infrastructures in the world. The quality of Dutch roads is nearly unmatched, and all necessary commodities for businesses are always in close proximity due to the relatively small size of the country. You can literally travel to Schiphol airport and the port of Rotterdam in just two hours’ time from any place in the Netherlands. If you own a logistics business in the Netherlands, you are already well aware of all the benefits and perks that the Dutch infrastructure offers. If you are a foreign entrepreneur who would like to expand their logistics, import, and/or export business to the European Union, then rest assured that the Netherlands is one of the safest and most profitable bets you could place. The port of Rotterdam connects the country with the entire rest of the world, whilst it also benefits from the European Single Market due to being an EU member state.
According to the World Economic Forum (WEF), Hong Kong, Singapore, and the Netherlands are home to the best infrastructure in the world. The Global Competitiveness Report, released by the WEF, ranks 137 countries on a scale where 7 points are the highest. Points are accumulated based on the quality of different types of infrastructure, such as railways, ports, and airports. As a result of these measurements, Hong Kong had a score of 6.7, Singapore 6.5, and the Netherlands 6.4.[1] This makes Holland the third-best country regarding infrastructure worldwide—no small feat. We will discuss the Dutch infrastructure in detail and how you, as an entrepreneur, can profit from its high quality and functionality.
The Netherlands performs exceptionally well compared to the rest of the world
The Netherlands is the main access point for all goods to the European continent, due to the accessibility of the country and the port of Rotterdam being the largest port in Europe. Therefore, it is of the utmost importance that the Netherlands also has the best infrastructure to facilitate the transport of all these goods to the rest of Europe. Many high-quality highway connections have been established in the country to facilitate transportation from the coast of the Netherlands to the rest of the country. These roads are also very well maintained. Due to a very high level of urbanization, as Holland is very densely populated, most of the city's roads are built to include sidewalks for bicycles, allowing the country to avoid congestion on its roads. The widespread use of bicycles has also enormously aided in reducing pollution, although roughly 80% of citizens still use cars. Nonetheless, bicycling has actually become a trend worldwide, partly because of the large number of bicycles in Holland. It has even become somewhat of a Dutch staple, just like windmills and wooden shoes. The Netherlands also has several thousands of kilometers of railroad as well as advanced waterways. The country has a highly developed communication system and digital infrastructure as well, with a very high level of coverage. According to the Global Competitiveness Report 2020 of the WEF, the Netherlands scores 91.4% on "Upgrade infrastructure to accelerate the energy transition and broaden access to electricity and ICT”. Meaning that the Netherlands scores exceptionally high on both its physical and digital infrastructure. In short, the strategic location of the Netherlands as a gateway to European markets and its well-developed logistics infrastructure, including ports, airports, and extensive transportation networks, make it a prime choice for companies involved in global trade.
The importance of a solid infrastructure
A good infrastructure is of extreme importance if a country wants to facilitate trade, business in general, and the smoothtransportation of natural persons. It also has a direct impact on the economy of said country because it allows goods to be transported in an efficient manner to available ports, airports, and ultimately to other countries. Without a good infrastructure, goods will not reach their destination in time, which inevitably leads to economic loss. A highly developed infrastructure will help in the economic development and growth of a country. The connection between travel hubs and a good infrastructure is also notable, due to the shorter travel times and higher level of ease when traveling. If you are a foreign company based in the Netherlands, the quality of the infrastructure will massively aid your company if you are aiming for very fast delivery options and excellent connections to the rest of the world.
A world-class airport and port are within easy reach
The Netherlands has the largest port in Europe and a well-known international airport within easy reach of each other. Amsterdam Airport Schiphol is by far the largest airport in the Netherlands, both in terms of passenger transport and cargo transport. Other civilian airports are Eindhoven Airport, Rotterdam The Hague Airport, Maastricht Aachen Airport, and Groningen Airport Eelde.[2] Furthermore, in 2021, 593 million metric tons of goods were handled in Dutch seaports. The Rotterdam port area (which also includes the ports of Moerdijk, Dordrecht and Vlaardingen) is by far the largest seaport in the Netherlands. 457 million metric tons were handled here. Other important seaports are Amsterdam (including Velsen/IJmuiden, Beverwijk, Zaanstad), North Sea Port (Vlissingen and Terneuzen, excluding Ghent), and Groningen Seaports (Delfzijl and Eemshaven).[3] You can reach both from any place in the Netherlands within a maximum of two hours, which is ideal if you aim for fast shipping.
Amsterdam Schiphol Airport
Schiphol started in 1916 on a dry-ground piece of land in the region known as Haarlemmermeer, which is close to the city of Haarlem. Thanks to courage and pioneering spirit, the national airport of the Netherlands has grown into a major global player in the last 100 years.[4] Due to the presence of Schiphol Airport, the Netherlands is excellently connected to the rest of the world by air. Schiphol also provides a lot of means for employment, both directly and indirectly. Partly because of Schiphol, the Netherlands is an interesting location for internationally operating companies. The Dutch are aiming to maintain that strong hub function. At the same time, attention must be paid to reducing the negative effects of aviation on people, the environment, and nature. There are various challenges around the airport in the fields of nitrogen, (ultra) particulate matter, noise pollution, quality of living environment, safety, and housing. This requires an integrated solution that offers certainty and perspective for both the hub function of Schiphol and the surroundings of the airport. European agreements on the fair taxation of aviation are actively supported. The level playing field within the EU and between the EU and third countries is central to this. The Dutch want rail transport in Europe to become a solid alternative to flying as soon as possible, both in terms of time and cost. At the national level, Schiphol commits to the blending of biokerosene and stimulates the production of synthetic kerosene.[5]
Port of Rotterdam
Rotterdam became the most important port city in the Netherlands during the nineteenth century, but the port itself has actually existed for many more centuries. The history of the port is actually interesting. Somewhere around the year 1250, a dam was built in the mouth of the peat river Rotte. At this dam, goods were transferred from riverboats to coastal vessels, marking the beginning of the port of Rotterdam. During the sixteenth century, Rotterdam developed into an important fishing port. In the second half of the nineteenth century, the port continued to expand, mainly to take advantage of the flourishing industry in the German Ruhr area. Under the direction of hydraulic engineer Pieter Caland (1826-1902), the dunes at Hoek van Holland were crossed and a new connection to the port was dug. This was called the ‘Nieuwe Waterweg’, which made Rotterdam much more accessible from the sea. New harbor basins were being constructed in the port itself, and machines, such as steam cranes, made the unloading and loading processes more efficient. Thus, inland vessels, trucks, and freight trains transported products faster to and from the ship. Unfortunately, during the Second World War, almost half of the port was heavily damaged by bombing. In the reconstruction of the Netherlands, the restoration of the port of Rotterdam is a top priority. The port then grew rapidly, partly due to the flourishing of trade with Germany. Expansions were already needed in the fifties; the Eemhaven and the Botlek date from this period. In 1962, the port of Rotterdam became the largest in the world. The Europoort was completed in 1964 and the first sea container was unloaded in Rotterdam in 1966. In the large steel sea containers, loose 'general cargo' can be transported easily and safely, which makes large-scale loading and unloading possible. The port continues to grow after that: the First and Second Maasvlakte will be put into operation in 1973 and 2013. [6]
As of today, Rotterdam is the largest port in the EU and ranks 10th worldwide. [7] Only Asian countries trump the port of Rotterdam, making it the largest port compared to continents like Africa and the US. To provide an example: in 2022, a total of 7,506 TEU (x1000) containers were shipped to the Netherlands and a total of 6,950 TEU (x1000) were shipped from the Netherlands, which equals a total of 14,455,000 containers that were imported and exported.[8] TEU is the designation for the dimensions of containers. The abbreviation stands for Twenty-Foot Equivalent Unit.[9] In 2022, 257.0 million euros were invested in the port of Rotterdam. In doing so, the Dutch focus not only on infrastructure but also on stimulating the use of sustainable energy sources, such as hydrogen, CO2 reduction, cleaner air, employment, safety, health, and well-being. In this way, the Dutch government immediately fulfils their important social role by creating space for the transition to a sustainable port in all respects.[10] Globalization is increasing the movement of goods worldwide. This means that the competition is also growing. The Dutch government is keen on keeping Rotterdam competitive because the port is also known as a "main port," an important hub in the foreign trade network. For example, in 2007, the ‘Betuweroute’ was opened. This is a railway line intended exclusively for freight transport between Rotterdam and Germany. All in all, the port of Rotterdam keeps growing, expanding, and flourishing, creating a beneficial hub for all kinds of companies worldwide.
The Dutch infrastructure and its components
According to the Dutch Central Bureau of Statistics (CBS), the Netherlands has around 140 thousand kilometers of paved roads, 6.3 thousand kilometers of waterways, 3.2 thousand kilometers of railways, and 38 thousand kilometers of cycle paths. This includes a total of more than 186 thousand kilometers of traffic infrastructure, which equals nearly 11 meters per inhabitant. On average, a Dutch person lives 1.8 kilometers from a highway or main road and 5.2 kilometers from a train station.[11] Next to that, the infrastructure consists of objects such as locks, bridges, and tunnels. This infrastructure actually underpinsDutch society and the economy. And whilst the existing infrastructure is aging, it is being used more and more intensively at the same time. That is why the Dutch are working on optimal assessment, maintenance, and replacement of infrastructure in the Netherlands. Some interesting figures are, for example, the amount of money it costs the Dutch government to maintain all existing infrastructure, which is around 6 billion euros annually. Thankfully for the government, all Dutch citizens that own a car are legally obliged to pay ‘road-taxes’ on a quarterly basis, which can be used to maintain roads and other infrastructural components.
The choice to repair, renovate, or replace a part of the infrastructure largely depends on the condition of the infrastructureand also on the extent to which the roads are used. Logically, roads that are used more often also require more maintenance. The Dutch are working on innovative technologies to assess the existing infrastructure in the Netherlands and better maintain and replace it. The Dutch government is extremely committed to the accessibility of the entire country. The transport and logistics sectors are of huge economic importance to the Netherlands. A solid infrastructure is needed for basic activities such as getting to work, visiting family, or accessing education. The Dutch infrastructure is therefore well-maintained, of high quality, climate-adaptive, and fits together seamlessly. Topics such as safety, an eye for new developments, and sustainability are important. Continued investment in infrastructure and associated bottlenecks is thus essential and should be acted upon when necessary.[12]
How the Dutch analyze, prevent, and solve infrastructural risks
Infrastructural risks are always a possibility, even with high levels of maintenance and foresight. Roads are used every day, with a staggering amount of drivers that can cause problems at any moment. Whenever the quality of a road diminishes, the risks for users of the infrastructure grow at the same time. It is of vital importance that all roads are well-kept at any given moment, creating a challenging scenario for the Dutch government and all involved parties. One way the Dutch safeguard their infrastructure, is by assessing the structural safety and service life of all involved structures. Up-to-date and accurate information about the current and future state of steel and concrete structures is a huge gain for infrastructure managers. This is also where digitalization comes in, which we will cover later. In addition, the Dutch are working on condition forecasting. This encompasses, for example, the monitoring of structures, roads, and railways to determine the current condition of the structures. By using the measurement data as input for a predictive model, they know more about the possible future condition and how long the construction will last. Better condition forecasting ensures cost savings and prevents traffic disruptions without compromising safety.
The Netherlands Organization for Applied Scientific Research (Dutch: TNO) is a massive player in the maintenance of Dutch infrastructure. Amongst other things, they conduct research and innovation in the fields of water safety, tunnel safety, structural safety, and investigating the traffic load of certain structures. Safety in general is a prerequisite for all infrastructure; without proper analysis and safety management, it becomes unsafe for natural persons to use certain parts of the infrastructure. For many existing constructions, the current regulations are not sufficient anymore. The TNO uses analysis and assessment methods to develop frameworks for the safe use of the Dutch infrastructure. This means that construction work is not replaced until it is actually needed, which reduces costs and inconveniences. Next to that, the Dutch TNO uses probabilistic analyses in their risk assessments and analyses. In such analyses, the probability of a construction project failing is determined. The uncertainties that play a role in this are explicitly taken into account. Furthermore, the TNO conducts research on samples in their Building Innovation Lab under strict conditions. For example, researching factors like the long-term behavior and consistency of the roadsor significant properties of structures that are important in maintenance. In addition, they regularly carry out damage investigations on construction sites. If there is damage with a major impact, such as personal suffering, major financial consequences, or even a partial collapse, an independent investigation into the damage is important and should be carried out. The Dutch have forensic engineers available for an investigation into the cause. In the event of damage, they are able to immediately start an independent investigation together with other TNO experts, such as constructors. This gives a quick picture of the situation, and it becomes immediately clear whether more measures are needed.[13]
The Dutch government is gradually shifting towards an infrastructure that also has digital components, such as cameras. This, however, also means that cybersecurity risk becomes a larger concern. About three-quarters (76 percent) of global infrastructure leaders expect more attention to data security during the next three years. Which is no surprise since the number of attack vectors is growing exponentially as more and more components are connected to the internet. This doesn’t only entail highly sought-after personal data, but also asset data that can be interesting for a variety of commercial purposes. For example, you could think of traffic movements that enable a better prediction of routes in a navigation system. Solid and adequate protection is a must. In addition, there is also physical safety. Physical safety testing has shown that weaknesses can surface, enabling unwanted or unintended activities. Think, for example, of opening locks or pumping stations. This means that thinking carefully about segmentation is essential. Does an office automation system need to be linked to operational systems? A choice that needs to be considered at the front end of the entire infrastructure development process. In other words, security by design is needed. Taking cybersecurity into account from the start is crucial, as opposed to testing it afterwards, because then you run into the problem that the way of building is already several years old, while the way in which attacks take place has developed much further.[14] Foresight is essential in order to prevent accidents, attacks, and various other issues concerning infrastructure.
Sustainability is very important to the Dutch government
The Dutch TNO has solid and established goals in order to guarantee a sustainable way of maintaining infrastructure with as little harm as possible to the direct natural environment. With the sustainable goal in mind, the Dutch are able to use innovation and foresight during every part of the process. If you want to operate in a country with consistently high-quality infrastructure as an entrepreneur, the Netherlands should probably be at the top of your list. Due to continuous research and innovation, new methods of maintenance and surveillance, and an overall oversight of all things important, the Dutch infrastructure remains in excellent and pristine condition. The TNO highlighted the following goals for the near future:
· Sustainable infrastructure
The TNO is committed to an infrastructure that has the least possible impact on the environment. They do this through innovations in design, construction, and maintenance. And they develop new solutions with governments and market parties. Rijkswaterstaat, ProRail and regional and municipal authorities take sustainability into account in their tenders. This is one of the reasons they are working on sustainable innovations and methods for better assessments of environmental performance. When working towards a sustainable infrastructure, they focus on three areas.
· 3 focus areas for sustainable infrastructure
The TNO is working on innovations to increase the environmental performance of infrastructure. They mainly focus on:
- materials
- product
- processes
In which knowledge is an important factor for further development and implementation. The materials should be of the best quality, the product should be as promised, and the process should enable a smooth transition from materials to product.
· Reducing emissions
According to the TNO, CO2 emissions from infrastructure can be reduced by 40% via more efficient use of materials and energy, life extension, reuse, and innovative materials, products, and processes. These measures often also entail a reduction in costs and other harmful substances. They are working on all kinds of innovations, from fuel-saving road surfaces to concrete made from waste materials, from a glass cycle path with solar cells to energy savings for construction equipment. The Dutch are very innovative in such approaches.
· Closing raw material chains
Asphalt and concrete are the most commonly used materials in the Dutch infrastructure, but generally around the world as well. New and improved methods in recycling and production ensure that more and more raw materials are reusable. This results in smaller waste streams and less demand for primary raw materials such as bitumen, gravel, or cement.
· Less damage and nuisance due to noise and vibrations
New railway lines, more and faster train traffic, and houses close to the railways require effective reduction of noise and vibrations. Among other things, the TNO conducts research into the severity of vibrations. This makes living next to a busy highway a lot more acceptable, and this is a very important factor in a densely populated country such as the Netherlands.
· Environmental performance assessment
The TNO also develops methods to assess the environmental performance of infrastructure projects. This allows a client to translate their environmental objectives into clear and unambiguous requirements during a tender. Because market parties know where they stand, they can make a sharp, distinctive offer. In particular, the Dutch focus on methods that help assess the environmental performance of innovative solutions at an early stage. This enables innovation while keeping the risks manageable. They develop methods for determining sustainability performance both nationally and at EU level.[15]
As you can see, the Dutch have ranked sustainability as a very important factor for future activities, purposes, and in general. Whatever needs to be done is done in a way that requires the least amount of harmful substances, whilst also ensuring the best possible lifespan for every structure involved. This is one of the ways the Dutch keep their high ranking regarding the national infrastructure.
Some crucial Dutch government plans for the near future
The Dutch government has laid out several plans for the future of infrastructure in the Netherlands. These are aimed at an efficient way of maintaining the quality of the roads and structures, but also at future developments and new ways of constructing, building, and maintaining crucial parts of the infrastructure. This ensures that you, as a foreign entrepreneur, can benefit from the stellar options the Netherlands offers for any logistics company. The plans are as follows:
- “We are structurally allocating €1.25 billion to make up for delays in the management and maintenance of our roads, railways, bridges, viaducts, and waterways and for the maintenance, renovation, and replacement of them in the future, also regarding road safety.
- Road safety remains the spearhead of our policy. Together with the municipalities, it is being examined where the speed limit can be meaningfully reduced to 30 km/h within inhabited areas. The speed on other roads remains unchanged.
- In consultation with the region, we are considering whether an alternative interpretation of a certain highway proposed by the region within the existing container solves the accessibility problem in an equivalent way. Access via (high-quality) public transport and cars to new residential areas in the region is part of this. If this is the case, the proposal from the region will be adopted. If not, the ongoing decision-making process will continue.
- We reserve funds to be able to build the Lely line in the long term with co-financing from the region and European funds. In the coming period, we will work out how the Lely line, within the framework of the Delta Plan for the North, can contribute to strengthening the economy of the North, opening up new housing areas to be developed, and improving international train connections with the north of Germany.
- We are investing in the expansion and improvement of the infrastructure for public transport, bicycles, cars, and water because we want solid and faster connections between cities and regions. We focus on the biggest bottlenecks from the Integrated Mobility Analysis 2021: connections in the (economic) regions and N-roads.
- The new homes in the 14 urbanization areas and beyond will also be easily accessible by public transport, bicycle, and car. To this end, a total of €7.5 billion will be added to the Mobility Fund for the next 10 years.
- We are committed to better international (night) train connections that connect to HSL junctions across the border, so that the Netherlands is sustainably connected. We involve European funds in our investments to create better cross-border connections. We encourage the movement of freight transport from the road to rail and water.
- We are developing 'hubs' where travelers can easily switch to a (shared) car, bicycle, train, or metro via tailor-made multimodal travel advice. We are also committed to making public transportation socially safer and more accessible to people with disabilities. We invest in bicycle parking facilities at public transportation hubs and bicycle highways. In order to keep travel to work affordable, the government is increasing the untaxed travel allowance.
- We are committed to good connections for inland shipping by better coordinating the operation of locks, bridges, and road traffic and ensuring good berths.”[16]
As you can see, the Netherlands invests a major portion in the quality and maintenance of its infrastructure. As an entrepreneur, you can benefit from this immensely.
The future of physical infrastructurein the Netherlands
Digitalization is changing everything at a very rapid pace. In a world where everything is becoming connected, the purely 'physical' infrastructure (such as roads, bridges, and electricity) is shifting further and further towards a 'physical-digital' infrastructure. Artificial intelligence, cloud computing, and cybersecurity are reshaping infrastructural thinking, according to the study The Future of Infrastructure, published earlier this year, in which infrastructure leaders were asked about their plans and expectations. Expectations that are partly shaped by the growing attention paid to the environment and broad social benefits.[17] In other words, the worldwide infrastructure is on the brink of great change. With continued digital surveillance, new methods of researching and measuring the strength and capability of structures, and evolving ways of looking at problems in general, all infrastructures in the world, including the Dutch infrastructure, are currently flexible and fluid in their development. Rest assured, as a foreign investor or entrepreneur, that the quality of the Dutch infrastructure will probably remain excellent and maybe even unmatched during the next decades, or even centuries. The Dutch have a knack for innovation and progress, and this shows very clearly, considering the goals and ambitions the Dutch government proposes. If you are looking for a country with high-speed, quality, and efficient travel routes, you have found the right place.
Start a Dutch logistics company in just a few working days
Intercompany Solutions has acquired many years of experience in the establishment of foreign companies. We can start your Dutch company in just a few business days, including several extra actions when requested. But our way of helping you as an entrepreneur doesn’t stop there. We can provide continual business advice, financial and legal services, general assistance with company issues, and complimentary services as well. The Netherlands offers many interesting possibilities for foreign business owners or startups. The economic climate is stable, there is much room for improvement and innovation, the Dutch are eager to learn from different points of view, and the accessibility of the tiny country is overall fantastic. If you are interested in the options that establishing a business in the Netherlands can offer you, please feel free to contact us anytime. We will gladly help you plan ahead, discover your potential, and minimize your risks. Contact us by phone or via the contact form for more information or a clear quote.
[1] https://www.weforum.org/agenda/2015/10/these-economies-have-the-best-infrastructure/
[2] https://www.cbs.nl/nl-nl/visualisaties/verkeer-en-vervoer/vervoermiddelen-en-infrastructuur/luchthavens
[3] https://www.cbs.nl/nl-nl/visualisaties/verkeer-en-vervoer/vervoermiddelen-en-infrastructuur/zeehavens
[4] https://www.schiphol.nl/nl/jij-en-schiphol/pagina/geschiedenis-schiphol/
[5] https://www.schiphol.nl/nl/jij-en-schiphol/pagina/geschiedenis-schiphol/
[6] https://www.canonvannederland.nl/nl/havenvanrotterdam
[7] https://www.worldshipping.org/top-50-ports
[8] https://www.portofrotterdam.com/nl/online-beleven/feiten-en-cijfers (port of Rotterdam throughput figures 2022)
[9] https://nl.wikipedia.org/wiki/TEU
[10] https://reporting.portofrotterdam.com/jaarverslag-2022/1-ter-inleiding/11-voorwoord-algemene-directie
[11] https://www.cbs.nl/nl-nl/cijfers/detail/70806NED
[12] https://www.tno.nl/nl/duurzaam/veilige-duurzame-leefomgeving/infrastructuur/nederland/
[13] https://www.tno.nl/nl/duurzaam/veilige-duurzame-leefomgeving/infrastructuur/nederland/
[14] https://www2.deloitte.com/nl/nl/pages/publieke-sector/articles/toekomst-nederlandse-infrastructuur.html
[15] https://www.tno.nl/nl/duurzaam/veilige-duurzame-leefomgeving/infrastructuur/nederland/
[16] https://www.rijksoverheid.nl/regering/coalitieakkoord-omzien-naar-elkaar-vooruitkijken-naar-de-toekomst/2.-duurzaam-land/infrastructuur
[17] https://www2.deloitte.com/nl/nl/pages/publieke-sector/articles/toekomst-nederlandse-infrastructuur.html
Privacy is a very big deal nowadays, especially since worldwide massive digitalization happened. The way our data is handled needs to be supervised and regulated in order to prevent certain individuals from misusing or even stealing it. Did you know that privacy is even a human right? Personal data is extremely sensitive and prone to misuse; therefore, most countries have adopted legislation that strictly regulates the usage and processing of (personal) data. Next to national laws, there are also overarching regulations that influence national legislation. The European Union (EU), for example, implemented the General Data Protection Regulation (GDPR). This regulation came into force in May 2018, and applies to any organization that offers goods or services on the EU market. The GDPR applies even if your company is not based in the EU, but at the same time has customers from the EU. Before we get into the details of the GDPR regulation and its requirements, let's first clarify what the GDPR aims to achieve and why it's important to you as an entrepreneur. In this article, we will thus explain what the GDPR is, why you should take appropriate actions to comply, and how to do this in the most efficient way possible.
What exactly is the GDPR?
The GDPR is an EU regulation that covers the protection of the personal data of natural citizens. It is therefore solely aimed at the protection of personal data and not professional data or the data of companies. On the official website of the EU, it is described as follows:
“Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data. The corrected text of this regulation was published in the Official Journal of the European Union on May 23, 2018. The GDPR strengthens citizens' fundamental rights in the digital age and promotes trade by clarifying the rules for businesses in the Digital Single Market. This common set of rules has eliminated the fragmentation caused by divergent national systems and avoided red tape. The Regulation entered into force on May 24, 2016 and has been in effect since May 25, 2018. More information for companies and individuals.[1]”
It is basically a means to ensure that personal data is handled safely by companies that need to handle data due to the nature of the goods or services they offer. For example, if you order a product on a website as an EU citizen, your data is protected by this regulation because you are based in the EU. As we explained briefly before, the company itself does not need to be established in an EU country to fall under the scope of this regulation. Every company that deals with customers from the EU needs to adhere to the GDPR, ensuring the personal data of all EU citizens is protected and safe. This way, you can rest assured that no company will use your data for other purposes than those specifically stated and outlined.
What is the specific purpose of the GDPR?
The main purpose of the GDPR is personal data protection. The GDPR regulation wants all organizations, large and small, including yours, to think about the personal data they use and be very thoughtful and considerate about why and how they use it. Essentially, the GDPR wants entrepreneurs to be more aware when it comes to the personal data of their customers, staff, suppliers, and other parties they do business with. In other words, the GDPR regulation wants to put an end to organizations that only collect data about individuals because they are able to, without sufficient reason. Or because they believe they can somehow benefit from it now or in the future, without much attention and without informing you. As you will see in the information below, the GDPR actually doesn't really prohibit much. You can still participate in email marketing, you can still advertise, and you can still sell and use the personal data of customers, as long as you provide transparency on how you respect the privacy of individuals. The regulation is more about providing sufficient information about the way you use the data, in order for your customers and other third parties to be informed about your specific goals and actions. This way, every individual can provide you with their data based on informed consent, at the very least. Suffice to say, you need to do as you say and not use the data for other purposes than what you stated, since this might result in very hefty fines and other consequences.
Entrepreneurs to whom the GDPR applies
You might ask yourself, "Does the GDPR also apply to my company?" The answer to this is fairly simple: if you have a customer base or personnel administration with individuals from the EU, then you process personal data. And if you process personal data, you must comply with the General Data Protection Regulation (GDPR). The law determines what you can do with personal data and how you must protect it. It is therefore always important for your organization, as it is mandatory for all companies dealing with EU individuals to comply with the GDPR regulation. All of our professional and personal interactions are increasingly digital, so considering the privacy of individuals is simply the right thing to do. Customers expect their beloved stores to handle the personal data they provide with care, so having your own personal regulations regarding the GDPR in order is something you can be proud of. And, as an added bonus, your customers will love it.
When you handle personal data, according to the GDPR, you are almost always processing this data as well. Think of collecting, storing, modifying, supplementing, or forwarding data. Even if you create or delete data anonymously, you are also processing it. Data is personal data if it concerns people that you can distinguish from all other people. That’s the definition of an identified person, which we will discuss in detail later in this article. For example, you have identified a person if you know their first name and last name, and this data also matches the data on their officially issued means of identification. As an individual involved in this process, you have control over the personal data you provide to organizations. First of all, the GDPR gives you the right to be informed about the specific personal data that organizations use and why. At the same time, you have the right to be informed about how these organizations guarantee your privacy. In addition, you can object to the use of your data, request that the organization delete your data, or even request that your data be transferred to a competing service.[2] So, in essence, the individual to whom the data belongs chooses what you do with the data. This is why you need to be meticulous as an organization with the information you provide regarding the exact use of the personal data you acquire, as the individual the data belongs to needs to be informed about the reasons their data is processed at all. Only then is an individual able to decide, whether you are using the data correctly.
Which data is involved exactly?
Personal data plays the most important role within the GDPR. Protecting the privacy of individuals is the starting point. If we read the GDPR guidelines carefully, we can divide data into three categories. The first category is about personal data specifically. This can be categorized as all information about an identified or identifiable natural person. For example, his or her name and address details, e-mail address, IP address, date of birth, current location, but also device IDs. This personal data is all information by which a natural person can be identified. Note that this concept is interpreted very broadly. It is certainly not limited to a surname, first name, date of birth, or address. Certain data - which at first sight has nothing to do with personal data - can still fall under the GDPR by adding certain information. It is therefore generally accepted that even (dynamic) IP addresses, the unique number combinations with which computers communicate with each other on the internet, can be regarded as personal data. This must, of course, be considered specifically for each specific case, but consider the data you process.
The second category is about so-called pseudo-anonymous data: personal data processed in such a way that the data can no longer be traced without the use of additional information, but still makes a person unique. For example, an encrypted e-mail address, user ID, or customer number that is only linked to other data via a well-secured internal database. This also falls within the scope of the GDPR. The third category consists of entirely anonymous data: data where all personal data that allows trace back has been deleted. In practice, this is often difficult to prove, unless the personal data is traceable in the first place. This is therefore outside the scope of the GDPR.
Who is qualified as an identifiable person?
It can sometimes be a bit difficult to define who falls under the scope of an ‘identifiable person’. Especially since there are many fake profiles on the internet, such as people with fake social media accounts. In general, you can presume that a person is identifiable when you can trace back their personal data without too much effort. Think, for example, of customer numbers that you can link to account data. Or a phone number that you can easily trace, and thus figure out to whom it belongs. This is all personal data. If you seem to have problems identifying someone, it is necessary to do a bit more research. You can ask the person for a valid form of identification, just to be sure you know who you are dealing with. You can also look in verified databases to acquire information regarding someone’s identity, such as a digital telephone book (which actually still exists). If you are unsure whether a customer or other third party is identifiable, try to contact that customer and ask for personal data. If the person doesn’t answer your query, it’s generally best to delete all the data you have and discard the information you were provided with. Chances are, someone is using a fake identity. The GDPR aims at protecting individuals, but you as a company also need to take appropriate steps to protect yourself from fraud. Unfortunately, people are able to use fake identities, so it’s important to be vigilant about the information people provide. When someone uses someone else’s identity, this might have serious repercussions for you as a company. Due diligence is advised at all times.
Legitimate reasons to use third-party data
A main component of the GDPR is the rule, that you should only use third-party data for specified and legitimate purposes. Building on the requirement of data minimization, the GDPR prescribes that you may only use personal data for a stated and documented business purpose, supported by one of the six available GDPR legal bases. In other words, your use of personal data is limited to a stated purpose and legal basis. Any processing of personal data you undertake must be documented in a GDPR register, along with its purpose and legal basis. This documentation forces you to think about each processing activity and carefully consider the purpose and legal basis for it. The GDPR enables six legal bases, which we will outline below.
- Contractual obligations: When entering into a contract, personal data must be processed. Personal data may also be used when exercising a contract.
- Consent: The user gives explicit permission for the use of his/her personal data or the placing of cookies.
- Legitimate interest: Processing of personal data is necessary for the purposes of the legitimate interests of the controller or a third party. Balance is important in this case, it should not violate the data subject's personal freedoms.
- Vital interests: Data may be processed when situations of life or death arise.
- Legal obligations: Personal data must be processed according to the law.
- Public interests: This mainly has to do with governments and local authorities, such as risks regarding public order and safety and the protection of the public in general.
These are the legal bases that allow you to store and process personal data. Oftentimes, some of these reasons might overlap. That is generally not an issue, as long as you can explain and prove that there is actually a legal basis. When you lack a legal basis for the storage and processing of personal data, you might be in trouble. Keep in mind that the GDPR has the protection of the privacy of individuals in mind, hence the reason there are only limited legal bases. Know and apply these, and you should be safe as an organization or company.
The data the GDPR applies to
The GDPR, at its core, applies to the processing of data that is either fully or at least partially automatic. This entails data processing via a database or computer, for example. But it also applies to personal data that is included in a physical file, such as files stored in an archive. But these files need to be substantial in the sense that the data included is connected to some order, file, or business dealing. If you own a handwritten note with only a name on it, it doesn’t qualify as data under the GDPR. This handwritten note might be from someone who is interested in you or otherwise be of a personal nature, after all. Some common ways data is processed by companies include order management, a customer database, a supplier database, staff administration, and, of course, direct marketing, such as newsletters and direct mailings. The person whose personal data you process is called the "data subject."This can be a customer, newsletter subscriber, employee, or contact person. Data regarding companies is not viewed as personal data, whereas data about sole proprietorships or self-employed persons is.[3]
Rules regarding online marketing
The GDPR has a significant impact when it comes to online marketing. There are some basic rules you will need to comply with, such as always offering an opt-out option in the case of email marketing. In addition, a tenderer must also be able to indicate and adjust their preferences. This means that you have to adjust the emails, if you currently don’t offer these options. Many organizations also use retargeting mechanisms. This can be achieved, for example, via Facebook or Google Ads, but keep in mind that you will need to request explicit permission to do this. You probably already have a privacy and cookie policy on your website. So with these rules, these legal parts also need to be revised. The GDPR requirements state that these documents need to be more comprehensive and transparent. You can often use model texts for these adjustments, which are freely available on the internet. In addition to legal adjustments to your privacy and cookie policies, a data processing officer must be appointed. This person is responsible for the processing of data and ensures that the organization is and remains GDPR-compliant.
Tips and ways to comply with the GDPR
The most important thing, of course, is that you, as an entrepreneur, comply with legal regulations and rules, such as the GDPR. Fortunately, there are ways to comply with the GDPR with as little effort as possible. As we already discussed, the GDPR in itself doesn’t actually prohibit anything, but it does set strict guidelines for the way in which personal data can be processed. If you don’t adhere to the specific guidelines and use the data for reasons that aren’t mentioned in the GDPR or fall outside its scope, you risk fines and even worse consequences. Next to that, keep in mind that all parties with whom you work will respect you as a business owner when you also respect their data and privacy. This will provide you with a positive and trustworthy image, which is genuinely good for business. We will now discuss some tips that will make compliance with the GDPR an easy and efficient process.
1. Map out which personal data you process in the first place
The first thing to do would be to research which exact data you need and to what end. Which information are you going to collect? How much data do you need to achieve your goals? Just a name and email address, or do you also need extra data such as a physical address and phone number? You also need to create a processing register in which you list which data you keep, where it comes from, and with which parties you share this information. Also take into account the retention periods, because the GDPR states that you must be transparent about this.
2. Make privacy a priority for your business in general
Privacy is a very important topic, and this will stay this way in the (un)foreseeable future, since technology and digitalization are only progressing and increasing. Thus, it is very important that you, as an entrepreneur, inform yourself about all necessary privacy regulations and prioritize this whilst doing business. This will not only ensure that you are compliant with all applicable laws, but it will also build an image of trust for your company. So, as an entrepreneur, immerse yourself in the GDPR rules or otherwise seek advice from legal experts, so you can be sure that you are doing business legally when it comes to privacy. You need to find out which exact rules your company must comply with. The Dutch authorities can also help you on your way with tons of information, tips, and tools to use on a daily basis.
3. Identify the correct legal basis for processing personal data
As we already discussed, there are only six official legal bases that allow you to process and store personal data, according to the GDPR. If you are going to use data, it is of vital importance that you know which legal basis is underlying your usage. Ideally, you should document the different types of data processing you do with your company, for example, in your privacy policy, so customers and third parties can read and acknowledge this information. Then, identify the correct legal basis for each action separately. If you need to process personal data for new motives or reasons, be sure to add this activity as well before you start.
4. Try to minimize your data usage as much as possible
You, as an organization, must ensure that you collect only the minimum data elements to achieve a certain goal. For example, if you sell goods or services online, your users usually only need to provide you with an email and a password for the registration process to run smoothly. There is no need to ask customers for their gender, place of birth, or even their address as part of the registration process. Only when users continue to purchase an item and want to have it shipped to a certain address does it become necessary to ask for more information. You then have the right to request the user's address at that stage, as this is essential information for any shipping process. Minimizing the amount of data collected minimizes the impact of potential privacy or security-related incidents. Data minimization is a core requirement of the GDPR and extremely effective in protecting your users' privacy since you only process the information you need and nothing more.
5. Know the rights of the people whose data you process
An important part of becoming knowledgeable about the GDPR, is informing yourself about the rights of your customers and other third parties, whose data you store and process. Only by knowing their rights can you protect yourself and avoid fines. It is true that the GDPR has introduced a number of important rights for individuals. Such as the right to inspect their personal data, the right to have data corrected or deleted, and the right to object to the processing of their data. We will discuss these rights briefly below.
- The right of access
The first right of access means that individuals have the right to view and consult the personal data processed about them. If a customer asks for this, you are therefore obliged to provide them with it.
- The right to rectification
Rectification is the same as correction. The right to rectification therefore gives individuals the right to make changes and additions to the personal data that an organization processes about themto ensure that this data is processed correctly.
- The right to be forgotten
The right to be forgotten means exactly what it says: the right to be 'forgotten' when a customer specifically asks for this. An organization is then obliged to delete their personal data. Do note that if there are legal obligations involved, an individual cannot invoke this right.
- The right to restrict processing
This right gives an individual as a data subject the opportunity to restrict the processing of their personal data, which means that they can ask to have fewer data processed. For example, if a company asks for more data than is absolutely necessary for the process involved.
- The right to data portability
This right means that an individual has the right to transfer their personal data to another organization. For example, if someone goes to a competitor or a staff member goes to work for another company, and you transfer data to this company,
- The right to object
The right to object means that an individual has the right to object to the processing of their personal data, for example, when the data is used for marketing purposes. They can exercise this right for specific personal reasons.
- The right not to be subject to automated decision-making
Individuals have the right not to be subject to fully automated decision-making that may have significant consequences for them or cause legal consequences of human intervention. An example of automated processing is a credit rating system that will fully automatically determine whether you are eligible for a loan.
- The right to information
This means that an organization must provide individuals with clear information about the collection and processing of their personal datawhen an individual asks for this. An organization must be able to indicate which data they process and why, according to the GDPR principles.
By familiarizing yourself with these rights, you can better foresee when customers and third parties might inquire about the data you are processing. You will then find it much easier to oblige and send them the information they are requesting, because you were prepared. It can save you a lot of time to always be prepared for inquiries and have the data at hand and ready, for example, by investing in a good customer management system that allows you to pull the necessary data fast and efficiently.
What happens when you do not comply?
We already touched on this subject briefly before: there are consequences when you do not comply with the GDPR. Again, be informed that you don’t need to have a company based in the EU to be required to comply. If you have even one customer that is based in the EU whose data you process, you fall under the scope of the GDPR. There are two levels of fines that can be imposed. The competent data protection authority in each country can issue effective fines at two levels. That level is determined based on the specific violation. Level one fines include violations such as processing personal data of minors without parental consent, failure to report a data breach, and cooperating with a processor that does not provide sufficient guarantees in terms of required data security. These fines can amount to up to 10 million euros or, in the case of a company, up to 2% of your total worldwide annual turnover from the previous financial year.
Level two applies if you commit fundamental offenses. For example, failure to comply with the data processing principles or if an organization cannot demonstrate that the data subject has actually given consent to the data processing. If you fall under the scope of level two fines, you risk a maximum fine of 20 million euros, or up to 4% of your company's global turnover. Do note that these amounts have been maximized and depend on your personal situation and your business’ yearly revenue, amongst other factors. In addition to fines, the national data protection authority may also impose other sanctions. This can range from warnings and reprimands to the temporary (and sometimes even permanent) cessation of data processing. In that case, you may temporarily or permanently no longer process personal data through your organization. For example, because you have repeatedly committed criminal offenses. This will essentially make it impossible for you to do business. Another possible GDPR sanction is the payment of damages to users who file a well-founded complaint. In short, be vigilant about the privacy and personal data of individuals to avoid such hefty consequences.
Do you want to know whether you are GDPR-compliant?
If you are planning on starting a business in the Netherlands, you will have to comply with the GDPR. If you are doing business with Dutch customers, or customers based in any other EU country, you will also have to adhere to this EU regulation. If you don’t know for sure whether you fall under the scope of the GDPR, you can always contact Intercompany Solutions for advice on the subject. We can assist you in finding out if you have applicable internal regulations and processes in place and if the information you provide to third parties is sufficient. Sometimes it can be very easy to overlook important information, that could nonetheless get you in trouble with the law. Remember: privacy is an extremely important topic, so it’s essential that you are always up-to-date regarding the latest regulations and news. If you have any questions about this subject or would like more information about business establishments in the Netherlands, feel free to contact Intercompany Solutions anytime. We will gladly assist you with any query you might have, or offer you a clear quote.
Sources:
https://www.afm.nl/en/over-de-afm/organisatie/privacy
[1] https://commission.europa.eu/law/law-topic/data-protection/data-protection-eu_nl#:~:text=The%20general%20regulation%20dataprotection%20(GDPR)&text=The%20AVG%20(also%20known%20under,digital%20unified%20market%20te%20.
[2] https://www.rijksoverheid.nl/onderwerpen/privacy-en-persoonsgegevens/documenten/brochures/2018/05/01/de-algemene-verordening-gegevensbescherming
[3] https://www.rijksoverheid.nl/onderwerpen/privacy-en-persoonsgegevens/documenten/brochures/2018/05/01/de-algemene-verordening-gegevensbescherming
When we register Dutch companies for foreign entrepreneurs, by far the largest number of legal entities established are Dutch BVs. This is also known as a private limited company in foreign countries. The reasons why this is such a popular legal entity are many, such as the lack of personal liability for any debts you make with the company and the fact that you can pay yourself dividends, which can often be more profitable in terms of taxes. In general, if you anticipate generating at least 200,000 euros annually, the Dutch BV is the most profitable choice for you. Since the Dutch BV is a legal entity with a certain structure dictated by law, there are aspects you should inform yourself about. For example, what are the rights and obligations and the division of tasks among the formal (and informal) bodies within a private company? In this article, we give a brief overview, providing you with enough information to become acquainted with the way a Dutch BV is set up. If you want to start a Dutch business in the near future, Intercompany Solutions can assist you with the establishment of a Dutch BV in just a few business days.
What is a Dutch BV?
A Dutch BV is one of the many legal entities you can choose for your business in the Netherlands. We cover the entirety of legal entities in this article, should you be interested in knowing more about all of these to make an informed decision. As mentioned briefly before, a Dutch BV is comparable to a private limited company. In short, this means we are talking about a legal entity with a share capital divided into shares. These shares are registered and are not freely transferable. Also, the liability of all shareholders is limited to the amount with which they participate in the company. The directors and those who determine the policy of the company may, under certain circumstances, be held liable for the debts of the company with their private assets. The limited liability of shareholders can disappear when banks let them sign privately for loans.[1] An interesting statement in the Netherlands is that "one BV does not qualify as a BV”.
You may have already heard this statement in the company of other entrepreneurs or from an advisor. It is not unusual for entrepreneurs to set up a second Dutch BV. The second BV then qualifies as a holding company., whereas the first BV is a so-called 'work BV’, which is like the operating company. The operating company is involved in all daily business activities, and the holding company is like a parent company. These types of structures are set up to spread risks, be more flexible, or for tax reasons. An example is when you want to sell (a part of) your company. In such cases, entrepreneurs often sell the operating company. You only sell the shares of the operating company, after which you can then park the sales profit of the operating company tax-free in your holding company. Another example entails the cashing out of profits. Imagine there are two shareholders with different private situations and spending patterns. One shareholder prefers to park their share of the profit from the operating company tax-free in their holding company. The other shareholder wants to dispose of their share of the profits immediately and takes the income tax for granted. You can also spread risks by establishing a holding structure. All property, equipment, or your accrued pension are on the balance sheet of the holding company, whilst only the daily activities of your company are in the operating BV. As a result, you do not have to put all your capital in the same place.[2]
What is the basic structure of a Dutch BV?
Taking the abovementioned information into account, the optimal legal structure for entrepreneurs choosing the BV as a legal entity consists of at least two private limited companies that ‘hang together’. The founder or entrepreneur does not hold the shares in the actual company, the operating company, directly, but through a holding company or management BV. It is a structure in which there is one BV in which you are a full shareholder. This is the holding company. You own the shares of this holding company. That holding company actually does nothing more than keep the shares in another operating BV that is therefore ‘underneath’ it. In this structure, you are therefore a 100 percent shareholder in your own holding company. And that holding company is then a 100 percent shareholder in the operating company. In the operating company, the daily business activities of your company are carried out, driven by account and risk. This is the legal entity that enters into agreements, provides services, and makes or delivers products. You can simultaneously have multiple operating companies that all fall under one holding company. This can be very interesting when you want to establish multiple businesses while still allowing for some coherence between them.
The board of directors
Every BV has at least one director (DGA in Dutch) or a board of directors. The board of a BV has the task of managing the legal entity. This includes conducting day-to-day management and determining the company’s strategy, including main tasks such as keeping the business running. Every legal entity has an organizational board. The tasks and powers of the board are approximately the same for all legal entities. The most important power is that it may act on behalf of the legal entity. For example, concluding purchase contracts, purchasing company assets, and hiring employees. A legal entity cannot do this itself because it is really only a construction on paper. The board thus does all this on behalf of the company. It is similar to a power of attorney. Usually the founders are also the (first) statutory directors, but that is not always the case: new directors can also join the company at a later stage. However, there must always be at least one director at the time of establishment. This director is then appointed in the deed of incorporation. Any possible future directors can also take preparatory actions before the establishment of the company. Directors can be legal entities or natural persons. As stated above, the board is charged with managing the companysince its interests are paramount. If there are several directors, an internal division of tasks can take place. However, the principle of collegial management also applies: each director is responsible for the entire management. This is particularly true regarding the financial policy of the company.
The appointment, suspension, and dismissal of directors
The board is appointed by the general meeting of shareholders (AGM). The articles of association may stipulate that the appointment of directors must be made by a certain group of shareholders. However, each shareholder must be able to vote on the appointment of at least one director. Those who are authorized to appoint are, in principle, also entitled to suspend and dismiss directors. The main exception is that the director can be dismissed at any time. The law does not limit the grounds for dismissal. The reason for dismissal can therefore be, for example, dysfunction, culpable behavior, or financial-economic circumstances, but even that is not strictly necessary. If the company relationship between the director and the BV is terminated as a result of such a dismissal, the employment relationship will also be terminated as a result. In contrast, any regular employee has dismissal protection in the form of a preventive review by the Dutch UWV or the subdistrict court, but the director lacks that protection.
The dismissal decision
When a director is about to be dismissed, specific rules apply to decision-making by the AGM. These rules can be found in the company's articles of association. There are some main rules, though. Firstly, both the shareholders and the director need to be summoned to the meeting, and this needs to be done in an acceptable amount of time. Secondly, the convocation needs to explicitly state that the proposed decision to resign will be discussed and voted on. And lastly, the director needs to be offered the opportunity to provide their vision regarding the dismissal decision, both as a director and as an employee. If these rules are not complied with, the decision is invalid.
What to do in situations ofconflict of interest
There are also situations in which there is a personal conflict of interest. In such situations, a director is not allowed to participate in the deliberations and decision-making within the board. If no management decision can be taken as a result, the supervisory board must take the decision. If there is no supervisory board or if all members of the supervisory board also have a conflict of interest, the AGM must take the decision. In the latter case, the articles of association may also provide for a solution. The purpose of Article 2:256 of the Dutch Civil Code is to prevent the director of a company from being guided in his actions mainly by his personal interests instead of solely the interests of the company, in which he has to serve as a director. The purpose of the provision is therefore, first and foremost, to protect the interests of the company by denying the director the power to represent them. This happens in the case of the presence of a personal interest or because of his involvement in another interest that is not parallel to that of the legal entity, and thus, he is not to be considered capable of safeguarding the interests of the company and its affiliated undertaking in a manner that can be expected of an honest and unbiased director. If you have a question about conflicting interests in corporate law, you can ask our team about such matters for expert advice.
In such cases, the first important factor is that it must be clear that there is a conflict of interest. Taking into account the far-reaching consequences of a successful appeal to the Dutch Civil Code, it is not acceptable to suffice with the mere possibility of a conflict of interest without this appeal being made concrete as described above. It is not in the interest of trade, and it is not in line with the spirit of Article 2:256 of the Dutch Civil Code that a legal act of the company could subsequently be annulled by invoking this provision without it being demonstrated that the underlying decision-making of the director concerned was actually unsound because of an impermissible confluence of conflicting interests. The question of whether a conflict of interest exists can only be answered in the light of all the relevant circumstances of the particular case.
Payment of dividendsby board decision
One of the main benefits of owning a Dutch BV is the possibility of paying yourself dividends as a shareholder, as opposed to a salary (or complementing it) when you are a director. We have outlined this subject more extensively in this article. Paying dividends entails paying out (part of) the profits to the shareholder(s). This radiates confidence to shareholders and attracts investors as well. Moreover, it is often more tax-efficient compared to a regular salary. However, a private limited company cannot simply pay dividends. In order to protect the creditors of private limited companies, profit distributions are bound by legal rules. The rules for paying dividends are laid down in Article 2:216 of the Dutch Civil Code (BW). The profits can either be reserved for future expenses, or distributed to the shareholders. Do you choose to distribute at least part of the profits to shareholders? Then only the general meeting of shareholders (AGM) may determine this distribution. The AGM may only take a decision to distribute profits if the equity of the Dutch BV exceeds the statutory reserves. A profit distribution can therefore only apply to that part of the equity that is larger than the statutory reserves. The AGM must check whether this is the case, before taking a decision.
Also note that the decision by the AGM has no consequences as long as the board of directors has not approved it. The board may refuse this approval only if it knows, or should reasonably foresee, that the company cannot continue to pay its payable debts after the dividend payment. Directors must therefore, before making a distribution, check whether the distribution is justified and if it does not jeopardize the continuity of the company. This is called the benefit or liquidity test. In the event of a violation of this test, directors are jointly and severally obligated to compensate the company for any possible shortfall caused by the distribution. Please note that a shareholder should know or have reasonably foreseen that the test has not been met when the dividend is paid. Only then can a director recover the funds from the shareholder, up to a maximum of the dividend payment received by the shareholder. If the shareholder cannot foresee that the test hasn’t been met, they cannot be held accountable.
Administrative liability and improper governance
Internal directors' liability refers to the liability of the director towards the BV. Sometimes, directors can take matters into their own hands and carry out actions that are not in line with the future of the company. In such cases, it can happen that a company sues its director(s). This is often done on the basis of Article 2:9 of the Dutch Civil Code. This article stipulates that a director is obliged to perform his duties properly. If a director performs his duties improperly, he may be personally liable to the BV for the consequences thereof. A number of examples from case law include taking certain financial risks with far-reaching consequences, acting in violation of the law or statutes, and failingto comply with the accounting or publication obligation. When assessing whether there is a case of improper administration, a judge looks at all the circumstances of the case. For example, the court looks at the activities of the BV and the normal risks that arise from these activities. The division of tasks within the board can also play a role. After careful consideration, the judge assesses whether the director has fulfilled the responsibility and care that can generally be expected from a director. In the event of improper management, a director may be liable to the company in private if they can be accused of a sufficiently serious accusation. It is then necessary to consider what a reasonably competent and reasonably acting director would have done in the same situation.
All the separate circumstances of the case play a role in assessing whether the director is guilty of serious misconduct. The following circumstances are important in such cases:
- the risks arising in general due to certain actions
- the nature of the activities carried out by the B.V.
- the division of tasks within the board
- any guidelines applicable to the board
- the information available to the director
- the information that ought to have been available to the director
- the responsibility and care expected of a director who is up to the task and performs it scrupulously
A serious accusation exists, for example, if the director has acted in violation of statutory provisions that aim to protect the BV. The director may still plead facts and circumstances on the basis of which it can be held that he is not seriously at fault. This can be tricky since the information at hand needs to be considered completely and accurately. A director may also be personally liable to third parties, such as creditors of the company. The criteria that apply are about the same, but in that case, there is also the question of whether the director can be blamed personally. In the event of bankruptcy, a late filing of the annual accounts or failure to comply with the statutory administrative obligation leads to a legally irrefutable presumption that there is a apparent improper performance of duties and that this is an important cause of the bankruptcy (the latter is rebuttable by an addressable director). The director can escape internal directors' liability by demonstrating two factors:
- They are not to blame for their actions
- They have not been negligent in taking measures to avert the consequences
In principle, the director will have to intervene if he observes that another director is guilty of improper management. Directors can check each other’s ways of doing business that way, in order to ensure that no director misuses his or her position within the company for personal means to an end.
The general meeting of shareholders (AGM)
Another important body within the Dutch BV is the general meeting of shareholders (AGM). As we already mentioned above, the AGM is, amongst other things, responsible for the appointment of directors. The AGM is one of the mandatory bodies of a Dutch BV, and as such, it has important rights and obligations. The AGM essentially has all the power that the board of directors does not have, creating a balanced way in making important decisions that is not too centralized.
Some tasks of the AGM include the following:
- Appointing and dismissing the board of directors
- Determining the destination of the dividend
- Amending the articles of association
- Dissolving the legal entity by means of a dissolution decree
As you can see, the AGM holds quite some power to make very important decisions for the company. These rights and obligations are set out in the law and in the articles of association as well. Therefore, the AGM ultimately has power over the Dutch BV. The board of directors is also obliged to provide the AGM with all relevant information. By the way, do not confuse the AGM with the shareholders' meeting. The shareholders' meeting is the actual meeting at which decisions are voted on and, for example, when the annual accounts are adopted. That particular meeting should take place at least once a year. Next to that, shareholders can be legal entities or natural persons. In principle, the AGM is entitled to all decision-making powers that have not been granted to the boards or any other body within the BV. Unlike directors and supervisory directors (and therefore also non-executive directors), a shareholder does not have to focus on the interests of the company. Shareholders may actually put their own interests first, provided they behave reasonably and fairly. The board and the supervisory board must provide the AGM at all times with all requested information, unless a compelling interest of the company opposes this. Furthermore, the AGM can also give instructions to the board. The board must follow these instructions, unless they are contrary to the interests of the company. This may also include interests such as those of employees and creditors.
Decision-making by the AGM
The decision-making process of the AGM is subject to strict laws and regulations. For example, decisions are taken within the AGM by a simple majority of votes, unless the law or the articles of association require a larger majority for certain decisions. In some cases, more voting rights may be granted to certain shares. In addition, it is possible to stipulate in the articles of association that certain shares are not subject to voting rights. So some shareholders might hold voting rights, while others might have fewer voting rights or even none at all. It is also possible to stipulate in the articles of association that certain shares do not have a right to profit. Please note, though, that a share can never be without both voting and profit rights, there is always one right attached to a share.
The supervisory board
Another body of the Dutch BV is the Supervisory Board (SvB). The difference between the board (of directors) and the AGM, however, is that the SvB is not a mandatory body, so you can choose whether you install this body or not. For larger corporations, it is advisable to have a SvB for practical management purposes, amongst others. The SvB is a body of the BV that has a supervisory function over the policy of the management board and the general course of affairs in the company and its affiliated companies. Members of the SvB are named commissioners. Only natural persons are allowed to be commissioners, and therefore legal entities cannot be commissioners, which differs from shareholders, since shareholders can also be legal entities. So you can buy shares of another company with your own business, but you cannot be a commissioner in the SvB by representing your business. The SvB has the task of supervising the policy of the board and the general course of affairs within the company. To achieve this, the SvB gives both solicited and unsolicited advice to the board. This is not just about supervision but also about the general line of the policy to be pursued in the longer term. The commissioners have the freedom to carry out their duties as they see fit and in an independent manner. In doing so, they must also keep in mind the interests of the company.
In principle, it is not mandatory to set up a SvB when you own a BV. This is different if there is a structural company, which we will discuss in a later paragraph. In addition, it may also be mandatory in certain sectoral regulations, such as for banks and insurers, in line with the Anti-Money Laundering and Terrorist Financing Act (Dutch: Wwft), which we have covered extensively in this article. Any appointment of commissioners is only possible if there is a statutory basis for it. However, it is possible that the court appoints a commissioner as a special and final provision in the inquiry procedure, for which such a basis is not required. If one opts for an optional institution of the SvB, this body must therefore be included in the articles of association at the time of the formation of the company, or at a later stage by an amendment to the articles of association. This can be done, for example, by creating the body directly in the articles of association or by making it subject to a resolution of a company body such as the AGM.
The board is obliged to continually provide the SvB with information necessary for the performance of its task. If there is reason to do so, the SvB is obliged to actively obtain information itself. The SvB is also appointed by the AGM. The articles of association of the company may stipulate that the appointment of a commissioner must be made by a certain group of shareholders. Those authorized to appoint are, in principle, also entitled to suspend and dismiss the same commissioners. In situations of personal conflict of interest, a SvB member must refrain from participating in the deliberations and decision-making within the SvB. If no decision can be taken as a result, since all commissioners must abstain, the AGM must take the decision. In the latter case, the articles of association may also provide for a solution. Just like a director, a SvB member can also be personally liable to the company in certain cases. This is possibly the case if there is imputably inadequate supervision of the board, for which the commissioner can sufficiently be blamed. Just like a director, a supervisory board member can also be liable to third parties, such as a liquidator or creditors of the company. Here too, approximately the same criteria apply as in the case of private liability towards the company.
The "one-tier board"
It is possible to opt for a so-called "monastic model of governance”, which is also called a "one tier board" structure. This means that the board is composed in such a way that, in addition to one or more executive directors, one or more non-executive directors also serve. These non-executive directors actually replace a SvBsince they have the same rights and obligations as supervisory directors. The same appointment and dismissal rules therefore apply to non-executive directors as to supervisory directors. The same liability regime also applies to supervisory directors. The advantage of this arrangement is that there is no need to set up a separate supervisory body. The disadvantage may be that, ultimately, there is less clarity about the division of powers and responsibilities. Due to the principle of collective liability for directors, keep in mind that non-executive directors will sooner be held liable for improper performance of duties than supervisory directors.
The works council
The Dutch law stipulates that every company with more than 50 employees should have its own works council (Dutch: Ondernemingsraad). This should also include temporary agency workers and hired workers, who have been working for the company for a period of at least 24 months. Amongst other things, the works council guards the interests of the staff in a company or organization, is allowed to contribute ideas on business, economic, and social issues, and can influence business operations through advice or approval. In its own unique way, this body also contributes to the proper functioning of the company.[3] According to the law, the works council has a twofold task:
- Consulting with the management in the interest of the company as a whole
- Representing the interests of the company's employees.
Under Dutch law, the works council has five types of powers, namely the right to information, consultation and initiative, advice, co-decision, and decision. In essence, the obligation to set up a works council rests on the business owner, who is not necessarily the company itself. It is either a natural person or a legal person who maintains a business. If the entrepreneur does not comply with this obligation, any interested party (such as an employee) has the possibility of requesting that the subdistrict court determine that the entrepreneur complies with his obligation to set up a works council. If you don’t set up a works council, you need to take into account that there are several consequences involved. For example, there may be delays in processing an application for collective redundancies at the Dutch UWV, and employees may oppose the introduction of certain schemes, because the works council didn’t have the chance to agree on them. On the other hand, keep in mind that the establishment of a works council certainly has advantages. For example, positive advice or approval from the works council about a certain topic or idea ensures more support and often facilitates quick and efficient decision-making.
The advisory board
Starting entrepreneurs are usually not so concerned with this particular body, and it is only after the first few years that business owners sometimes feel the need to discuss and reflect on the content and quality of their work, preferably in a meeting of well-informed and experienced people. You can think of the advisory board as a group of confidants. The constant focus combined with the extremely hard work during the first period of entrepreneurship sometimes creates tunnel vision, resulting in entrepreneurs no longer seeing the big picture and overlooking simple solutions in front of them. In principle, the entrepreneur is never bound by anything in a consultation with an advisory board. If the advisory board is opposed to a certain decision, the entrepreneur can choose their own path without hindrance. So essentially, a company can choose to set up an advisory board. There are no decisions taken by an advisory board; at best, only recommendations are formulated. The establishment of an advisory board has the following advantages:
- The entrepreneur has a sounding board to discuss ideas and inspiration with
- Transparency and continuity of decision-making are promoted
- More systematic attention is paid to the company's long-term vision and strategy
- The balance between the interests of the company and the interests of the entrepreneur and any other shareholders is monitored and reflected upon
Unlike the SvB, an advisory board does not supervise the board of directors. The advisory board is primarily something like a think tank, where the main challenges of the company are discussed. The main focus is on discussing the strategy, mapping out possibilities, and creating a solid plan for the future. The advisory board will have to be convened with sufficient regularity to guarantee its continuity and the involvement of the advisors as well. It is advisable to consider the nature of the company when composing the board of advisors, meaning that you seek out individuals who are able to provide in-depth and specialized input tailored to your company’s niche, market, or industry. As already discussed, an advisory board is not a statutory body. This means that an advisory board can be set up without obligation in any way that an entrepreneur sees fit. In order to manage mutual expectations, it is wise to draw up a regulation that describes the agreements that apply with regard to an advisory board.
The structural regulation
In Dutch, this is called "structuurregeling". The two-tier structure is a statutory system introduced around 50 years ago to prevent boards of directors from acquiring too much power in situations where, given the spread of shareholdings, the shareholders were considered less able to do so. The essence of the structural regulation is that a large company is legally obliged to set up a SvB. The structural rules may be compulsory to apply to a company, but they may also be applied voluntarily by a company. A company is covered by the structural scheme if a number of size criteria are met. This is the case when a company:
- Has equity that equals or exceeds €16 million
- Has set up a works council
- Employs at least 100 people in the Netherlands
If a company falls under the structural regime, the company itself is also called a structural company. The structural scheme is not mandatory for a group holding company when it is established in the Netherlands, but the majority of its employees work abroad. However, these multinationals can choose to apply the structural scheme voluntarily. And in some cases, there may be the mandatory application of a weakened structural regime. If these requirements are met, the company will be subject to various special obligations vis-à-vis normal private limited companies, including, in particular, a mandatory SvB that appoints and dismisses the board, and to whom certain major management decisions must also be submitted.
Intercompany Solutions can set up your Dutch BV in just a few business days
If you are serious about starting a company overseas, then the Netherlands is actually one of the most beneficial places to choose. The Dutch economy is still very stable compared to other nations worldwide, with a flourishing entrepreneurial sector that holds plenty of possibilities for expansion and innovation. Entrepreneurs from all over the world are welcomed here with open arms, making the business sector incredibly diverse. If you already own a foreign company and would like to expand to the Netherlands, then the Dutch BV is the best possible option for you, for example, as a branch office. We can advise you regarding the most optimal and effective way to establish your company in the Netherlands. With many years of experience in this field, we can provide you with results that are specifically tailored to your preferences and situation. Next to that, we can take care of the entire registration process in just a few business days, including possible extra services such as the opening of a Dutch bank account. Feel free to contact us anytime with any queries you might have, and we will make sure that all your questions are answered. If you would like to receive a free quote, contact us with your company details, and we will get back to you as soon as possible.
[1] https://www.cbs.nl/nl-nl/onze-diensten/methoden/begrippen/besloten-vennootschap--bv--
[2] https://www.kvk.nl/starten/de-besloten-vennootschap-bv/
[3] https://www.rijksoverheid.nl/onderwerpen/ondernemingsraad/vraag-en-antwoord/wat-doet-een-ondernemingsraad-or
Is it possible to create your own cryptocurrency?
Since the Bitcoin white paper was published in 2008 by the mysterious character known as Satoshi Nakamoto, crypto has literally taken the meaning of ‘currency’ to a whole new level. Until today, almost no one knows the real identity of this person. Nonetheless, he revolutionized the way we can transfer funds, as the white paper for Bitcoin initiated a movement that allows people all over the globe to transfer funds without the involvement of a third trusted party, such as a bank. Since then, thousands of new cryptocurrencies have been launched by various individuals everywhere. Some were also very successful, such as Ethereum and even Dogecoin: a cryptocurrency that essentially started as a joke. Although it takes some time and research to truly understand the workings of cryptocurrencies, this new form of currency enables everyone to buy and sell products without the interference of a third party, but also to create their own currency. That is something truly groundbreaking, as generally only governments were able to create and print currency.
Essentially, this means that you can also create a crypto coin. By creating a digital token, you can fund any project when you launch an Initial Coin Offering (ICO). If people invest in your coin, you don’t only gain investors, but your coin could actually become a valid coin that can be used and traded. Cryptocurrencies have grown in popularity tremendously during the past years. Since you can raise quite a bit of money with an ICO, more and more companies and individuals are developing their own cryptocurrency. Is this difficult to do? Not always. Anyone with some technical knowledge can create a cryptocurrency themselves. In this article, we will explain the process, and provide you with some insight regarding the best way to list your new coin on an exchange. You will also see, how Intercompany Solutions can assist you in making this process less costly, and also much faster and easier.
What is crypto?
Crypto, fully known as cryptocurrency, is a form of currency that only exists digitally. It doesn’t exist in any solid form whatsoever. When you buy and own crypto, you store this in a digital wallet, that you can protect by a seed phrase and various forms of security. Crypto is a general collective term used to describe various crypto coins, of which Bitcoin is by far the most famous cryptocurrency. This is similar with traditional currency, since most countries have their own currency like the Dollar, Yen, Pound and also the Euro. Although the Euro is somewhat special, since it's a currency issued by a collaboration of various nations, as you probably know already. In any case, just like there are plenty of traditional currencies, there are also plenty of different cryptocurrencies. All cryptocurrencies run on blockchain technology. Blockchain technology is the technique through which crypto exists, which controls and stores everything in data traffic. So, if you send one crypto coin to your neighbor, it is checked and stored in the blockchain on multiple computers in the network. By being monitored and stored on multiple computers in the network, it increases security and reliability. Some cryptocurrencies went even further and added technology to the blockchain, such as Ethereum with its so-called ‘smart contracts’. This technology allows people to create contracts between parties, that don’t need a third party to enforce or legitimize the contract, since it does all this by itself. It is essentially a piece of code written, which becomes active once a contract is settled. When you study blockchain technology, you can see how banks, for example, can completely be surpassed when buying or selling goods or services in cryptocurrency. This is exactly what makes crypto so interesting for ‘regular people’.
But it’s not just free trade between people that is facilitated with crypto. Crypto, as an investment, has a lot of potential. Some experts even speculate that it may take over our current money system. No one knows for sure and there are supporters and opponents of these developments, but it is certainly the right time to immerse yourself in the world of crypto. A large difference between cryptocurrency and 'normal' currency is that regular currencies are semi-regulated in value, whilst crypto prices change and fluctuate continuously due to supply and demand. If, for example, your Euro suddenly becomes less valuable, the Dutch Central Bank tries to step in to ensure that the value stabilizes. The same applies if the coin becomes more valuable.
Thus, with the exception of inflation, consumers do not regularly notice the changes in value that the Euro undergoes on a daily basis. You only really know the value of a currency, when you try to exchange it for another currency. This often happens when you travel. Also, when you go to the store, you always pay the price mentioned for any products you buy. You don’t end up at the cashier’s desk and find, that the amount you have to pay at checkout is different from the price mentioned next to the product. This is different with Bitcoin and all other cryptocurrencies, sincethe value of any cryptocurrency is influenced by supply and demand. This means that the increase in value and the decrease in value alternate continuously and are determined by the purchases and sales in the market. The alternation of an increase in value and a decrease in value is called volatility. Knowing what these terms mean will help you better understand the crypto world. So, when you want to invest in crypto or create your own coin, be sure that you understand that its value is definitely not set in stone beforehand. A flexible approach works best.
More about blockchain technology
All cryptocurrencies are virtual assets, which are used as payment in transactions that are done online/digitally. As explained above, cryptocurrencies are not managed by banks and other (centralized) financial institutions, which means there is no third party that keeps records of the transactions that are made. As a general rule, all centralized institutions and systems record transactions. These recorded transactions are then managed by using a ledger. This ledger is normally only accessible by a very limited amount of third parties. With crypto, this is entirely different, since the system itself is completely decentralized and therefore has no need whatsoever for institutions or organizations to manage transactions. This is where the blockchain comes in: it is actually a database, that contains all transaction data as well as information about created coins, and ownership records. So it’s a ledger in itself, which is secured by mathematical cryptographic functions. The open-source part ensures, that any person can access this ledger, view all data and also become part of this system. All the transactions are ‘chained together’, which forms the blocks on the blockchain. These are added to the distributed ledger continually. Thus,; it eliminates the need for any third party to control and oversee transactions, as the blockchain itself is already doing this.
Who can create a new cryptocurrency?
In essence, anyone can decide to make a cryptocurrency, whether you are very serious about a particular project, or simply for fun and possible financial gains. Just keep in mind, that you will need to invest quite a bit of time, money and also other resources if you want to succeed, such as advanced technical knowledge, or the help of a team of experts. The creation process of the coin or token is actually the easy part, whilst maintaining the cryptocurrency and growing it often proves to be more challenging. If you are someone who is simply curious about cryptocurrency, creating one can be a very interesting side project. You are definitely not the only one, as there are plenty of coins and tokens being issued on a monthly basis. We suggest that you browse around first and read a lot of white papers, to ensure that someone else hasn’t already implemented your idea. If this is the case, try to come up with something new and exciting, as this will provide a solid basis for possible future success. The easiest way to create a new token, is by using an already existing blockchain. If you want to create something entirely new, you will have to build your own blockchain with a native crypto, but this requires highly advanced technical expertise. Launching a token on an existing blockchain platform, however, can already be done with relatively little technical knowledge. We will discuss this later in detail.
The difference between a coin and a token
There is some confusion sometimes regarding the words ‘coin’ and ‘token’. These two terms are often used interchangeably, but are different nonetheless. A crypto coin is mostly native to a particular blockchain, its main purpose is generally to store value and usage as a medium of exchange, whereas a token is built on an already existing blockchain for some decentralized project. Tokens generally represent certain assets, or it can also offer the one who is holding it specific features. Tokens also offer several distinct functions, such as security, governance and utility. Coins can be mined and earned via proof of work and proof of stake. Both coins and tokens use blockchain technology, which is sometimes also explained as distributed ledger technology. But, as we explained, tokens are built on top of existing blockchains, whilst coins are often created simultaneously with the creation of a new blockchain. You should definitely consider which option works best for you, before you start working on your project. It might also be helpful to ask for advice from an expert, he or she can tell you in more detail which possibility would suit your ideas best. The amount of knowledge you already have also plays a big part.
What are the average costs of creating a cryptocurrency?
It’s very hard to tell, beforehand, how much money you will have to invest when creating a new token or coin. The degree of customization is a huge factor. A standardized token on an already existing blockchain, such as Ethereum or Bitcoin, will generally be easier to create and therefore the least costly. If you want to modify a blockchain however, or create a new one, you should take into account that this will require much more expertise, time and therefore also money. Some platforms offer their services for free, when you want to create a standardized token. Nonetheless, if you have a very ingenious idea, creating your own blockchain and native cryptocurrency might be worth the investment.
Benefits and pitfalls when making your own cryptocurrency
There are some pros and cons regarding creating your own cryptocurrency. Because this technology is considered quite new, not everyone has the correct knowledge to know what they are getting themselves into. It’s much different from, for example, asking an investor for financial support, or trading on a regular exchange. Still, the fact that it is so new is actually also a big chance to achieve something valuable and original. Some of the benefits of creating a cryptocurrency involve the fact that you can customize the crypto in many ways, almost without limits. So you can make something truly unique that represents your ambitions well. Also, it provides you with a fantastic opportunity to expand your knowledge about cryptocurrencies and blockchain technology in general. Next to that, there’s also the fact that your token or coin can actually gain value, which can create financial independence for you. Some hurdles might be the lack of proper technical knowledge, which can potentially make it very hard for you to realize a new coin. The process itself is also very time-consuming and sometimes expensive, as we mentioned previously. It also requires ongoing maintenance, if you want your project to succeed. But if you already have a successful business and money to spend, you can negate this by hiring experts who do all the hard work for you. Make sure you have a decent planning and know what you want to do yourself, and what you can possibly outsource. This will make the process much easier and manageable.
The basic equipment you will need
One of the main benefits of creating a cryptocurrency, is the fact that you don’t need to invest in heavy machinery, expensive appliances or any kind of high-end gadgets. All you need is a working internet connection and a computer or laptop with sufficient specs. This will provide you with all the things you need. We strongly discourage you to try to create a cryptocurrency with your smartphone or tablet, however, since it’s almost impossible. If you aren’t very knowledgeable in the field of computing science or technology in general, you will surely also need some expert assistance. So this means, you will need to hire a team of experts who can assist you. If you know your way around, this won’t be necessary and the initial investment will not be very high. We will now outline the four different methods you can apply, to create a coin or token with blockchain technology.
1. Hire a(n) (team of) expert(s) to create a cryptocurrency for you
One of the easiest ways to create a cryptocurrency is by hiring a blockchain development team of experts. This is especially necessary, when you want the coin to be highly customized. There are very specific companies and enterprises that focus on creating and also maintaining new cryptocurrencies and blockchain networks, which are known as blockchain-as-a-service (BaaS) companies. Some of these companies can create and develop entirely customized blockchains for you, whilst others already have an existing blockchain infrastructure they use for your project. You can also decide to hire a BaaS company to create a highly customized token that runs on an existing blockchain. If you don’t have a lot of technical knowledge, or you simply want the job to be done correctly, this might be the best option for you, provided you have the funds to pay for their services. Otherwise, we suggest you try to create your own token on an already existing blockchain.
2. Create a new token on an already existing blockchain
The simplest option when you go DIY and don’t hire others to help you out, is to create a token on an existing blockchain. This makes it possible to make a new crypto without modifying or creating a new blockchain. Some platforms, such as Ethereum and its smart contracts, are actually created specifically to this end: to make it possible for many different developers to create a token that Ethereum hosts. This token is hosted by the blockchain, but not native to the blockchain, since the ETH coin already is the native coin. Even though it is relatively easy to create a token on a blockchain that already exists, you should take into account that you will need an average degree of technical knowledge. There are multiple apps nowadays that make the process much easier, so you can use one of those. We outlined some basic steps you will have to take, when creating your own token on an existing blockchain.
i. Pick the blockchain platform you want to host your token
The first step obviously encompasses choosing the blockchain platform you want to use to host your new token. There are many options, since every blockchain is open-source and therefore, viewable, usable and editable. The most popular blockchains to consider are the Ethereum platform, Bitcoin’s blockchain and the Binance Smart Chain. If you want to use the existing blockchain of Bitcoin, for example, you need to firstly download the software of the cryptocurrency. Once you have done this, you make a copy, which you then name yourself: this will be the name of your token. Since the codes are open-source as we mentioned just now, this is all allowed. Everyone can use the software, that’s the whole point of cryptocurrencies. The main goal to keep in mind, is that the new coin should offer something new and, possibly, also better, than Bitcoin itself. Also, be aware of so-called ‘cryptojacking’, this is when a malicious third party infiltrates your computer and tries to mine your coin or token. They essentially use their computing power to undo transactions in the past, which will make your token worthless. Read a bit about it, so you know how to protect yourself from such happenings.
The process of creating a token differs a bit with each blockchain and native coin. If you want to use the Ethereum blockchain to create your token, for example, you need to find the standard codes on the internet and download these. The special feature of the Ethereum blockchain is its smart contracts, which revolutionized the way we can settle contracts between tow or multiple parties, and make sure all obligations are met. The contract is added to the blockchain, with all relevant provisions and conditions, and is carried out automatically. This basically eradicates the need for third parties, such as lawyers, notaries and even judges. Also, bets can be made this way to ensure everyone keeps their promises. In any case, if you like to and have the knowledge to do so, you can add extra functions on top of the existing blockchain and thus, create your own token. Keep in mind, that, with the Ethereum blockchain, you pay for every transaction. The value of the new currency must therefore certainly be higher than the cost per transaction.
ii. The creation process of the token
Once you have decided on the blockchain you want to use, you can start the actual creation process of the token. The difficulty level highly depends on the level of customization you wish to apply to the token. The more customized, the more technical knowledge is required to realize the token. There are some online apps and tools, however, that take you through the process step by step. Some apps even facilitate the process in a few clicks, but this doesn’t generally create a very unique token. You can browse on the internet and look at the apps and tools, to see whether this might help you.
iii. Minting your new crypto token
When the token itself has been created, it’s time for the next step: minting the token. Minting is actually a very old concept, which goes back as far as the 7th century BC. It was essentially an industrial facility, where precious metals such as gold, silver and electrum were manufactured into actual coins. Since this period, minting is an integral part of economics, since this is literally how money is made. Every modern day society that has a central authority that creates currency, mints (prints) regular fiat money. With crypto, the minting process is obviously a bit different, since cryptocurrencies aren’t physical or even comparable to fiat money. The process itself involves validating transactions made with the token, which will then be added as new blocks on the blockchain. As you can see, this is where the previously mentioned ‘cryptojackers’ come in, since they undo the transactions you just validated. Best be on the lookout for such malignant interferences, if you want your token to succeed. Minting also supports the validation of transactions in so-called proof-of-stake (PoS) blockchain networks.
Please also note, that minting and staking are somewhat alike, since these two concepts both support blockchain networks. However, where minting involves validating transactions, creating new blocks on the blockchain and recording data on-chain, staking is the process where you buy cryptocurrency and lock them on an exchange or in a wallet for a specific amount of time, which in turn is favorable for the security of the network. When you use a well-known blockchain such as Ethereum, chances are that you won’t have to invest in a lawyer or auditor to issue your tokens. Keep in mind that tokens generally benefit from the safety of the security that an established blockchain offers, even though they are less customizable than coins. If you are a starting crypto creator, creating a token is the safest way to begin and build experience. Also, the blockchain you are operating on might offer some interesting and innovative options for everyone who creates a token on this particular blockchain. In general, it helps to be associated with a well-established blockchain platform, since this can help immensely to enhance the value and credibility of your token.
3. Modifying the code of an existing blockchain
A third and interesting option involves the modification of an existing blockchain, which is simpler than creating an entirely new blockchain, but then also more difficult than using an existing blockchain to create a token. What you basically do is copy the source code again, just like you do when you create a token on a blockchain that exists. Only this time, you start by modifying the source code itself, to make changes that might somehow be beneficial to the blockchain. If you modify the source code, you can create a coin instead of a token, which will be native to the new blockchain you just created. This option does require more advanced technical knowledge, since you might need to modify quite a bit if you want to reach your objectives exactly, so a lot of customization might be involved. Note, that you will need to hire a lawyer or blockchain auditor, once you finish modifying the code and creating the coin. You need to figure out where you stand legally, since this varies enormously per country. For example, it’s illegal to create crypto in China. Make sure you meet all legal requirements, before you start minting your cryptocurrency.
4. Making your own blockchain and native cryptocurrency
Creating your own blockchain is the hardest way to create crypto, but it also allows for the largest amount of customization and originality. It’s very complicated to create an entirely new blockchain, meaning that you will need a very high level of expertise and probably also a degree in programming and coding. Generally, only top-notch programmers are able to create a new blockchain, so don’t try this if you are inexperienced. We strongly advise that you look for a solid course, if you want to be able to do this by yourself in the future. Then, you will be able to write your own unique code to support a new native cryptocurrency. If you would like to create a crypto that is completely new or innovative in some way, this is principally the best way to do it. You have the freedom to design your coin exactly how you like, and the upside is that you don’t have a token, but a real coin, which is considered to be slightly superior to a token. Building your own blockchain involves a few standard steps, which we will explain below.
i. Selecting a consensus mechanism
A blockchain has a certain operating protocol, which is also referred to as the consensus mechanism. This is the term for all incentives, ideas and protocols that make it possible for a network of nodes to be able to agree on the state of a blockchain. Consensus mechanism is often referring to either proof-of-work (PoW), proof-of-authority (PoA) or the previously mentioned proof-of-stake (PoS) protocols. Keep in mind, though, that these are actually particular components of consensus mechanisms that protect against certain attacks, such as Sybil attacks. The most used consensus mechanisms are PoS and PoW.
ii. The architecture of the blockchain
You also need to think about the design of your blockchain. This is actually where you can put all your unique ideas to work. How do you want your blockchain to differ from already existing blockchains? What do you want to offer and achieve with your self-made blockchain? What kind of functions or options would you like to design? Do you want your blockchain to be public, or private? Permissionless, or permissioned? You get the chance to design every bit of it, which makes this process so interesting if you know what you are doing, since you can now showcase the reason you want to make a crypto coin. Your blockchain is literally the building block of your crypto, so design wisely and put a lot of effort and thinking into your project and white paper. Also, make sure you can explain your idea well, you will need to be able to pitch if you want to attract investors in a later stage.
iii. Audit and legal compliance advice
After you have designed the blockchain itself, you need to hire an auditor or lawyer to audit the blockchain you created, including the code. Most independent developers hire a professional to sort this out, mostly because an expert will also be able to pinpoint any flaws or vulnerabilities that you can correct before you start minting. It is also very important that you verify that you comply with all laws and regulations. Without the verification of legal compliance, you don’t know whether what you are doing is even legal, so make sure you never miss this step to protect yourself. A legal professional can confirm your cryptocurrency is in line with all national and, if relevant, international laws and regulations.
iv. Minting your new crypto token
As already explained in the part about creating a token on an existing blockchain, this is the time you are ready to mint your crypto. You are completely free to decide the amount of coins you want to issue, as well as whether you mint them all in one go, or if you decide to increase your supply over time gradually when new blocks are added to your blockchain. You should definitely ask for advice from an expert, if you want to maintain everything the best way you can. You can now proceed with listing your coin on an exchange, or start an ICO.
How Intercompany Solutions can help you
With many years of experience with the establishment of Dutch companies and offering advice with ICO’s and listing your coin or token on an exchange, we can assist you with a wide variety of services. If you would like to start a new crypto project, for example, we can help you with listing the crypto on (de-)centralized exchanges, please take a look at this article for more information. We can also help you with any business plan or white paper you might need to write, or provide you with information regarding Dutch compliance regulations. If you would also like to establish a Dutch business, adjacent to your crypto aspirations, we can take care of the entire registration process in just a few business days. Feel free to contact us with any pending questions you might have, or if you would like to receive a personalized quote.
When contemplating the possibility of becoming a business owner, most (future) entrepreneurs generally choose to register their business in their home country. The reason they often state, is because this is the most practical option that doesn’t involve too much hassle and paperwork. When you set up a business in a different country, you automatically also have to comply with the (tax) laws and regulations of that country. So it takes a bit of legal and financial research, when you decide to start a business in a different country than your own. Nonetheless, it is still a very lucrative decision for many foreign entrepreneurs to expand internationally. For starters, you get to benefit from all facilities and regulations a certain country has to offer. In this article we will outline why starting a Dutch company is often a very good idea, what you have to think about when starting a company overseas, and we will also sum up many of the benefits the Netherlands has to offer to foreign investors and entrepreneurs. If you are already enthusiastic about the possibility of starting a Dutch business, then Intercompany Solutions can assist you during the entire registration procedure.
The Netherlands is a very competitive country businesswise
More than most countries in the world, the Dutch offer a very friendly and competitive business climate, meant to push you to your limits as an entrepreneur. Doing business is substantially different from being an employee, since you are solely responsible for all your daily business activities. This means, that you need a focused and disciplined approach to everything that you undertake. According to the Dutch Central Bureau of Statistics (CBS), approximately 13% of all Dutch citizens are self-employed. This amounts to roughly 1+ million Dutch people who own a company. Next to Dutch citizens, many foreigners have also decided to start a Dutch business, alongside many well-known multinationals who also have at least one base of operations in the Netherlands, which makes the total number of Dutch companies even larger. This means, that you will find healthy competition in the country, as well as ample possibilities to network with fellow entrepreneurs. There are also many events and incentives that you can attend, in order to help grow your company even further. You need to take into account, however, that competition can also be fierce. So a good dose of ambition and competitiveness will certainly help you along the way.
The Dutch love innovation and improvement
One of the most striking qualities of the Dutch is their insatiable appetite for constant improvement, innovation and reinvention. You only have to look at the way the Dutch handle water crises, to see how incredibly versatile their approach to different sets of problems is. This is palpable in almost every market or niche the Dutch enter: in every way, they always strive for new possibilities to solve old problems. If you are someone who likes to do things better than they were done before, then the Netherlands offers you plenty of space to innovate. There are many business opportunities within progressive niches such as clean energy, the bio-industry, pharmaceuticals, technology, IT and logistics. Next to that, many online entrepreneurs will find the fast-paced climate to their liking, since new technology is being invented in consecutive timeframes. You will also find many professionals within their fields, who can help you build your company to a higher level. If you are looking for qualified employees, then the Netherlands also offers you a wide variety of expertise and experience overall. We will discuss the multilingual and highly educated workforce later in this article. Innovative ideas and progressive solutions are always welcomed in the Netherlands!
Many different niches to operate in
As we already briefly discussed above, you can choose a wide variety of niches to start a business in the Netherlands. Logistics is a very popular market until today, mostly due to the fact that the country is highly accessible. You can access an airport or port within a maximum of 2 hours from every location in the Netherlands, making the Netherlands a perfect country for web shops, drop-shipping businesses and general logistics companies. If you are looking for online business possibilities, then the country also facilitates many startups in this regard. Experts and specialists within any field are also welcome, especially if you are able to implement new solutions that make existing processes more efficient and cost-effective. The new way to do business is the way that improves old ways and structures. There are already so many businesses operating in most niches, that you generally only stand out of the crowd, when you have something innovative or completely new to offer. If you love changing old ways into fruitful and efficient new procedures. Then the Netherlands is definitely the place to start your business.
The pharmaceutical business is also continuously growing, so if you happen to have a degree in that direction, you will find plenty of possibilities in the Netherlands. One of the fastest growing sectors is the agricultural sector and the food sector. There are many farmers in the Netherlands, who are basically always looking for ways to improve their way of growing crops and holding livestock. During the past decade, there has been a lot of attention aimed at the bio-industry, specifically some of the horrendous conditions animals are being kept in. Thus, the government is trying to change the way livestock is kept and handled. If you happen to have any experience or ideas in this regard, you could actually make a huge impact on a global scale. This is due to the fact, that a very large percentage of all crops and food originating from Dutch farmers is being exported all over the world. Furthermore, you will also be doing nature a favor by making sure, that the bio-industry becomes more friendly towards animals. As the Netherlands is famous for its import and export activities, you will obviously also find many business opportunities here in that direction. If you are ambitious and driven, there is almost nothing you will not be able to achieve in this amazing country.
One of the best infrastructures of the world
A very particular benefit of the Netherlands is its solid infrastructure. This doesn’t just apply to the physical infrastructure, but also the digital variant. Holland is relatively small, but it's well-known for the fantastic quality of the roads and highways. Which is not really a surprise, since the road tax Dutch citizens pay in the Netherlands is one of the highest in the world. Nonetheless, if you own a company that needs to transport a lot of shipments, you will find that such activities go very well here. The connections between highways are also plenty, which allows you to get out of the country in a maximum of 2 hours. The digital infrastructure is also one of the best in the world, especially now that fiber optic is being installed in almost the entire country. The Netherlands has also placed 5G towers all over the country, generating high-speed internet access wherever possible. If you need to hire an office and house employees, at the very least you can be sure that everything related to connectivity is very well taken care of.
Good and stable tax rates
A very important factor most (aspiring) entrepreneurs look at when deciding where to base their company, are the current tax rates, of course. Since this will provide you with a rough calculation regarding the amount of money you will actually be able to keep and spend yourself, once profits have been taxed. The Netherlands has been known for its very stable economic and fiscal climate for decades, which provides many interesting benefits for both starting entrepreneurs, and already existing companies and multinationals. If you establish a small sole proprietorship in the beginning, there are multiple interesting tax deductions you can benefit from. Once you start making a larger sum of money in a certain timeframe, we always advise converting your sole proprietorship to a private limited company. In Dutch, this is named a Besloten Vennootschap (B.V.). This is due to the fact, that the benefits of a Dutch BV exceed the benefits of a sole proprietorship above a certain amount of profit. Currently, the corporate tax rates are as follows:
Taxable amount | Tax rate |
< € 200,000 | 19% |
> € 200,000 | 25,8% |
These rates sometimes change a bit, but the difference is never very noticeable. If you compare the Dutch tax rates to some of the neighboring countries such as Belgium and Germany, you will see that the rates are quite modest and reasonable. If you would like to know more about current tax rates and what this will mean for your company, please don’t hesitate to contact Intercompany Solutions for more information.
A multilingual and highly educated workforce and freelance pool
We already briefly discussed the fact that most Dutch citizens are highly educated, and in most cases also bilingual. If you are starting a company that will also be hiring employees, then this little fact will be of the utmost importance to you as a business owner. Hiring employees requires a certain amount of trust, since you will be outsourcing a part of the daily business activities to complete strangers. Therefore, knowing that a potential employee is skilled and knowledgeable, at the very least, will provide you with more certainty. According to some recent numbers from the Dutch Youth Institute (NJI), more teenagers are going to HAVO or VWO and fewer to VMBO. In the Netherlands, high school is categorized in multiple levels, which ranging from lowest to highest are as follows:
- Practical education
- VMBO
- HAVO
- VWO
- Lyceum
- Gymnasium
With diplomas of the last three mentioned levels. You automatically are eligible to attend university. In some cases, you can also get into university with a HAVO degree, by doing an extra test that is aimed at the specific degree you want to do. In 2020/2021, 45% of students in the third year will are in HAVO or VWO. 22.5% of third-year students in secondary education follow a VWO course, and almost 23 percent are in the third year of HAVO. Ten years earlier it was 21.7% and 20.7% respectively. The share of third-year students in pre-vocational secondary education fell from 52 percent in 2010 to over 48.7 percent in 2020.[1] Of course, you will not always need university-educated employees for all jobs. An administrative assistant, for example, will do fine with a practical education degree. This will also be more profitable for you when looking at salaries, since the higher the education, the higher the monthly wage.
But this proves that more than 50% of all Dutch youngsters are eligible for a university course and degree, and in most cases they obtain these too. Nowadays, plenty of degrees are taught in two languages, the second language mostly being English. The Dutch are actually the best English-speaking citizens in the world, with English not being their mother tongue. Only people from English-speaking countries are more proficient in the language. That is quite a feat! So if you are looking for customer service representatives, or account managers, for example, you will find a large number of excellent and qualified candidates here. Another plus: since Holland is such a densely populated country, most people will live close to your office and won’t need to travel far. This ensures, that employees are always on time for work.
The Netherlands is a member state of the European Union
One of the most important benefits of doing business in the Netherlands, is the fact that the country is a member of the European Union. This ensures free trade possibilities in the European Single Market. If you are planning to start a business in fields such as import, export and/or logistics, then this offers you a lot of benefits. You will not have to pay any VAT for goods or services from one of the other EU member states, for example. Neither do you have to charge VAT to other EU member state companies. There is also a lack of customs procedures, since the entire EU is considered to be open to trade freely. This also applies to personnel, next to goods and services. Again, if you are in the logistics sector, this will save you an enormous amount of time, since you won’t have to bother with filling in endless of customs forms ever again. If you currently own a business that operates within the EU, but you don’t have a physical office in the EU, then we strongly advise you to consider this. This will make your daily business activities much smoother and easier. Intercompany Solutions can assist you with setting up a new office, or branch office in the Netherlands. This will make it possible for you to trade with(in) the EU directly.
Your Dutch company can be set up in just a few business days!
As you can see, setting up a business in the Netherlands has a very wide variety of interesting benefits and possibilities for any imaginable business. It doesn’t really matter whether you are an already established entrepreneur, or currently in the startup phase: the Netherlands offers opportunities for anyone who is ambitions and driven. If you already have a general vision about the company you would like to set up, then Intercompany Solutions can arrange the entire procedure for you in just a few business days. We can also immediately take care of extra tasks for you, such as setting up a Dutch bank account and finding a suitable location for your offices. If you haven’t got a clear picture yet about the business you want to start, but you are interested in establishing a Dutch business, then we can also help you. We can aid you in looking for a direction that you feel comfortable with, for example. We can also tell you more about certain niches that are doing well at the moment, meaning that there are business opportunities to be made in certain directions. If you tell us a little bit about your expertise and ambitions, we can think along with you to find something that fits your preferences perfectly. Please feel free to contact us anytime with all the questions you might have. We will make sure you receive all the answers you need, to be able to open up a potentially successful Dutch business that will thrive from the start.
[1] https://www.nji.nl/cijfers/onderwijsprestaties
When you start a Dutch business, you will very often benefit from some startup perks and options. During the first five years of your business, for example, you can opt for the so-called ‘starter deduction’ for three times. This means you will get a discount on your yearly tax return. This is just one example of possible financial benefits, that the Netherlands offers to starting entrepreneurs in order to enthuse people to start a company. Another option is the extended first financial year, that is also created especially for starting entrepreneurs. It means that, during the first year of your business, you will not have to draw up annual accounts and submit the corresponding declarations to the tax authorities. Instead, you can choose to do this one year later. In this article, we will explain some of the advantages and disadvantages of the extended first financial year, making it easier for you to choose whether this is a viable option that will aid your startup.
What is an extended first financial year exactly?
An extended financial year is the first financial year, that can be extended beyond the next filing date of the annual accounts. This happens on the basis of the articles of association, which you set up when you established the company. The main reason to extend the first financial year is when you establish your company later or in the middle of a year, for example in August. Every financial year lasts from the 1st of January until the 31st of December. So if you set up a business in August, you only have a maximum of 5 months left before the year ends. This would mean, that you would already have to draw up your annual accounts after a period of 4 to 5 months, which often is too little to determine whether your company is doing well. Thus, you can make a request to extend the first financial year. This will mean your first financial year will be extended with 12 months. This allows you to wait until the next financial year, before you submit the annual accounts, for a period of 17 months.
The annual accounts and the financial year
It’s probably best if we explain some of the terminology we use in more detail, since not everyone is well-acquainted with accounting and fiscal matters regarding Dutch companies. Especially if you are a foreign entrepreneur, since you don’t know Dutch laws as well as Dutch residents are supposed to. The financial year is basically the period during which the complete accounts of the enterprise are carried out. During this period, you need to draw up the annual accounts of your company, to show the Dutch Tax Authorities your financial data. The annual accounts contain the balance sheet, which reflects the situation of the company at that specific time.
In addition, the annual accounts contain a profit and loss account, with an overview of the total yearly turnover and yearly costs your company has made. Finally, the annual accounts must contain an explanation of, among other things, the persons employed by your company. It also needs to state the manner in which the balance sheet is drawn up. How extensive this explanation should be, depends on the size of the company. If you would like to know more about the way you should draw up your annual accounts, then you can always contact Intercompany Solutions for in-depth information. We can also assist you with the entire process of your yearly tax return, so you can focus your attention on important matters, such as your daily business activities.
More details about the financial year
A financial year is the period over which the financial report is created. This report consists of drawing up the annual accounts, the annual report and filing returns. The financial year usually lasts 12 months and in most cases runs parallel to the calendar year. Every calendar year starts on the 1st of January and ends on the 31st of December of each year. This is considered to be the clearest timeframe for most companies. If you decide to deviate from the calendar year, then the year is called a 'broken financial year'. This is also why entrepreneurs decide to extend the first financial year, due to the fact that a broken financial year is sometimes very short.
When you know that a financial year will last shorter or longer than a regular calendar year, you will need to submit a request to the tax authorities to arrange this. In general, information about when the financial year ends is included in the articles of association of your company. If you want to adjust the length of the financial year in any way, then you need to take into account that the articles of association must also be amended. You also need to keep in mind, that it is not permitted to change a financial year for the sole purpose of obtaining a tax advantage in a particular situation. Please make sure you always have a solid reason to amend the regular financial year. An extended first financial year is possible for a Dutch BV, but also for a partnership and a sole proprietorship.
Does the financial year differ from a regular calendar year?
For almost all companies it is advisable to keep the calendar year as a financial year, but for some organizations it’s more convenient to proverbially ‘close the books’ at a divergent time. For example, if you run a company that provides goods and services to schools and universities. A school year is different from a regular calendar year, since schools start each year in August or September and end in June or July. Oftentimes, when the schools start again, new boards are elected and changes are made to institutions and companies. The board is responsible for the proper delivery of an annual report, so that the new board can start well-read and informed regarding finances. Hence, for companies that are heavily involved in the school system, it can be more beneficial to have the financial year run parallel to the academic year.
A broken financial year
As we already discussed above briefly, a broken financial year is a year that contains less than 12 months. This is due to the fact, that a company can be started anytime during a calendar year. If this has happened, we speak of a broken financial year. The financial year then starts at the time of incorporation, and runs until 31 December that same year. When you want to extend the first financial year, the extension will always be a period of 12 consecutive months. So, the year will be exactly one year longer than usual, the amount of extra time depends on the date you established your business. This can be one single day (if you incorporated your company on the 30th of December), but also almost an entire year, for example, when you founded your business at the end of January that same year. In such cases, your first financial year will actually last almost 2 entire years in reality.
When to request an extended first financial year?
In general, you request an extended first financial year when there is a broken financial year. We already explained this phenomenon in detail above. The main purpose of an extended financial year is the fact that companies that have only existed for a few months, must already draw up annual accounts and submit declarations. The financial year for these companies with an extended first financial year then runs until the 31st of December the following year. You can easily apply for an extended financial year via the website of the Dutch Tax Authorities. There are as good as no requirements for postponing this first financial year. If you like, Intercompany Solutions can also help you with extending your first financial year, simply contact us for more information and assistance.
What are the advantages and disadvantages of an extended first financial year?
One main benefit of an extended first financial year, is the fact that you save yourself a lot of work during the first stages of your business set-up. Drawing up annual accounts actually takes a lot of time, which you can definitely put elsewhere when you are still in the starting phase of your company. Next to saving time, you also save money since you don’t have to outsource your administration during the entire first year of your business. This saves considerably in costs for the administration and the preparation and auditing of the annual accounts by an accountant. The corporate tax rates in the consecutive year can also be a reason to opt for an extended financial year. During the past years, the corporate income tax in the Netherlands fluctuated a lot. Depending on when your financial year ends, this can mean that you save money because you will have to pay less taxes. There are also certain tariff brackets with limits, but in practice, you won’t reach these limits in the first months of opening your company. Thus, it can be profitable for you to opt for an extended first financial year when you set up your company during the second half of the year.
One main disadvantage is directly linked to the previously mentioned advantage of possibly lower tax rates, when you extend the financial year. When tax rates can drop, they can inevitably rise too. So, a disadvantage of an extended first financial year is the uncertainty about the possible amount of the (corporate) income tax rate one has to pay. If there is a tax increase in the following year, you will not only have to pay more tax on the profit generated in that year, but also on the profit from the previous year, because it is 'booked' in the same year. If you have to pay corporate income tax over an extended financial year and therefore several years, it may be that the rate has changed in the meantime, if it increases you pay the increased rate. Another disadvantage is that you have to wait longer to draw up the annual tax return, which causes you to have less insight into your own financial data. The success of a company can be measured by its profits during the first year. If you extend the first financial year, you will simply have to wait a bit longer before you draw up the report.
Which types of companies can ask for an extended first financial year?
There are many different legal entities to choose from in the Netherlands, each with its own benefits and disadvantages in some cases. In our experience, by far most entrepreneurs choose for a Dutch BV, which is the same as a private limited company. But some people also choose a sole proprietorship, or partnerships. Each type of Dutch company has to do with a financial year. However, you can only apply for an extended first when you established either a Dutch BV, a general partnership or a sole proprietorship. The other legal forms are not eligible for an extended first financial year.
Intercompany Solutions can assist you with opting for an extended first financial year
An extended financial year can be advantageous for many starting entrepreneurs. If you set up your Dutch business during the latter part of the year, and you expect to stay below the future rate bracket of 19% with your accumulated profits, we advise you to opt for an extended financial year. This will make the first year a lot easier for you, also due to the fact that you extend your fiscal responsibilities for a while. WE also advise you to invest in solid accounting software, which will automatically track data for you and your company. It will also enable you to look at your data before you actually have to file the annual tax return, making it possible for you to gain insight into your company’s success.
If you want to include an extended financial year in the administration, you can do that well via this type of accounting software. Are you in doubt, or do you still have questions? Please feel free to contact one of our advisors, or use the contact form on the website to contact Intercompany Solutions. We aim to answer your query as soon as possible, with clear and efficient solutions to your questions. Of course, we are also able to take some work off your hands, making it easier for you to focus on your core business.
In 2020, the Netherlands has reached the 4th position in the latest World Economic Forum ranking of the world’s most competitive economies. This is quite an achievement, considering the relatively small area the Netherlands covers on the world map. Nevertheless, the Dutch are quite apt at creating and keeping solid international relations, and have been doing this successfully for centuries. Doing business in the Netherlands is booming, you can clearly prove this by looking at positive experiences from a multitude of foreign investors and entrepreneurs. A very large portion of Dutch startups actually generate high profits in just a few years, due to the competitive and innovative business climate in the country. We will explain in further detail what the global competitiveness ranking means in this article, next to outlining some of the Netherlands’ biggest benefits and feats for business owners.
The global competitiveness index
The global competitiveness index is a yearly report, which is generated by the World Economic Forum. This report measures, analyzes and identifies certain factors that have proved to contribute to rather high rates of economic growth in any country. This is done for a timeframe of around 5 years, so it’s measured over the years. You can access a world map on the website, that shows the current state of all world countries in combination with the Index of Competitiveness. The report itself is published yearly, though please note, that there have been no reports during the pandemic. The 2020 report is thus the most recent index. The index has been created since 2004, and is therefore one of the world’s leading reports when it comes to the competitiveness of any given country in a particular year. If you are contemplating starting a business in a foreign country, we recommend this report, so you can make an informed decision regarding the best base of operations for your future company.
Before the WEF global competitiveness report was created, competitiveness was rated with the help of both macroeconomic and microeconomic ranks, based on Jeffrey Sachs's Growth Development Index and Michael Porter's Business Competitiveness Index respectively. The global competitiveness index of the WEF manages to integrate the macroeconomic and the microeconomic aspects of competitiveness into a new single index. Amongst other factors, the index assesses the ability of countries in which they are able to provide high levels of prosperity to their citizens. This is also based on the productivity of any country when using available resources. It therefore also focuses on sustainability in the near future, and whether current national and international goals are achievable.
The Dutch ranking in the index
The Netherlands holds a fantastic fourth position in the latest index, outranking for example Germany, Switzerland, Japan, Sweden and the United Kingdom. This makes the Netherlands one of the world's most competitive economies and an ideal base for any business venture. The index maps the competitiveness landscape of a total sum of 141 national economies, via a complex procedure using i03 indicators. These indicators are then organized into 12 themes, that cover a wide variety of issues such as the infrastructure of any country, its macroeconomic stability, the quality of IT and ICT, overall health, expertise and experience of the workforce and its general economic stability. The report also states that “the country’s own performance is consistently strong across all pillars, and it appears in the top 10 of six of them”. Some of the factors the Netherlands has a leadership position in, are its macroeconomic stability, overall health and of course its high-quality infrastructure. The authors of the report also state, that the innovation ecosystem is also well-developed.
Benefits the Netherlands offers to potential business owners
As already stated above, Holland houses an astounding infrastructure, both physical and digital. The roads are of the best quality worldwide and are well-maintained. You can reach any part of the country in around two hours, making it possible to ship goods abroad very fast. The infrastructure is also well-connected to the port of Rotterdam and Schiphol Airport, next to Amsterdam. The digital infrastructure is one of the fastest of the planet with the highest coverage per household, which is around 98%. You will also find a very lively and vibrant entrepreneurial market in the country, since a lot of foreign multinationals have already decided to move their headquarters here, or branch out in the form of a branch office. These are huge companies such as Panasonic, Google and Discovery. But it’s not just large corporations that thrive here; small businesses are also plenty and doing very well. The tax climate in the Netherlands is very stable and moderately low, compared to some other countries. If you set up a Dutch BV, you will be able to profit from the low corporate income tax. This also makes it easier to pay dividends.
A lot of foreigners state that they also feel very safe in the Netherlands, even in large cities. There is a very busy atmosphere with plenty of things to do, whilst the cities also offer plenty of coworking spaces for starting and already existing entrepreneurs. This makes it easier for you, to meet potential new business partners and/or clients. We also want to point out that the Dutch are extremely innovative and always look for ways to make current processes better, faster and more efficient. They are absolute geniuses with water, for example. Other countries often ask the Dutch for support when new dams need to be built, or measures taken against floods. If you like edgy niches and technological development, the Netherlands offers a very positive and future-oriented ambiance in which you can thrive.
How Intercompany Solutions can help your Dutch business grow and expand
Are you enthusiastic about starting a Dutch business? Starting a company in the Netherlands is not complicated at all, once you know exactly which documents and (possibly) permits you will need. The Dutch government offers an extensive list of visas and permits necessary to do business here from a foreign country. In any case, you have come to the right address for issues such as:
- Company establishment
- Legal and financial advice
- Support with various tasks such as opening a bank account
- Advice about the best options for your business
Establishing a business in the Netherlands can be accomplished in just a few business days. Please look on our website for detailed information about company establishment. If you have any questions, feel free to contact our team anytime. We will happily offer you the support and advice you need, or create a clear quote for you.
Sources
https://www.weforum.org/reports/the-global-competitiveness-report-2020
One very lively sector in the Netherlands is the food and beverage industry, which is actually the largest industry in the country. In 2021, more than 6000 companies were active in the food, beverages and tobacco industry. The total turnover amounted to approximately 77.1 billion euros that same year. The share of companies in the food, beverages and tobacco industry recording an increase in turnover is also rising: during the first quarter of 2020, 52% of companies showed an increase in turnover, compared to 46% in the same quarter of 2019.[1] This means, that the food and beverage industry can be seen as a very lucrative sector to either invest or start a company in. Moreover, it is a very versatile sector with an enormous amount of different opportunities. You can choose to stay on the logistics side and transport goods, such as refrigerated specialty goods. You can also choose to operate more on the consumer side, such as opening a restaurant, owning a store or operating as a franchise company. You can alternatively produce goods, which you can learn from some skilled Dutch who have been doing this for decades.
In any case: this sector offers a lot of possibilities and ways to expand. Due to the constantly changing methods of producing food and raw materials, this is also a very vibrant and innovative sector. Whenever some new procedure is invented to grow vegetables more efficiently, for example, the Dutch are always the first to implement it. These new methods are also often invented in the country itself, due to the intertwining of innovation and production within this industry. If you have expertise in one of these areas, then this sector will definitely offer you plenty of opportunities for growth and expansion. We will outline the basics concerning this industry in this article. We will also show you some current trends that are circulating, and how you can be able to use this to your benefit. Whether you are already active in the food and beverage industry, or aspiring to establish a Dutch business in the sector: there is always room for new ideas and entrepreneurs.
The current market situation of the industry
The Netherlands is quite known for its very modern and competitive food industry. The country is also one of the world's largest producers of everyday products such as fruit and vegetables, meat, cheese, dairy and a variety of dairy products, sausages, starch derivatives and luxury products such as chocolate and beer. The Netherlands is actually the second-largest exporter of agriculture in the world, which is amazing, considering the very small size of the country. This amounts to approximately 94.5 billion euros. Around a quarter of this sum is re-exported. That’s no small feat! A very large portion of the food and beverages that are produced in the Netherlands, are thus exported to different countries. It’s not really a surprise that the Dutch can export so much. When you look at the way they learned to mass-produce vegetables and fruits in greenhouses, for example, you see the sheer ambition that correlates with their success in these fields. If you are someone who is excited about the overlap between production and innovation, you will find that Holland is a perfect base of operations for any innovative company in this regard. The Dutch are always looking for new ways to perfect processes and procedures, and this is no different in the food and beverage industry.
Pricing pressure and how it affects farmers
In the past decades, discount supermarkets have been competing fiercely with already established big names such as Ahold-Delhaize (Albert Heijn), which is is one of the world's largest retailers. The company is actually also very well-known in the US. Nonetheless, the market share of certain discounter supermarkets is also increasing in the Netherlands. This leads to constant competition in all supermarkets, since brands like Ahold also need to step in with high-quality A-brands and discount promotions to be even able to compete. The total amount of sales in Dutch supermarket roughly amount to a total of 45 billion annually. The fact that the supermarkets keep fiddling with the prices, creates a rather unstable situation for Dutch farmers and crop producers. It requires them to grow food in innovative and more efficient ways, in order to be able to make a profit from their products. Nonetheless, the Dutch are pretty gritty when it comes to overcoming obstacles and thus, that is what they continually do.
Other potential issues in the food industry include the obligation to always guarantee food safety to all clients, which falls under international legal regulations such as EC1935/2004. Strict hygiene requirements and legal regulations make the food industry continuously challenging, which inevitably means that you always need to stay up-to-date regarding the latest legislation and regulations, when you operate within this industry. This is especially true, when you deal in high-risk components. If you want to be successful and make a difference, it’s important to simplify your work as much as possible and make the processes as clear as possible. Make sure you select the right materials and machinery, which you can base on industry criteria. Also, make sure all employees are sufficiently educated and carry the necessary diplomas to be able to carry out their jobs.
Legal conditions regarding the export and import of products fit for human consumption within the EU
Next to laws and regulations that tell you how to produce and prepare food correctly and lawfully, you also need to take into account that there are strict regulations covering the transportation of food, beverages and other products fit for human consumption. In general, you can conclude that if a product has been produced in any of the EU member states, and is currently still in free circulation in the EU, then it can also be sold in the Netherlands. The obligation to notify any imported goods lies with the Dutch importer, meaning you if you import food and beverages. This also applies to any form of packaging. Please be informed, though, that special rules apply to goods subject to Dutch excise duty. This includes goods such as alcoholic beverages, tobacco but also more ‘normal’ products such as fruit and vegetable juices, lemonade and mineral water. There are certain extra terms and conditions for importing and exporting such goods, due to their nature. You can read more about excise duty in this article.
Trends and developments in the food and beverage industry
From private label products to the meat processing industry and from dairy to industrial bakeries: the food industry is diverse and consists of all kinds of food producers. Developments in the food industry are moving fast. Consumer behavior is changing, which inevitably has consequences for the production and distribution of food and beverages. At the same time, the chain must become more sustainable and innovation is never standing still. Also, this industry is one of the most influenceable industries when it comes to its client base. This is fairly logical, since humans simply will not consume any foods or drinks that they do not like. Furthermore, the industry is heavily subject to temporary trends and hypes. Some examples included the startling popularity of products such as frozen yogurt (FroYo), coffee-to-go, fast food trends, churros and pokébowls: you probably still remember there was a phase when literally everyone was consuming these products on the streets.
This means that you need to be very flexible when operating within this industry, as these trends and hypes often change very fast. One of the most remarkable trends currently, is the fact that some consumers are increasingly looking for one-stop-shops, whilst other consumers are actually more interested in the origin of food, and thus, look for original products and specific markets to shop in. Especially local products of fair origin are popular within this latter group, whilst the formerly mentioned group simply desires the existence of stores where they can buy everything they can think of. It’s kind of a tug of war between practicality and sustainability.
It speaks for itself, that catering these two target groups simultaneously can be a challenge. But that’s the reality now, so being in the food and beverage industry requires you to think on the job and be creative with your ideas. Keeping your head above water is necessary, especially since the pandemic and lockdowns hit this sector so hard. If you want to stand out from the crowd, and you are offering end-products to consumers directly, you will need a flexible business model that caters different needs simultaneously. In practice, the boundaries between different niches in this industry are blurring, thus making it possible to establish so-called fusion businesses, that combine several niches in one service. In essence, supermarkets are already doing this. But keep in mind that starting a new supermarket or chain of supermarkets is almost impossible, due to several big companies that have already monopolized this specific sector. Nonetheless, you could probably still pull off an original concept store, when you offer interesting products of good quality for a reasonable price. Our advice would be to inform yourself about the possibilities in this regard, but make sure that you have enough practical knowledge and expertise to be able to run such a business.
Organic and sustainable products
As discussed above, a growing number of consumers are actively looking for products that leave less of an impact on the planet, and are also grown or produced without any pesticides, genetic modification and other forms of pollutants. Many studies have shown by now that a lot of our food is heavily polluted, which also has severe risks and consequences for our general health. Thus, a lot of companies have invested in organic products, or replaced existing products with organic variants. Sustainability is also a big deal nowadays. An increasing amount of products is shipped from sustainable farms or destinations, which are often also considered Fairtrade. Especially supermarket chains offer a continuously wide range of products, and doing so shape consumer awareness through targeted promotion of quality. In addition to sustainability and animal welfare, the taste and origin of the product also play an important role. As a result, the consumer is willing to buy higher quality products, provided the price-performance ratio is right, and the consumer also has faith in the origin of the product.
Buying products as close to the source as possible
Another big trend is buying as much locally as possible, in order to minimize one’s carbon footprint. Some products are shipped from countries on the other side of the planet, which makes the journey long and expensive, especially when you consider the sheer amount of fossil fuels being used to ship these products. Therefore, a large amount of consumers are actively trying to buy as much local food as possible. This also helps local farmers sell their goods for fair prices. This way, the consumers are guaranteed a certain level of delivery and quality. The corona crisis seems to have further reinforced this need, as many national and international logistics flows have been disrupted. Both retailers and industry are moving from 'just in time' inventory management to 'just in case'. Or rather, they are going to hold more stocks to be sure of delivery, instead of delivery of raw materials at exactly the time you need it. This makes buying local produce and food even more attractive, since you feel more secure as a consumer when you can actually visit a farm and check the stock yourself. Plenty of Dutch supermarkets have also picked up on this trend, and are now selling local products as an addition to their general stock.
Sustainability is becoming increasingly important
Next to the sustainability of products in the food and beverage industry, the term itself is becoming increasingly important. The current climate debate has thrown much fuel on the fire too, of course. Sustainability is important for consumers as well as entrepreneurs, but not everyone actually knows enough about what sustainability really means. In general, you can say that some consumers are well aware of the footprint of their food. This encompasses the impact on the environment, but also of the impact on their own health. Thus, consumers now place higher demands on the way food is produced and shipped. Radical transparency regarding the sustainability of any product is becoming the norm. We see entrepreneurs, farmers and producers responding to this by introducing specific ‘quality marks’, such as the Eco-Score and the Fairtrade logo. These trademarks and logos aim at providing consumers with more insight into the impact of the production of specific food products on climate and the environment overall.
Within this framework, you can distinguish five specific factors that you should be conscious about as an entrepreneur, especially when you want to enter the food and beverage industry.
- You should actively aim to reduce the impact of your products on the climate, and the (living) environment. To be able to do this, you should ask yourself questions such as: which consequences can I expect the production of my product to have on the climate, nature and the immediate environment? Needless to say that if you, for example, dump toxic waste into a pond next to your company, this is not considered positive, since the toxic waste will have a definite negative impact on the environment.
- Aim to make any kind of packaging you use more sustainable. You can opt for recycled plastic, or other materials that have a less negative impact on the environment. Or aim for plastic that can be returned via a deposit when the consumer buys the product.
- The improvement of animal welfare is also a hot topic. There is more attention nowadays to the often cruel and inhumane ways in which animals in the bio-industry are kept, and with good reason. If you breed animals yourself, then make sure they have enough space to walk around, preferably also outside. Animals need sunshine, just as humans do. Provide them with healthy food, as opposed to GMO-infested fodder and food full of hormones. If you import or resell animal products, then at the very least make sure that you know how the animal was bred, fed, transported and slaughtered. This will provide you with insight in the animal’s living conditions. A fairly large amount of consumers are very alert regarding this subject, mostly consumers with plenty of money to spend. So it makes sense to be informed about the welfare of animals, also because they deserve a proper life.
- Aim solely for healthy products, or at the very least as healthy as possible. More and more consumers are aware of their diet and try to eat food that matches a healthy lifestyle, such as going to the gym multiple times per week. There is also a lot more attention these days towards unhealthy additives in food, so it would be counterintuitive to produce food with a lot of unhealthy substances. The average consumer of today simply won’t buy it anymore.
- Try to dramatically reduce any food waste. A lot of food is thrown away and wasted in the chain, both by the consumer and by the industry, retail and hospitality. To reduce this, you can decide to work together with other companies, such as “Too good to go” and other companies who make sure food doesn’t end up in the bin.
If you take these guidelines seriously, chances are very good that your company can present itself as sustainable. This will enormously heighten your chances of success in the current food and beverage industry.
Home delivery of food is gaining in popularity
In the past, it was considered normal to go to the store whenever you needed something. Since the digitalization of our world, home delivery has become the alternative to going out shopping. At first, this concerned solely products such as appliances and non-food items, but during the years it became easier to order food from the comfort of your couch. Nowadays, you can order food from restaurants online, special meal delivery services, meal boxes and of course also your regular groceries. The chain is digitizing and data makes these developments possible. The future might lie in personalization of the offers for the consumer, such as tailor-made food. Nonetheless, most people also still like to go out for dinner, so it’s not foreseeable that the regular way of shopping will end anytime soon.
The food supply chain is changing and evolving
As we already explained in a former paragraph: the way people consume nowadays has changed dramatically, as opposed to, for example, three decades ago. Digitalization of our society has opened up almost endless possibilities, creating a standard consumer that is much more demanding and knowledgeable than ever before. With every business, the product needs to be tailored to the target audience to be successful and popular. As such, the formula for the business and the product assortment are based on the preferences of the target audience. This means that businesses need to be very flexible nowadays to stay popular, considering the fact that consumers change their minds a lot, next to constantly wanting the newest and best products. This has resulted in producers having to differentiate their products more often and adapt the formula to the target group. This can be anything, such as changing the taste or ingredients, different packaging, freshness, whether the product needs to be prepared or can be eaten as it is, et cetera. This can also be seen in supermarket chains, which have a dominant position throughout the entire food chain. At the same time, the growth of online retail and consumption outside the home creates more competition, so even big supermarkets are looking for ways to distinguish themselves, which in turn offers opportunities for the industry. If you want to stand out in the food industry, make sure you come up with something original and practical at the same time.
Private brands and A-brands are growing rapidly
In response to discount supermarkets such as Lidl and Aldi, supermarkets such as Jumbo and Albert Heijn have invested heavily in cheaper private labels, in order to be able to compete with the former. Not everyone has the money to spend solely on A-brands nowadays, which makes it necessary for supermarkets to offer a wide variety of products, also regarding the sale price. On the contrary, A-brands and more expensive labels have also gained immense popularity, mainly with the middle class crowd that now demands more than ever. Manufacturers of A-brands thus increasingly outsource their products to specialized (private label) producers, so that they can focus on product innovation and brand development themselves. If you aspire to launch a new product in the food and beverage industry, such as a restaurant, food product or beverage, then make sure that you tailor the product to the right audience. Marketing can do wonders if you are aiming for the most demanding audience in the industry. This audience can make your product instantly successful though, for example, with the help of influencers. Due to the increasing expressions of individualism by entrepreneurs in the food and beverage sector, it is now actually easier than ever to launch an interesting product and become highly successful.
Innovation and technology in the food industry
There are plenty of possible investors to support you within this industry, ranging from banks to crowdfunding initiatives and so-called angel investors. This is due to the fact, that the industry is highly experimental and prone to change, and therefore excellent for constant innovation. You can discern the continuous innovation in multiple areas:
- The traceability of a product: There is an inclining amount of transparency when it comes to the source of a product, where it was made and how it was made. This is in line with more sustainable production, the composition of a product, fair working conditions and animal welfare.
- Possible allergens in the product: More and more is becoming known about the exact effect certain foods and supplements can have on your health. This can be linked directly to consumers becoming more aware of their diets and health issues, and thus, deciding to consume more consciously. This requires food producers to add more information to the packaging of the product, so consumers can look up easily whether the product might contain something potentially hazardous to their health, such as lactose, nuts or shells of animals.
- The importance of circularity: Consumers are conscious about the need for a more circular economy and general way of life. Therefore, circular entrepreneurship involves taking measures such as better valorization of residual flows, the reduction of waste and the circular procurement of packaging.
- Clean label products are trending: The general consensus is that products need to be as clean and natural as possible, preferably with no additives at all. This is parallel with the consumer wanting to live a healthier lifestyle and limit the amount of unhealthy products on a general basis. This means the product itself should be as natural as possible, but the packaging and production process as well. Clean and simple is the new way to produce food.
- The way in which best to respond to consumer needs: This has been explained before, the way the consumer thinks is of the utmost importance in the food and beverage sector. Without consumers, there is no market. This means, that innovation and improvement in this field go hand in hand constantly. You will need to take into account that the packaging of any product might have to be changed on a continuous basis, that you will have to improve the quality of the product regularly and that new options or flavors will be required by the needy consumers.
- The topic of robotization, automation and artificial intelligence: The entire chain is being digitized step by step, which opens up entirely new production possibilities. This paves the way to positive changes such as improving production processes, using less energy, reducing waste and making better products.
In addition to production and distribution, we also see that smart industry is on the rise. Smart industry is the collection of a large number of technical innovations and digitization. Think of robotization, mobile internet, cloud computing, internet of things, 3D printing and data. This innovation leads to the emergence of smart factories in which machines and robots communicate with each other, detect and repair errors themselves. These developments have an impact on every company in the food sector. The general consensus is that it is important, that food is produced with respect for people, animals, nature and for the farmer in an economically viable manner. Robots can actually make the process a lot cleaner, more efficient and safer. That is also why developing various sustainable and innovative concepts as entrepreneurs in the food chain is so important. Wondering where your opportunities lie? Feel free to contact our team to chat about your options.
Trends that have a somewhat negative impact on the industry
Next to positive and neutral trends we mentioned above, there are also a few trends that might be seen as setbacks. This is entirely normal though, since the world of business is always prone to constant changes, additional legislation and laws, economic fluctuations, political changes and international happenings. This is no different in the food and beverage industry. The past few years especially brought on drastic changes, both nationally and internationally. Below you will find two examples of trends that had a negative impact on the food and beverage industry.
The industry is struggling due to increasingly critical consumers
The global population has steadily been growing, which has also enabled the prosperity to increase. Logically, this also means that the demand for food increases. Since the Dutch export a lot of food, this will lead to international export growing during the next years. The Dutch market, on the contrary, remains somewhat stable. This can definitely be linked to an increasingly critical consumer, as we have already discussed multiple time in this article. In poor times, people are happy when there is food on the table at all, whilst in more prosperous times, we can allow ourselves to become more decadent. And that is actually exactly what has happened during the past six decades or so. People don’t just eat to eat anymore, but they eat what they love. Nonetheless, consumers still demand a good price-quality ratio for groceries. Only for products with a clear added value, such as a premium product with a unique experience or taste, do people want to pay more. This has led to the entire middle segment struggling, including B-brands.
As discussed above, we mainly see growth in niches and specialties, such as organic, vegetarian and convenience. The latter is stimulated by the fact that the consumer is looking for more and more convenience. Segments that benefit from this are the home delivery of groceries and the offering of pre-cut, prepared items and fresh ready-made products. Consumers are also experimenting more in taste and are therefore open to international flavors and unique, exotic products. This can prove hard to realize for brands and producers who aim more at the middle and lower segment. Next to that, it becomes clear that the consumer is willing to pay an additional price for the service, such as home delivery or healthier food, but not so much for the product itself. For food producers, the challenge is to produce efficiently and with the right scale and at the same time to bind the consumer with unique products that consistently keep a stable quality and price. This way, you generate trust regarding your product or brand, and trust is a very valuable commodity nowadays.
Lockdowns have heavily impacted and disrupted the chain
The corona pandemic has caused a lot of chaos in every industry, but the food and beverage industry is one that has been hit especially hard. The lockdowns have limited all sorts of social activities, such as:
- Restaurant visits
- Social gatherings
- Sport events
- Nightlife
- Cinema visits
- Theme park visits
- Swimming pools
- Museums
- Catering services
- Access to specialty stores
All these activities have one major thing in common: food and drinks are served everywhere. This means, that not just these entrepreneurs but, in essence, the entire chain has been hit. For example, when a farmer depends on certain restaurants and caterers for his main income, the temporary closing of these businesses might also be the final blow for his already struggling company. The worst part is that not all entrepreneurs in the food and beverage industry survived, meaning that a substantial amount went bankrupt. The ones that did survive still struggle, whilst some other concepts and services actually flourish since the pandemic and lockdowns, such as home-delivery services. Due to the lockdowns, entrepreneurs have learned the value of being flexible and open to change, because everything around you might change at any instant. The effects of the corona outbreak will be felt until 2022, especially for producers who supply the hospitality industry and are not flexible enough to switch with more sales to food retail. Due to the corona pandemic, there are a number of strategic issues in the chain.
For example, the supply of raw materials is under constant pressure due to logistical challenges and speculation. Raw material prices are rising sharply and margins are therefore under pressure. Container prices and raw materials for packaging have also risen sharply. This means that end-product sellers have to inevitably raise their prices, which only stimulates more price changes. Next to that, labor costs in general are increased due to many people being ill and not being able to come to the workplace. There is also less and less qualified personnel available, which leads to more vacancies that can be filled in almost every industry. It can be suspected that part of the sales in the catering industry and other food services will be lost, and instead shift towards retail and online. More stock of essential raw materials and products therefore needs to be maintained, to be able to deliver whenever necessary. Moreover, further automatization and robotization of the process might provide some interesting benefits for the entire chain, such as more efficient processes and faster production. Something that also happens, is focusing on production and sales possibilities closer to home, as opposed to very distant countries. There are definitely a lot of plans in place to counterbalance all the negative effects of the lockdowns, but the industry is not there yet. The Dutch thus welcome foreign entrepreneurs with bright ideas, to benefit and expand this sector even further.
Opportunities for foreign entrepreneurs and investors in the food and beverage industry
In the Netherlands, there are excellent opportunities available for foreign entrepreneurs, who would like to join the Dutch (And European) food and beverage industry. With a highly densely populated country full of vibrant cities, there are endless outlets for creative consumer products. Further than that, the Netherlands is world-famous when it comes to the export of food processing) products and agricultural goods. This means that you will have a high-quality worldwide digital and physical network available, ready to ship all your goods to. Next to that, the organic products sector still shows excellent potential. The Netherlands also has a solid and good reputation when it comes to doing business in general, and is seen as a highly competitive and innovative country for all kinds of entrepreneurs. You can find highly schooled and multilingual personnel in the entire country for your company, as well as a vast array of freelancers in any niche and industry. The country is well-liked internationally, and other countries will happily do business with you, once they hear you are based in the Netherlands. The food and beverage industry is especially vibrant, as it is fueled by a legion of Dutch farmers who have passed down their businesses from generation to generation. You will have plenty of access to high-quality raw materials here, organic products and fresh items, to create any end-product you can come up with.
Business ideas in the food and beverage industry
Since this industry is very broad, it can be difficult to choose a specific company type within the food and beverage sector. You can roughly divide businesses between companies that produce food and raw materials, companies that package and combine food and products, companies that create products for the consumer and companies that sell food and beverage products. Of course, there are also businesses that transport these goods, but those fall into the general logistics category. We will provide you with some examples of all four business types
Companies that produce food and raw materials
If you want to start a company that produces consumer goods, you need to take into account that there are strict hygiene and safety laws covering this sector. This needs to be strictly regulated, to be able to protect consumers from food poisoning and other hazards. But if you follow these regulations, you have a good shot at success if you produce quality products that add something extra to the consumers’ experience. Some possibilities include:
- Farming
- The bio-industry
- Cultivating vegetables and fruits
- Brewing of beverages
- Tobacco plantations
Companies that package and combine food and products
Once the main ingredients and raw materials have been grown or cultivated, these need to be packed for shipping. This is a very specific industry, since almost every product you can think of is packaged differently. This doesn’t only concern the packaging materials, but also the way something is packaged. Packaging is heavily influenced by current marketing trends, to appeal to the consumer. This means, you will have to stay up-to-date within your niche to meet consumer demands. Some possibilities include:
- Plastic packaging
- Glass packaging
- Metal packaging
- Paper and cardboard packaging
- Specialty packaging, such as holiday themes and packaging for frozen goods
Companies that create products for the consumer
Raw materials and ingredients can also be combined to create multipurpose end-products. This is the case in ready-to-eat meals and meal boxes, but also in the case of restaurants and other facilities where people can consume food and beverages directly. This industry also has strict hygiene regulations, since food that isn’t prepared or cooked properly can seriously harm consumers. Some possibilities include:
- Home delivered meals
- Take-out restaurants
- Assorted meals that are ready to cook which are sold in supermarkets
- Restaurants
- Bistros
- Snacks and candy
- Specialty goods prepared by craftsmen
- Products created especially for the diet- and sports industry
- Supplements
Companies that sell food and beverage products
The last category basically consists of all stores and shops, that sell consumer goods such as food and beverages. These companies usually buy prepackaged products and re-sell them for a small profit directly to the consumer. This category is also very large, since nowadays, you can basically sell food and beverages anywhere (provided that you don’t sell any products you need a license for). Some possibilities include:
- Supermarkets
- Online web shops
- Kiosks
- Stores with specialty goods
- Organic stores
- Liquor stores
- Candy stores
- Stores with overseas products
As you can see, there can be quite some overlap between the categories. Nonetheless, it should be possible to find a niche that suits your interests as an entrepreneur easily, especially if you already know the direction you would like to take with your company.
Intercompany Solutions can assist you with the establishment of your Dutch food and beverage company
Intercompany Solutions is specialized in the establishment of Dutch companies, as well as all extra services that come along with this specialty before and after the establishment. If you can send us all the necessary documents, we can register your company with the Dutch Chamber of Commerce in just a few business days. You can find more information regarding the detailed process of company registration on this page. After your company is registered, we can also sort out many different other things for you, such as:
- Opening a Dutch bank account
- Provide you with all necessary information from the Dutch Tax Authorities
- Help you with periodical tax returns
- Assist you with a business plan
- Provide you with legal advice concerning your business
- Connect you to other entrepreneurs in the Netherlands
If you would like to know more about our services, or would like to receive a quote from us for desired services, please do not hesitate to contact us. You can expect us to get back at you as soon as possible.
Sources:
https://www.rabobank.nl/kennis/s011086915-trends-en-ontwikkelingen-voedingsindustrie
[1] https://trendrapport.s-bb.nl/vgg/economische-ontwikkelingen/voeding/
When you start a Dutch business, you will need to adhere to all Dutch laws that regulate the business environment. One of such laws is the so-called fiscal retention obligation. This essentially tells you, that you need to archive your business administration for a certain amount of years. Why? Because this allows the Dutch Tax Authorities to check your administration whenever they see fit. The tax retention obligation is a legal obligation that applies to all entrepreneurs in the Netherlands. If you are used to work with rather old files and ways of archiving your administration, this can prove to be quite the challenge. There is even a good chance that, without knowing it, you are not complying with the retention obligation.
In essence, the fiscal retention obligation states, that all entrepreneurs in the Netherlands are legally obliged to keep the administration of their company for seven years. Please note, that for some documents, the retention period of seven years applies, but for others ten years. The documents also need to be stored in a way, that allows inspectors of the Dutch Tax Authorities to easily check the administration within a reasonable period of time. In this article, we will outline what the fiscal retention obligation means for your company, how you can adhere to it and what pitfalls to look out for.
Information about the fiscal retention obligation
As we already explained above, all Dutch business owners have the legal obligation to offer the Dutch Tax Authorities the opportunity to check the administration up to seven years ago. This applies to basic data about your financial spending and earning, such as the general ledger, your stock administration, accounts receivable and accounts payable, purchase and sales administration and payroll administration. So all the money that goes out and in during any particular fiscal year, which runs from the 1st of January until the 31st of December. You need to keep in mind, that this means that every single Dutch entrepreneur must be able to show all data from the past seven (or ten) years, during a random check by the tax authorities. Random means, that they can come by unannounced, so you generally always need to be prepared.
There are many possible reasons for a check to happen, although sometimes it just happens as a general audit. The tax authorities might simply decide that you need a periodical check, in order to make sure that you are doing everything legally and have your administration up to date. These checks happen randomly, but not very often. In other cases, there is mostly a clear reason why the tax authorities decide to check up on you. For example, you submitted returns that the tax authorities find suspicious. Or you could think of an investigation, that the tax inspector performs at one of your suppliers, or a business partner or other involved third party. The inspector then requests access to your administration, and sees if he can detect errors or irregularities. This is why bookkeepers and accountants often point out to their clients that it is very important to run a well-designed and concise administration.
Not just because the tax authorities can come and dive into your administration, but because of other benefits specifically for you and your company. If you run a solid administration, then this provides you with insight into your financial figures. You can somewhat see it parallel to a household book: you monitor all money that is coming in and going out. This means you know exactly where there are issues, for example, when you spend more on assets than you actually make in profits. Despite the fact that the chance may not be great that an inspector will knock on your door, it is still wise to have the administration in order. For entrepreneurs, accounting is also a reliable source of figures to make informed decisions. This means it’s easier to decide when to invest in something new, as opposed to investing less and making more money for a period of time instead. It gives you an overall outlook of the profitability of your company, which is very important if you want to achieve genuine success.
When do you apply the retention obligation period of 10 years?
As we briefly mentioned above, the regular period of retention is 7 years. In some cases, entrepreneurs will need to store information and data for a few years longer, namely 10 years. One of the situations in which this prolonged retention obligation applies, is when you own or rent an office building, or other type of business premises. The data on immovable property is subject to a retention obligation of ten years, so if you own any kind of property via your company, you are subject to the longer retention period. The same applies, when your company provides, or is involved in providing, radio and television broadcast services, electronic services and/or telecommunication services, and has also opted for the so-called OSS-scheme (One-Stop-Shop). Keep in mind, that it is actually entirely possible to make agreements with the tax authorities about certain regulations or arrangements, such as:
- How detailed the administration should be
- The way in which the records are kept
- Keeping data other than the basic data for a shorter period of time
Also keep and update, if applicable, the "basic data" time registration for the yearly entrepreneurial tax deduction. This is also true for keeping a good mileage registration. You should keep one for using your private car for business, or the other way around: when you use your business car only for business and never privately.
Who should keep an administration, exactly?
One of the first questions you might ask, is who is obliged to keep an administration for at least 7 years? In reality, every single business owner is required to do so. It doesn’t matter how large or small your business is: the obligation rests with every Dutch entrepreneur. You don’t only need to keep an administration, but the administration must also be kept in a way that allows the tax authorities to check it. So, there are some rules and regulations involved, meaning that your administration has to be proper according to Dutch law. You need this administration to correctly submit a VAT return and declaration of intra-community supplies (ICP), but also to be able to conduct your business properly. In general, this means you need to keep all the original documents, so you will be able to show them to the tax inspector when he/she performs a check.
Who is exempt from keeping complete VAT records?
There are some entrepreneurs, who do not have to keep complete VAT records:
- Entrepreneurs who only supply VAT-exempt goods or services
- Legal entities that are not entrepreneurs, but do have a VAT identification number
Additional administrative obligations
Do you own a company that trades in margin goods? Then additional administrative obligations apply to you. What are margin goods? Margin goods are generally used (secondhand) goods, that you have purchased without paying VAT. Under certain conditions, the following items can also be regarded as margin goods:
- Art
- Antiques
- Collectibles that you purchase or import with VAT.
What falls under the category used goods?
Used goods are all goods, that you can use again, whether or not after repair. Please note, that all goods that you buy from a private individual are always used goods, even if they have never been used. Used goods also include goods that have been bred in-house or, as in the case of horses. When you trade margin goods, you need to keep records. This is due to the fact, that trade in margin goods is subject to general administrative obligations. In addition to this, different rules apply to your administration of margin goods. The purchase and sale of margin goods must, of course, be kept in your records. For these goods, there are two different methods to achieve this:
- You calculate the VAT per individual good, and keep track of purchases and sales per item in your administration. The tax authorities call this the individual method.
- You calculate the VAT on the total profit margin in a declaration period. We call this the globalization method.
Both methods are subject to additional administrative obligations. So which method do you use? This question can be answered by stating, that it depends on the type of goods which method you are allowed to use. The globalization method is mandatory for the following goods:
- Means of transport, such as cars, motorcycles, bicycles, mopeds and caravans
- Clothing
- Furniture
- Books and magazines
- Photo, film and video equipment
- Videotapes, DVDs, music cassettes, CDs, LPs, etc.
- Musical instruments
- Household appliances
- Electrical appliances
- Pets
- Art, antiques and collectibles (under certain conditions, as previously mentioned)
The globalization method is also mandatory for the parts, accessories and supplies used in these goods, since they form an integral part of the margin goods themselves. So, even if you put a new exhaust tube on your used car, it will be part of the margin good (the car).
Goods that are not qualified as margin goods
Do you trade in other goods than margin goods? Meaning that your goods are not qualifiable as used? Then you need to apply the individual method, as opposed to the globalization method. The globalization method allows you to offset negative profit margins against positive profit margins. This is not allowed with the individual method, though. In any case, it is entirely possible to ask the Dutch Tax Authorities to change methods, whenever you believe this will be the right fit for you. Only in the case when you are an auctioneer, or an intermediary acting on behalf of you as an auctioneer, you may not apply the globalization method. This may be due to the fact, that an auctioneer functions as an intermediary between buyers and sellers, and can thus not be seen as the owner of the item. Also, you can sell margin goods with VAT. You can actually choose to sell margin goods with VAT. You can read what you need to do in your administration under Administrative consequences when selling under the normal VAT scheme.
The exact documents you need to keep during a certain timeframe
As we mentioned previously, you need to keep all basic data of your company’s administration for a period of 7 years, for the tax authorities to be able to check the data. The period of 7 years starts when the current value of any good or service expires. To be able to explain what ‘current’ means in this context, we can use the example of a car lease contract. Imagine you lease a car during a period of 3 years. As long as the contract is active, the good or service is seen as current. With the termination of the contract, however, the good or service is no longer being used at that moment and, thus, qualifies as being expired. The same applies to the situation, when you make a final payment to pay something (off). From that moment on, you need to store data regarding this good or service for 7 consecutive years, since this is when the retention period actually begins. Of course, you would like to know which documents and what data you will need to archive. Basic data consist of the following in general:
- The general ledger
- The stock administration
- The purchase and sales administration
- The accounts receivable and accounts payable administration
- The payroll administration
In addition to the abovementioned basic data, you need to take account of the fact that you must also keep all master data. Master data relates to subjects such as information about your debtors and creditors and article files. Please note, that all mutations in the master data must be traceable afterwards.
The correct way to store invoices
An important part of the retention obligation is the specific way in which data is received and stored. According to the legal provisions covering this particular subject, you must keep books, documents and data carriers that are important for taxation in the exact same way, as you have received them. So, in its original state, meaning the primary recording of the source data. This means, that a digitally received document also needs to be stored digitally, which can seem counterintuitive in the beginning, as storing data physically used to be the norm for so long. This does no longer apply. For example, a quote or invoice that you receive via e-mail, needs to be stored as a digital file, since the original way in which you received it, is digital. According to the rules of the retention obligation, you may only store this quote or invoice digitally.
Another thing you should do, is storing the source of the file you received, next to storing every digital file digitally. Just saving the invoice itself is not enough, because the tax authorities want you to be able to prove that, after receipt, the invoice has not been adjusted by you by hand. So, you realize this by not only storing the invoice itself, but also, the e-mail in which the invoice was attached. This allows the inspector to see, that the invoice that you have saved as a PDF or Word file, is really the same as the one originally received via e-mail. The data in the information system, the so-called derived data, must be traceable back to the source data. This audit trail is an important condition when it comes to digitally storing the administration. You are also allowed to ask your customers for identification. What is not allowed, according to the GDPR rules, however, is that this form of identification is copied and, for example, stored in an administration. This is only allowed in cases that this is mandatory, such as when you are hiring an employee, or people need to prove their identity in order to become a subscriber of (some) of the services you offer.
The correct way of keeping a physical administration
An invoice or other document that you receive by post on paper, and that must be kept, you may actually digitize and digitally store according to the tax authorities. So in essence, you replace the source file, which is the invoice on paper, with a digital file. This is called conversion. But keep in mind, that in this scenario you also need to retain the original file, as we mentioned above, for the legally binding period. When digitizing, there are some important factors you should be informed about. Business owners often digitize by scanning invoices, taking a photo of documents, or by having a digitization tool linked to their accounting program, which is also called 'scan & recognize'. Only through this last way of digitization, is it possible to digitize invoices not only more easily, but also according to the correct procedure.
In a brochure about the retention obligation, the Dutch Tax Authorities refer to the conditions that a conversion must meet. It is important, here, that the security features of the original document are not lost. This means, that you always keep paper invoices physically (in paper form) for the period of seven years. Especially cash-paid receipts are difficult for the tax authorities to check for authenticity. On the other hand, there are also examples of accounting firms that have made agreements with the tax authorities about this. For example, offices have collectively received permission for all their customers to store physical invoices digitally, so that they no longer have to keep anything on paper. It is wise for you, as an entrepreneur, to explore your options and possibly talk to the tax authorities about your specific wishes. They often are willing to be flexible and help you out in certain ways, as long as you keep everything clean, transparent and legal.
The proper way to store digital data
There are several ways to properly store digital data. The most important condition is, of course, that the data must be stored for 7 (or 10) years. Do you store all your data and work on your own server? Then Dutch fiscal law dictates, that you need to have a good backup procedure, whilst you also need to perform these backups consistently. Next to that, these backups must be stored on a different location, than the location where the digital administration is located. You could, for example, use an external hard drive to this end. It is also allowed and possible to opt for a cloud solution to store your data. Did you know, that cloud-based accounting software has many advantages, such as the following:
- You and your bookkeeper or accountant can access the data from any device
- Your data is kept safe and cannot be lost or damaged if a computer or other device crashes
- You can inform yourself and steer your company based on real current data
- You can also link other programs to the accounting software
When you keep these rules in mind, you are pretty secure of storing your digital administration in the correct way. We will outline some more interesting details regarding a digital administration further below.
Extra conditions and requirements regarding digital storage of files and data
Do you have stored data on old-fashioned equipment? The retention obligation also means, that the retained data must be accessible. So, you will need to be able to access and open the original file. This means that, for example, old equipment that allows you to access data must be preserved, if certain digital files can only be consulted in this way. You can think of old storage media, such as an old floppy disk, or an earlier Windows version. Furthermore, most accounting packages support the so-called audit file financially. The audit file is an excerpt from the general ledger. Please note, however, that it is not sufficient to keep only the audit file, because it does not include all administrative entries. Moreover, keep in mind all the electronic means of communication, such as your calendar, apps and SMS. All messages via e-mail, WhatsApp, SMS and even Facebook should be kept as far as they are considered falling under the category ‘business communication’. In the event of an inspection, this information must be made available in the form requested by the inspector. This rule also applies to a keeping a digital agenda.
More about the conversion of paper file to digital or storage medium
Under certain conditions, you may transfer data from one storage medium to another. For example, scanning a paper document or the contents of a CD-ROM to a USB stick. Of course, there are certain conditions in order to be able to do this, which are as follows:
- The conversion is done correctly and completely
- The converted data is available throughout the entire retention period
- You are able to reproduce the data and make it readable and controllable within a reasonable time
If you succeed in realizing this, you will not be obliged to keep paper documents anymore. So if you manage to meet the aforementioned conditions, you no longer need to keep the original document. This will save you time and space, since you won’t have the need for a physical administration anymore. So basically, the digital version will take the place of the original. In principle, conversion is possible for all documents, with the exception of:
- The balance sheet
- The assets and liabilities statement
- Certain customs documents.
Without a physical administration, you can actually save a lot of office space and yourself plenty of extra work. No more looking in old archives, or shoeboxes in stuffed closets. When you look at the digital developments of the past 10 to 20 years, it is wise to make the step to a fully digital administration. It is almost impossible to ever lose a file that’s stored digitally, especially when you use a cloud-based solution. Also, it’s a lot easier and faster to loop up digital files. Also help your accountant. Talk to your accountant now and then, and try to set up the administration in such a way, that you comply with the statutory retention obligation. Online accounting programs not only provide more controllable administrations. With well-guarded firewalls and secure keys, good online accounting programs automatically store your administration in the cloud. You can see it as a digital safe, in a safe place, that no one else can access apart from you and your accountant. Or: the tax authorities, when the inspector has to check your books.
Intercompany Solutions can inform you further about the fiscal retention obligation
As you can see, there is quite a lot involved with the fiscal retention obligation. It is wise to always stay informed about the latest legislation regarding the topic, so you know as an entrepreneur that you are operating in conformity with all applicable Dutch laws. Your accountant should actually inform you about this, as well as about all the options to comply with this law in a proper and safe manner. If you don’t have an accountant and don’t know how to comply, or maybe you just started your own business and are new to such topics: in all such cases, you can always contact Intercompany Solutions. We can provide you with extensive financial and fiscal advice, including the best way for you to keep a proper administration. We can also offer support and advice when it comes to paying taxes and drawing up your yearly tax return. Don’t hesitate to contact us directly for more information.
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