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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:

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:

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:

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:

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:

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:

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

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:

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:

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:

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:

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:

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:

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: 

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:

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:

  1. The balance sheet
  2. The assets and liabilities statement
  3. 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.

Sources:

https://www.wolterskluwer.com/nl-nl/expert-insights/fiscale-bewaarplicht-7-punten-waar-je-niet-omheen-kunt

https://www.rijksoverheid.nl/onderwerpen/inkomstenbelasting/vraag-en-antwoord/hoe-lang-moet-ik-mijn-financiele-administratie-bewaren

https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/btw/administratie_bijhouden/administratie_bewaren/

If you are thinking about starting a Dutch company, chances are high that you are opting for a Dutch BV, which is the equivalent of a private limited company. A Dutch BV has many benefits, such as a relatively low corporate tax rate and the fact that you will not be personally held liable for any debts you make with your company. Thus, many starting entrepreneurs choose to establish a Dutch BV for their new business. But how do you actually establish a Dutch BV? Is it always necessary to establish an entirely new business, or can you also buy someone else’s (empty) company, also known as a shelf company? In practice, you can do both. You can buy an already existing and thriving company, an inactive company or start a BV yourself. We will discuss all three options in this article, to make it possible for you to contemplate which possibility suits your needs and wants best. We will also outline the pro’s and cons of each option. Afterwards, we will also let you know how you can take care of the process practically, and how Intercompany Solutions can assist you with the endeavor.

What is a Dutch BV?

A Dutch BV is a certain type of legal entity. A legal entity is basically the specific company type you choose, when you become an entrepreneur. Next to a BV, there are various other Dutch legal entities, such as the sole proprietorship, a cooperation, a NV and a foundation. All these legal entities have their own unique characteristics, which are somewhat tailored to the type of business you want to establish. For example, a foundation is a good choice when you want to start a charity, since you generally won’t be making any profits.  A sole proprietorship is a good option for starting freelancers, who don’t expect to make a large profit during the first years of business and will probably also not hire personnel. A Dutch BV, however, is actually suitable in most cases, and is therefore one of the most chosen legal entities to date.  With a Dutch BV, you can set up a holding structure, which enables you to distribute your workload and profits over several companies. One of the main benefits of a BV is the fact, that you will not be personally liable for debts you make with your company, as we already mentioned briefly above. This makes it easier for you to take on more challenging projects and risks.  A large number of successful Dutch businesses are a BV, which makes it a logical choice for starting entrepreneurs.

Reasons why a Dutch BV is a good choice for starting entrepreneurs

Next to not being liable for company debts, there are more benefits to owning a Dutch BV. The current corporate income tax rates are quite low, which makes it a profitable choice. Also, you can pay yourself dividends with a Dutch BV, which can sometimes be more beneficial than paying yourself a salary.  The current highest personal income tax rate is 49.5%. When you generate more profit in a certain period and would like to pay yourself an extra bonus, it can therefore be more profitable to pay yourself dividends instead of salary, as the amount of taxes levied will be lower. This can literally save you tens of thousands of euros, which makes it a very popular possibility.  Another massive benefit of a Dutch BV, is the possibility of attracting investors by offering them shares in your company. Once your company is doing well, you will both profit from this agreement. Next to that, a Dutch BV provides your company with a professional appearance. Oftentimes, customers and third parties tend to respect someone with a private limited company, since it generally means you make a substantial amount of profit. If you believe you won’t be able to generate this amount during the first years of your business establishment, then we advise you to start a sole proprietorship instead. Once you cross the minimum revenue line, you can always convert your sole proprietorship into a Dutch BV during a later stage.

Buying an already existing company

As we already explained, there are multiple ways to acquire a Dutch BV. If you already own a company, or you are able to invest some money, it is generally possible to buy an already existing Dutch BV. This can either be done by acquiring the company entirely, or merging with an existing BV. The main difference is that acquisition will make you the new owner of the company, whereas mergers will often result in shared ownership.  You can read more about mergers and acquisitions in this article. If you plan on taking over another company, you should be very thorough with your investigation of said company. At the very least, you should research factors such as the profits the company has made during the past years, the owners of the company and their background, possible illegal activities that have taken place, possible partnerships and also the current financial situation of the company. We strongly advise hiring a responsible partner to assist you with the acquisition process, for you to be sure about the credibility of the company. The upside of buying an existing company is the fact, that the business itself is already running. By acquiring a business, the management changes, but the daily business activities can go on seamlessly, until you decide you want to change things. Once you are the owner, you can steer the company according to your own preferences.

Buying an inactive BV: a shelf company

Another option is acquiring a so-called ‘empty’ BV, which is commonly known as a shelf company. The name is derived from ‘shelving’: when you temporarily don’t use something, you put it on the proverbial shelf, where it rests until someone decides to use it again.  This means, that a shelf company is currently not doing any business at all, it simply exists without any activities taking place whatsoever. This company may have been involved in previous business transactions, but this is certainly not always the case. So it involves a BV that no longer has debts or assets and in which no activities take place. As a result, no more assets will arise in the BV in the future. At most, the BV will still receive some debts, e.g. the invoice from the accountant for drawing up and filing the annual accounts. Next to that, an owner of an empty BV can choose to dissolve the BV. As a result, it ceases to exist. The owner also has the option to sell the shares. He then has no more costs and receives a purchase price for the shares. This is where you, as a potential buyer, come into the picture.

There are some benefits to acquiring a shelf company. One of the main advantages of buying a shelf company, in the past, was the little amount of time that is needed to complete the process. In theory, a shelf company can be bought in just a single business day. Keep in mind that buying a shelf company still requires a notarial deed, but the process of acquisition is easier than the incorporation of an entirely new BV. Nonetheless, the transfer procedure itself has become almost as expensive and time-consuming as incorporating a new BV. This is due to increased KYC compliance requirements, due to which clearance and identification of all involved parties is required. Also, keep in mind, that shelf companies are generally sold with a premium. This makes acquiring a shelf company more expensive than the incorporation of a new BV, even if the timeframe is somewhat shorter. We would also like to note that all shelf companies have a legal, financial and also tax history. In many cases, shelf companies have been involved in previous business activities. You should therefore thoroughly research any possible shelf company you would like to buy, in order to know whether the company hasn’t been involved in any shady activities, or still has debts.

Risks of buying a shelf company

When you decide to set up a completely new Dutch BV, you know absolutely sure that the past of the company is entirely ‘clean’. Since you just established it, and, therefore, it has no past. But when you buy a shelf company, this is not always the case. The business activities that you initiate after the purchase of a shelf company run a risk, without you as an entrepreneur having to have done anything 'wrong' yourself. Perhaps a guarantee has been issued by the seller that the Dutch BV has no debts. But it is not entirely certain whether there are no obligations from the past. Remember, that a buyer of a shelf company cannot see whether there are still creditors, which might put you in a precarious position, as a creditor can still find the Dutch BV despite a name change via the registration number and the history registered with the trade register. This essentially means, that collecting an old debt can immediately mean the end of your company. That is a waste of all of your investments in the company, and the takeover of the shelf company itself. Guarantees given by the seller of the company are worth as much as that seller himself, meaning that if you don’t know the seller, you basically know nothing. Moreover, in order to implement guarantees, litigation must be carried out, which is costly.

This can be a very tricky story, all in all. As a buyer, you can require the seller to be liable for any debts they made in the past with the company. Nonetheless, you still have no guarantee that you will actually get the money back from the seller afterwards. One way to limit such risks, is to hire and instruct an accountant to examine the books of the shelf company. With an auditor's report, you can normally obtain a guarantee that everything is in order. However, keep in mind that this involves extra accounting costs on top of all other expenses. This makes buying a shelf company with no risks attached a rather costly way to start or continue a business. So in order to ‘save’ the notary costs that you would normally pay for establishing a new Dutch BV, you will probably have to make several other payments, that, when added up, are generally higher than the costs of starting a new company. Furthermore, the shares of the shelf company must be transferred by notarial deed, since that's what the law says. The notary costs for the establishment of a BV are hardly any higher than the costs for the acquisition of shares. In addition, after the transfer of the shares, the name and purpose of the company usually must be changed. This requires a separate deed of amendment of the articles of association. The buyer of the shares therefore needs to spend a lot more money, than if said buyer sets up a new BV.

Incorporating a new Dutch BV

In the past, it was considered costly to start a new BV, since there was a minimum capital requirement of 18,000 euros. In 2012, the incorporation procedure has been simplified, by abolishing these minimum capital requirements, but also the governmental consent procedure and the bank declaration. A Dutch BV can now be established with a subscribed capital of €1 or even €0.01. This led to a drastic decline in the need for shelf companies, which consequently made the entire market for such companies almost disappear. These type of companies are extremely scarce nowadays, the only need for such a company might arise out of a specific name or logo that you might want to use, but cannot whilst the company itself still exists. However, you could also consider coming up with a similar name or logo, that doesn’t infringe on any existing copyrights. Incorporating a new Dutch BV can actually be arranged in just a few business days, with significantly lower costs than you would have to spend on the acquisition of a shelf company. With this ‘new’ procedure, the establishment of a Dutch BV has become a lot simpler and therefore also faster. The Dutch Ministry of Justice does not have to carry out background checks on the persons of the founders, directors and shareholders anymore, which saves you an ample amount of time. A new BV can therefore be set up just as quickly as the shares of an existing BV are transferred.

Need advice? Intercompany Solutions can help you with company formation

We can understand that the choice between setting up an entirely new company and buying an already existing company can be tough. In some cases, a certain company might have a very positive image within a specific market, making it easier for you to immediately start doing business and benefit from the already built image. Nonetheless, you should also consider the fact that you might be burdened with debts you know nothing about. If you have a business idea and would like to implement this, the team at Intercompany Solutions can assist you with making the right choice. If you are an already established entrepreneur or investor, buying an already existing company might be a good bet. If you are starting your first company, however, the risks might simply be too high. It is very important to do solid research and come up with a business plan, that outlines all the costs and risks involved regarding starting a company. This business plan will provide you with a blueprint of all factors involved, which will make it easier for you to make a well-thought-out decision. In all cases, we can assist you with the entire process of business establishment, or company takeover. In general, this should not take more time than a few business days. Feel free to contact us with your query, we will try to respond as soon as possible with helpful advice and tips to make the process as smooth as possible. We can also take care of the process for you, if you so desire.

If you are an ex-pat starting your own business, it is probable that you will have lots of questions about the tax implications.

Questions will certainly arise, such as what is the right kind of legal entity to, a BV or is the “eenmanszaak” or sole trader/one-person business) a more suitable option?

You may well be advised to seek the help of a tax accountant or administrator in The Netherlands who will be able to answer all of these questions by giving you all the required information and advice on all matters which are important for your particular situation.

Keeping your books in order can be a very time-consuming business. Besides the bookkeeping, you want to be sure that all the tax declarations are done in time without thinking about it and without any issues.

You need the help of an expert who is able to look at your present situation, but also your future business plans and experiences. Contact Intercompany Solutions for the tailored tax advice that will give your fledgling start-up the best possible chance. With our help, you will always be up-to-date with your administration and tax matters in The Netherlands.

Let us take care of all the tax matters, so you can focus on your business in The Netherlands.

So, if I inherit a company in the Netherlands, do I have to pay inheritance tax or gift tax?
Yes, if you inherit or receive a business as a gift, you pay tax. How much? That depends on the value of the company. And sometimes you get an exemption.

If you continue the business, you can get an exemption from inheritance tax or gift tax
For example, if you take over the family business from your parents. This scheme is called the business succession scheme(1). You then pay less or no tax.

When can you make use of the business succession scheme?

How do you make use of this business succession scheme?
You have to file a gift tax or inheritance tax return and state that you want the exemption. We strongly advise you to engage an advisor if you are taking over a company. They can also help you determine the value of the company for inheritance or gift tax.

Are you the heir of an entrepreneur? After the death of the entrepreneur, you will have to deal with various tax issues, such as inheritance tax and substantial interest. An executor can provide you with good services in settling the inheritance.

Substantial interest in Dutch law
Owning at least 5 percent of the shares of a BV company or NV is called a substantial interest. In the event of death, the substantial interest passes on to you as heir. You do not have to file a tax return for the profit from a substantial interest. This only applies if the shares become part of your private assets, and you are liable for tax in the Netherlands.

If after you acquire the shares you decide to emigrate or place the shares in another (holding) company, the tax authorities will consider this a taxable event.

Inheritance tax
As soon as the estate has been settled, you as heir must settle on the inheritance tax (a tax on the value of the shares or depository receipts thereof). With a high business value, this often means a large amount per heir. This can endanger the survival of the business if the inheritance tax is paid from it. The law provides for deferment of payment under certain conditions. Then this tax must be paid in 10 equal annual installments.

Continuing the business
Do you want to continue the inherited business? If you take advantage of the business succession facility, you do not have to pay tax on much of the value of the business assets. View more information about the business succession facility.

Sources:
https://ondernemersplein.kvk.nl/belastingzaken-bij-erven-van-een-onderneming/

https://www.bedrijfsopvolging.nl/kennisbank/bedrijfsopvolgingsregeling-borbof/

https://www.erfwijzer.nl/onderneming.html

If you would like to set up a business in the Netherlands, you will need to take into account that this means you will also have to pay several business taxes. The exact amount and type(s) of tax(es) you will need to pay depend on the legal entity you choose, your business activities and several other formalities. To give you a head start, we have compiled basic information about Dutch business taxes and the implications this has for your possible business venture in the Netherlands. For personal advice on this matter, you can always contact Intercompany Solutions.

When is someone considered an entrepreneur for Dutch income tax purposes?

Not everyone who wants to be a Dutch entrepreneur actually is an entrepreneur for income tax purposes. If your activities take place in the economic sphere, and if you can expect a profit, you have a source of income and you may be an entrepreneur for income tax purposes. If your activities take place within the hobby or family sphere, you are not an entrepreneur for income tax purposes.

In order to qualify for income tax, there are 3 sources of income:

The source of your income depends on a number of factors. The law and case law set certain requirements that entrepreneurs must meet. After you have registered your company, we will assess whether you meet these requirements on the basis of your circumstances. The Dutch Tax authorities pay attention to several factors, which we have outlined below.

How independent is your company?

A business generally implies a certain measure of independence, as you don’t work for someone else but yourself. This means you should be the one that determines general management, daily activities and the goal of your business. If others determine how you should organize your company and how you carry out your activities, there is no solid basis for independence and thus; there is usually no independent company.

Are you making a profit? If so, how much?

Generally, the main goal of any business is generating profit, unless you want to establish a Dutch business in the non-profit or charity sector. If you only manage to make a very small profit or suffer structural losses that outweigh the profit, it is unlikely that you will make a real profit. In that case your activities won’t be marked as a business.

Do you own any capital?

Since the introduction of the Flex-BV, you don’t have to deposit an obligatory amount of capital anymore to start a Dutch business. Nonetheless, capital is necessary for many types of companies in several industries. You might have to invest in machines, advertising, hiring employees and insurance, just to name a few examples. Sufficient capital to start a business and running it for some time indicates that you might have a business as per Dutch law.

Who will be your clients?

The best thing for any business is a stable client base. The more clients you have, the more you will be able to reduce payments and certain continuity risks. With a full client database you also don’t depend on just a few clients anymore, increasing your independence as a business owner and thus, making it more viable for your business to survive.

How much time will you put into your work?

The amount of time someone spends on business activities is also a deciding factor. If you spend a lot of time on an activity without yielding returns, you usually don't own a business on paper. This essentially means that you must spend enough time on your work to make it profitable. If this is the case, your business can be seen as valid. Also keep in mind that you may be eligible for certain types of entrepreneurial deduction. For some of these entrepreneurial deductions you must meet the Dutch “urencriterium”, which is loosely translated as hours criterion or the reduced hours criterion.

“Urencriterium” or hours criterion conditions

Someone usually meets the hours criterion if you meet the following 2 conditions:

How do you publicize your company?

You depend on clients for your company’s existence. In order to be an entrepreneur, you must make yourself sufficiently known, for example through advertising, an internet site, a sign or your own stationery. Your company needs to be distinguishable from other brands and competitors, next to being uniquely tailored to your goals and ambitions. The more people know about your company, the higher the chances of success.

Are you liable for your company's debts?

If you are liable for the debts of your company, then you may be an entrepreneur. This is a tricky subject, though, as some Dutch legal entities profit from a division between personal debt and corporate debt. If you are the owner of a Dutch BV, for example, you will not be personally liable for any corporate debts you make. This doesn’t mean you don’t have to pay those debts though; any debts you make with your company need to be paid in full.

Can you be affected by an 'entrepreneurial risk'?

An entrepreneurial risk involves certain factors that can be troublesome and unexpected with any business. Is there a chance that your clients will not pay? Do you use your good name for the performance of your work? Are you dependent on the demand for and supply of your products and services? If you run 'entrepreneurial risk', this generally means you probably have a business.

When are e-commerce activities considered being (part of) a business?

A lot of people are currently interested in setting up an e-commerce business, due to the flexibility and freedom of movement this option provides. The Netherlands is especially a stable and reliable country to set up an e-commerce business, since the country provides a very competitive and financially profitable market. Do you have an internet site which you regularly use to advertise on the internet for business purposes? Or do you earn money with your internet site, such as by selling goods or services online, or with activities as an affiliate? If the answer to these questions is 'yes', then you are probably an entrepreneur. But whether this is really the case depends on several factors. For example, there are differences between being an entrepreneur for income tax and being an entrepreneur for VAT.

When are you not considered as an online entrepreneur?

If you have an internet page or a website, this doesn’t automatically make you an e-commerce entrepreneur. Do you offer goods or services for free? Or only in the hobby or family atmosphere? Then you are not an entrepreneur according to Dutch law. This is due to the fact that you do not have to pay VAT, and, you also do not have to state anything in your income tax return.

E-commerce entrepreneur for Dutch income tax

Do you sell goods or services online? And can you realistically expect a profit from these goods and/or services? Then this is seen as income and you may be an entrepreneur for income tax purposes. Do you want to register your company in the Netherlands as an online entrepreneur? Then Intercompany Solutions can assess for you whether you meet the requirements for entrepreneurship on the basis of your circumstances. Often, entrepreneurship can only be assessed after the end of a business year for income tax purposes.

Not an entrepreneur, but receiving income?

Do you have income from your internet activities that cannot be considered a hobby? And do you lack any basis of paid employment, but you cannot be considered an entrepreneur either? For Dutch income tax purposes, this is qualified as 'results from other activities'. Your profit is calculated in the same way as with entrepreneurs. But you are not entitled to certain schemes for entrepreneurs, such as the self-employed deduction or the investment deduction. In such a case it would be wise to consider establishing a formal company and possibly benefit from deductions and premiums.

E-commerce entrepreneur for Dutch BTW (VAT)

If you are not an entrepreneur for income tax purposes, you can still be an entrepreneur for VAT purposes. This is mainly the case, when you carry out activities independently and earn income from these activities. In order to find out whether you are an entrepreneur for VAT, we can assess certain facts for you and help you find the best way to do business.

Business taxes in the Netherlands

Once you are officially considered to be an entrepreneur or company owner according to Dutch law, you will need to pay an assortment of various business taxes. Meaning you cannot escape the tax authorities, but this is generally the case in any other country. Not everyone pays the same type and/or amount of taxes. As a Dutch entrepreneur you are required to file a quarterly and yearly tax return, pay tax and sometimes you get something back as well. But what kinds of taxes will you face?

Dutch BTW or sales tax (VAT)

In the Netherlands you pay a certain amount of VAT over services and goods, so as a company owner you will have to charge your customers tax too. This is called Dutch BTW, which is the same as VAT. The abbreviation VAT means 'Value Added Tax'. It concerns the tax you pay on sales made. You charge VAT on your invoices. And vice versa; if you pay invoices, they also state  the amount of VAT that you have to pay. The standard rate for VAT is 21%. In some cases special rates apply, these are 6% and 0%. Exemptions may also apply. You pay the VAT that you owe to the tax authorities per month, quarter or year. The Dutch Tax Authorities will let you know exactly how often you have to file a return. In most cases, entrepreneurs file a quarterly VAT return.

Dutch corporate tax

Dutch corporate income tax is a tax that is levied on the profits of companies, which are mostly qualified as a B.V. or N.V.. These companies and organizations must file an annual corporate tax return. Natural persons such as sole proprietorships pay tax on the profits through income tax. This is different for companies. Public companies, private companies and sometimes also foundations and associations pay corporate tax. In some cases, exemption from corporate tax is possible. Think, for example, of an association or foundation that mainly obtains its income through the efforts of volunteers or where the pursuit of profit is of additional importance.

Dutch dividend tax

If your company is a N.V. or B.V. and makes a profit, you can distribute part of that profit to the shareholders. This is usually done in the form of dividend. In that case, you pay dividend tax to the Dutch Tax Authorities. Does your company pay dividends to shareholders? In that case, you must withhold 15% dividend tax on the dividend you pay out. You must declare and pay within one month of the day on which the dividend is made available. In a number of cases you may be eligible for a (partial) exemption or refund of dividend tax.

Dutch income tax

You pay Dutch income tax on your taxable income if you have a sole proprietorship or partnership under firm. This is your income, minus all operating costs settled with any deductible items and tax arrangements. You must declare this to the Dutch Tax Authorities before the 1st of May every year. You only have taxable income if you make a profit with your business. This taxable income is the basis for your income tax. With your tax return, you can deduct deductible items and tax arrangements from your profit. This reduces the profit and therefore you pay less income tax. Examples of these deductible items and tax schemes are: the entrepreneur's deduction (consisting of the self-employed deduction and any starters deduction), general tax credit, investment deduction, SME profit exemptions and employed person's tax credit.

Dutch wage tax and national insurance contributions

If you employ staff, you inevitably need to pay your employees a salary. You need to deduct payroll tax from those salaries. These payroll taxes consist of the withholding of payroll tax and the payment of national insurance contributions. National insurance policies are legally required social insurance policies, that insure your employees against the financial consequences of old age, death, special medical expenses or having children.

The benefits of outsourcing accounting activities

Any entrepreneur establishing a business in the Netherlands can choose to their own administration, and therefore also their tax return. In such cases, it is desirable that you are well informed of any fiscal, financial and economic changes. The (partial) outsourcing of your administration and periodical declarations may initially seem expensive. But experience has shown, that an administration office or accountant actually earns you money.

When starting a business, you can include various scenarios in your business plan that include expectations of costs, including those of taxes. If you write a business plan, you can look at different financial scenarios together with the expert and see what influence the taxes have on the liquidity within your company. Intercompany Solutions can assist you during every step of this process; from the registration of your company to accountancy services. Please feel free to contact us for professional advice or a clear quote.

Read further: Company Formation Netherlands

The Netherlands is known worldwide as a very stable country economically, with a healthy fiscal and political climate. A few mentionable reasons that have led to this image are the fairly modest tax rates when compared to neighboring countries. Furthermore, clear and efficient administrative processes and the innovative use of IT and technology in order to facilitate tax compliance also contributed to this end. Compared to the rest or the European Union (EU), the Netherlands has a very competitive corporate income tax rate, which is 25% for yearly profits exceeding 245,000 euros and 15% for profits below that amount.

This year (2021) the corporate tax rates will be further reduced to and 15% instead of 16,5%. The tax system in the Netherlands has many attractive features and benefits, which especially attracts foreign companies and investors. Nonetheless, this doesn’t mean that nothing dubious ever happens. The country has experienced some difficulties in the area of tax avoidance, both by national as well as international companies, which is mainly due to the beneficial taxation system.

The Netherlands has a competitive fiscal climate

The Netherlands is a major hub for foreign multinationals, investors and entrepreneurs. This didn’t happen without a reason; the Dutch tax regulations and ruling practice have been around for more than 30 years and thus, provide international company owners with proper clarity when they decide to branch out to the Netherlands. The stable government also attracts many multinationals due to the stability it provides. The Dutch Tax Authorities are considered to be both cooperative and accessible, which makes foreign business owners feel safe and secure. Unfortunately, like with all good things, there are also investors and companies that use the profitable system to avoid certain financial obligations.

Fraud is still prevalent in all layers of society

Some people are not familiar with the extraordinarily large amount that is invested in the Netherlands by foreign companies and investors. During 2017, for example, the total amount of foreign investment totaled 4,3 trillion euros. The shocking fact is though, that the majority of this money wasn’t invested in the Dutch economy at all, only 688 billion euros of the original 4,3 trillion. That is only 16% of all total foreign investments. The other 84% went into subsidiaries or so-called shell companies, which are basically only set up to avoid paying taxes elsewhere.

Looking at these enormous amounts, it becomes clear immediately that this is not done by small players to hide some illegal profits from taxation. Only the largest multinationals and richest individuals in the global economy can pull such vast amounts off. This includes Dutch companies like Royal Dutch Shell, but also many foreign multinationals such as IBM and Google. These companies have established branch offices, headquarters or other operations in the Netherlands so the payable amount of tax in their country of origin is reduced. Some well known brands and companies are technically Dutch, as they established their headquarters in the country for the sole purpose of tax avoidance.

In order to visualize this, here is an example. The Netherlands is a very small country with a relatively small number of inhabitants, compared to the rest of the world. And yet, in 2016 16% of all foreign profits claimed by US companies were accountable to the Netherlands. This would seem as if the Dutch order a huge amount of goods and/or services from the US, but reality is a bit more shady. The companies in essence parked the money in their Dutch subsidiaries in order to avoid taxation, or they moved the money via so-called letterbox entities, which transfer the profits to other suitable tax havens. This way, they can funnel it to locations with a 0% corporate tax rate and avoid taxation altogether. It’s a clever trick that has been going on for quite some time, but the government is finally doing something about it.

The EU and the Dutch government are both taking action

The Dutch State Secretary of Finance has proposed to put forward a new tax policy agenda, which the government has agreed to adopt in order to put an end to such practices. The first priority of this agenda is thus tackling the evasion and avoidance of taxes. The other priorities are the reduction of the tax burden in the labor sector, the promotion of a competitive Dutch tax climate, making the tax system green and also more workable. This agenda is aimed towards a better and more resilient tax system, in which loopholes such as the current tax evasion are not possible to construct anymore. The Secretary aims for a simpler, more comprehensible, more workable and also fairer tax system.

A withholding tax to counter tax avoidance

During this year (2021) a new system of withholding taxes will be introduced, that focuses on interest and royalty flows to jurisdictions and countries with low or 0% tax rates. Suspicion of abusive tax arrangements is also included in this system. This is to prevent foreign investors and company owners from using the Netherlands as a funnel to other tax havens. Unfortunately, due to the evasion and avoidance of taxes this way the country has been in a somewhat negative spotlight recently. The Secretary wants to improve the situation by tacking tax evasion and avoidance head-on, in order to make a swift end to this negative image.

EU directives on tax avoidance

The Netherlands is not the only EU country that has been taking measures to eliminate tax fraud, as the EU adopted Directive 2016/1164 already during 2016. This directive lays down multiple rules against tax evasion and avoidance practices, which inevitably negatively affect the internal market. The rules are also accompanies by several measures to tackle tax avoidance. These measures are focused on interest deductibility, exit taxation, anti-abuse measures and Controlled Foreign Companies.

The Netherlands has chosen to implement both the first and the second EU anti-tax avoidance directives (ATAD1 and ATAD2), although the Dutch will implement even stricter standards than the standards required in the EU directives. Some examples include the absence of so-called grandfathering rules applying to existing loans, the lowering of the threshold from 3 to 1 million euros and the exclusion of the group exemption in the earnings stripping rule. Next to that, banks and insurance companies will be confronted with a minimum capital rule in order to ensure a more equal situation concerning debt and equity throughout all sectors. This will lead to a healthier economy and more stable companies.

The importance of transparency

One of the main factors that contribute to a healthy and viable tax system is transparency. This is particularly true when the need arises to tackle difficult problems such as tax evasion and avoidance. For example; fines that can be attributed to culpable negligence shall be made public, which in turn will also push accountants and tax advisors to execute their tasks with more diligence and honesty. If you want to establish a company or branch office in the Netherlands, we advise to choose a stable partner that knows all the necessary rules and regulations. Intercompany Solutions can assist you with the entire registration process, furthermore we can also help you along the way with accountancy services. You can contact us anytime for more information and friendly advice.

If you are a foreign company with a Dutch office or subsidiary, this entails you also fall under the Dutch VAT regulations. The Dutch word for VAT is BTW; meaning the turnover tax you charge to your clients. All Dutch companies have unique VAT identification numbers, which changed for sole proprietorships on the 1st of January in 2020. If you do business in the European Union, you need to pay and charge VAT for nearly all services and goods, apart from a strict list of exemptions.

In this article we will provide you with a basic overview of Dutch VAT. For example the current rates, which services and goods fall under these rates and a list of exemptions. Please also keep in mind, that from July 1, 2021, new VAT rules for e-commerce will apply. So if you are thinking about starting a Dutch e-commerce company, you can find more information about these new rules here. You can also find some interesting information about starting an e-commerce business in the Netherlands in this article.

The Dutch VAT rates

In the Netherlands there are three distinguishable VAT rates: 0%, 9% and 21%. The highest rate of 21% is basically the standard rate for all products and services, which is why this is considered the general VAT rate. The 9% rate applies to certain products and also services. Amongst others these are food products, books, artistic works and medicines. You can find an extensive list below. The 0% VAT rate applies when your Dutch based company does business with companies based in other countries.

The three VAT tariffs explained

21% tariff

The 21% tariff is in essence the most commonly used tariff in the Netherlands. Most services and products fall under this category, unless there are reasons for exemptions. Another reason why a product or service might have a different tariff, is the reverse-charge mechanism when doing business with companies and people in other EU Member States. If none of these exemptions apply and your product or service does not fall under the 9% or 0% category, you always pay and/or charge 21% VAT.

9% tariff

The 9% tariff is also named the low tariff. This tariff applies to a wide variety of goods and services that are used daily or on a regular basis, such as:

The 9% rate only applies if the eBook is similar to the physical edition to which the 9% rate applies.

The 9% rate does not apply if this news website consists mainly of advertising, video content or listenable music; in that case the 21% rate applies.

The 9% rate also applies to a number of services closely linked to goods covered by the 9% rate:

The 21% rate includes the lending or rental of works of art by others, such as art lending institutions.

0% tariff

The 0% tariff applies to all company owners and entrepreneurs, who do business with foreign countries. It doesn’t matter whether the company owner is a foreigner or not; if the business is executed from an established branch office in the Netherlands, all its activities fall under the Dutch tax regulations. The 0% tariff mostly applies to the supply and shipping of goods from the Netherlands to other EU countries, but can also apply to certain services that are provided from the Netherlands.

These can also be services that are related to cross-border transactions, for example transportation of goods internationally or work on goods that will be exported. This tariff also applies to all international transport of travelers and passengers. An interesting note: if you apply the 0% VAT tariff, you still have the right to deduct VAT on your quarterly statement to the Dutch Tax Authorities.

Exemption from VAT: how does this work?

Next to the three distinct VAT rates, there are also certain businesses and business activities as well as sectors that are completely exempt from VAT. This means (in simple terms) that the customers of such companies and organizations do not have to pay any VAT. These businesses, activities and sectors are as follows:

This comprehensive list can also be found on the website of the Dutch Tax Authorities.

More special exemptions

Next to the standard exemptions mentioned above, there are also a number of extra exemptions which lead to a 0% VAT rate. The most relevant are all mentioned below. If you have a business idea in any of these sectors, chances are high you don’t have to charge VAT to your customers and clients.

The healthcare sector

All medical professions and consultations that solely focus on healthcare are exempted from VAT. This exemption applies to all professions that can be categorized under the Health Care Professions Act (BIG). So this exemption applies to professions such as paramedics, therapists, doctors, surgeons, general practitioners, care homes, orthodontists and dentists.

However, please keep in mind that the exemption only applies if the services offered are within the area of expertise of the professional. So a dentist cannot use the 0% rate if he or she, for example, offers psychology sessions without the proper academic degree and professional experience. This rule also stretches to third parties, as temping agencies that provide health care professionals have to charge the regular rate of 21%. The latter also applies to personnel registered in the BIG register.

Digital and online services

If you own a company that supplies digital services such as telecommunications and broadcasting, or online e-services, then the place from where you supply these determines which VAT rate applies and where it needs to be paid:

Tax-free shopping

You might know this situation from various national and international airports: tax-free shopping. This situation applies, when you sell goods to non-EU residents: in that case you do not charge VAT to your customers. In order to prove this on future declarations, you can use a copy of the sales invoice stating your customer’s credentials. A cheque with the customer’s name or a copy of his or her passport is also considered proof, in the case of the latter you will need to cover the citizen service number and the customer’s photo due to privacy legislation.

Fund-raising activities

Some fund-raising activities are also exempt from VAT, this is the case if the activities are initiated for:

Keep in mind there is a limit to the exact amount you can raise for such organizations. If you exceed this limit, other VAT rates may apply.

Vocational education

If you consider working in the Netherlands as an independent teacher or for a private school, there might be a possibility your services are exempt from VAT. Your services need to be within the field of vocational training, and you also need to be registered in the Central Register of Short Professional Training Courses (Centraal Register Kort Beroepsonderwijs, CRKBO).

Sports clubs

Most services that are offered by non-profit sports clubs and organizations are exempt from VAT too. The services need to be closely related to physical exercise and/or the actual practice of sports.

You can look on the website of the Dutch Tax Authorities for an extensive list of tax (VAT) exemptions.

Intercompany Solutions can help you with all financial matters

If you plan to establish a company in the Netherlands, you will have to go through a lot of paperwork and separate actions in order to realize this. Our experienced team can help you during this process, as we can handle the entire procedure in only a few business days. We are also always available to assist you with any financial questions and matters. Please contact us for more in-depth information about our services.

If you want your Dutch e-commerce company to do business in the entire European Union, you will have to deal with different VAT rules than those that apply if you only deliver to customers in the Netherlands. A number of basic rules apply to VAT in the EU. This includes certain threshold amounts for the levying of VAT if you sell to consumers in other Member States as well as VAT registration abroad. From July 1, 2021, however, new VAT rules for e-commerce will apply. This article will explain the most important VAT rules for Dutch companies in e-commerce, such as web shops and platforms that supply to foreign consumers in the EU. This also includes dropshipping.

Basic rules that apply in the entire EU

VAT is levied in all countries within the EU. EU countries themselves determine the level of VAT rates on products. Which country is allowed to charge VAT is determined by:

For sales and deliveries where goods are shipped from the Netherlands to consumers in other EU countries, Dutch VAT is payable as a basis as long as you stay below a certain threshold amount. This means that you will charge your foreign customer Dutch VAT until your turnover in the relevant country reaches the applicable threshold amount.

Threshold amounts for foreign sales

Within the EU, threshold amounts have been agreed upon for the levying of VAT on sales to consumers in other Member States. This is also known as distance sales. If your turnover in another EU country exceeds the threshold amount within a year, you calculate the VAT rate for that country. You then pay the VAT there and submit a VAT return. The distance selling threshold varies by country. The Dutch Tax Authorities have more in-depth information about this.

The threshold amounts do not apply to the supply of excise goods, such as alcoholic drinks and cigarettes. The threshold amounts also don’t apply to new or almost new means of transport such as cars. Deliveries of these types of goods do not count towards the threshold amounts. With every delivery, regardless of the amount, you calculate the VAT of the country where these goods are shipped.

If you sell goods that fall under the so-called margin scheme, these deliveries do not count towards the threshold amounts. If you apply the margin scheme, you owe Dutch VAT to the Dutch Tax Authorities on the profit margin of the goods. You do not charge VAT to the customer and do not state this on the invoice, since the VAT is already included in your sales price.

Information about VAT registration

You can only calculate foreign VAT with a VAT registration in the relevant country. You will receive a VAT number from the foreign tax authorities and submit a local VAT return. Furthermore, you can also hire a tax advisor who takes care of your foreign VAT registration and declaration, ICS is always happy to assist with such tasks. Ensure timely VAT registration in the country where you owe VAT to avoid hefty fines. Even if you first paid VAT in the Netherlands, the foreign tax authorities are still entitled to the VAT owed there. You still need to pay these abroad before you reclaim the Dutch VAT.

When to use a foreign VAT rate?

When you deliver to customers in another EU country who do not submit a VAT return, such as consumers, you can always use the foreign VAT rate and file a local return. This is possible even if you stay below the threshold amount. You must submit a written request for this to the Dutch Tax Authorities.

1st of July 2021: new EU VAT directive for e-commerce

From 1 July 2021, the new EU VAT directive for e-commerce will apply. The new rules apply when you achieve an annual turnover of 10,000 euros or more with your Dutch web shop or e-commerce business from sales to consumers in EU countries outside the Netherlands. If your turnover in other EU countries remains below 10,000 euros per year, you may continue to charge Dutch VAT. With the new VAT Directive, the European Commission wants to modernize and simplify VAT taxation, create a "level playing field" for entrepreneurs within and outside the EU and combat VAT fraud on small-value parcels.

Changes that might impact your company

Implementation of the new bill has direct consequences for your business operations due to the following 3 changes:

1.      No more separate threshold amounts

As of 1 July 2021, the threshold amounts for intra-EU distance sales per individual EU country will be cancelled. There will be 1 joint threshold amount of 10,000 euros. This threshold applies to all intra-EU distance sales of goods, together with sales of digital services to consumers in the EU. If your total amount of foreign sales in EU countries remains below 10,000 euros per year, as a Dutch e-commerce business you may continue to charge Dutch VAT. Just keep in mind that the transport of the shipment needs to be initiated in the Netherlands and that you need to own a branch office in an EU country.

From the moment you exceed the threshold amount of 10,000 euros, you charge the VAT rate of the EU country where your customer is located. You can arrange your foreign VAT return in 2 ways. Either you submit a local VAT return for each individual EU country to which you have sold and shipped goods, or you register your company for the 'Union Regulation' within the new one-stop-shop system of the Dutch Tax Authorities.

2.      VAT exemption for imports up to 22 euros expires

When goods are imported into the EU, there exists a VAT exemption for import VAT on shipments with a value up to and including 22 euros. This exemption will expire on 1 July 2021. The EU aims to create a "level playing field" for all sellers within and outside the EU. From 1 July 2021, import VAT will be due on the import of goods into the EU, regardless of the value of the shipment. Shipments with a value up to and including 150 euros will remain exempt from import duties though.

When you sell products from outside the EU to customers who do not submit a VAT return, you must declare the VAT from 1 July 2021 in the EU country where the goods arrive. For example, when you deliver products from Taiwan through your web shop directly to consumers in Belgium, You must pay Belgian VAT on this delivery.

3.      Platforms pay VAT when taking on an active role

An entrepreneur is responsible for the VAT payment on products that he or she sells to consumers via a platform. In the new VAT rules, the platforms are responsible for this VAT payment if the platform plays an "active role". But an active role is more than just bringing together supply and demand digitally. For example: facilitating orders and payments for products. The platform supports the purchase and delivery of products to private customers and is therefore due VAT in the country where the customer lives.

Furthermore, the following applies:

If the value of the shipment is above 150 euros, the platform is also liable for VAT when it facilitates the delivery to a consumer by a non-EU-based entrepreneur and the goods go from one EU Member State to a consumer in another Member State. If you own a platform and have goods shipped directly by professional sellers from outside the EU to customers in other EU countries, you need to investigate together with your tax advisor whether you will be faced with a greater VAT obligation and liability after the introduction of the new rules.

The new ‘One stop shop’-system

Following the changes of the law, the current MOSS scheme for suppliers of digital services in the EU will be merged into the new One Stop Shop (OSS) system. As a user of the current MOSS scheme, you declare your VAT from 1 July 2021 via the new one-stop shop. You can also declare distance sales via the new portal. If you exceed the threshold amount of 10,000 euros with both deliveries, digital services and goods, you can submit your declaration via this portal. As an entrepreneur you can declare the VAT payable in other EU countries via the OSS portal of the Dutch Tax Authorities. You do this by registering for the 'Union Regulation'. You do not need a VAT registration in other EU countries.

Service providers will soon also be allowed to declare VAT via the 'Union Regulation' in the OSS portal. When you opt for the new system, you will first need to de-register his other EU VAT numbers. If you need these other VAT numbers for other sales tax-related matters, for example for the deduction of input tax, you can also choose to keep the number. You will not be able to reclaim VAT paid in these countries via the one-stop shop though. To do this, you must submit a separate request for a refund to the Dutch tax authorities. In this case a local declaration is more convenient, which will also save you extra administrative actions.

The before mentioned companies and platforms that sell products from outside the EU to consumers in EU countries and have them delivered directly can use the OSS portal. This is possible with the "Import regulation" within the portal. The Dutch Tax Authorities arranges that the VAT declared via the OSS portal is sent to the correct EU country. When you store goods for your web shop in a warehouse in another EU country, you need a VAT number from that EU country. The goods delivered by you from the foreign warehouse are taxed with local VAT. They are delivered from that country, and you cannot declare your VAT via the Dutch OSS portal. You file a VAT return in the relevant EU country.

Special information regarding the small business regulation (KOR)

The small business regulation (KOR) is a specific exemption from VAT. You can use the KOR if you are located in the Netherlands and have no more than € 20,000 in turnover during 1 calendar year. The KOR is for natural persons (sole proprietorships), combinations of natural persons (for example a general partnership) and for legal entities (for example foundations, associations and private limited companies). If you, however, exceed the threshold of 10,000 euros in turnover in EU member states other than the Netherlands with your web shop, you become liable for VAT in the relevant EU member states. At that point the VAT rules of the EU member state of your consumer apply and thus, the Dutch KOR is then no longer applicable.

You must declare this turnover in the Netherlands. You can register for the Union Regulation within the one-stop shop, or you can register locally for VAT and file a local tax return. For example, if you also purchase in the relevant country with local VAT, this might prove to be cheaper. You can then deduct the VAT paid directly in your tax return. The turnover on which you file a declaration locally in another EU country does not count towards the KOR. You can continue to apply the KOR until you reach a turnover of 20,000 euros in the Netherlands. If your annual foreign turnover in the EU remains below 10,000 euros and this turnover, together with your Dutch turnover, does not exceed 20,000 euros, you may continue to work under the KOR. In that case, you do not calculate VAT and also do not declare VAT.

Customs legislation for e-commerce shipments

In addition to the VAT rules, customs legislation for e-commerce shipments will also change from 1 July 2021. An electronic import declaration is required for all shipments with a value up to 150 euros. In addition, new regulations will be added for these small shipments that are currently being further elaborated. Suppliers who directly deliver goods from countries outside the EU can, under certain conditions, use the 'Import regulation' within the OSS portal. With this Import Regulation, a supplier submits a VAT return in 1 EU country. This arrangement only applies to shipments with a value of up to 150 euros. Instead of import VAT, the supplier directly pays the VAT applicable in the country of destination via the one-stop shop.

Customs agents, transport and postal companies will have a different regulation if companies do not use the Import regulation. In this case, customs at the EU border will estimate the value of the shipment. Companies collect the VAT due directly from the consumer. They report the import VAT owed on a monthly basis and pay this via an electronic declaration. This also only applies to shipments with a value up to 150 euros. Read more on E-commerce in The Netherlands.

Implementation of these new rules

The One Stop Shop, or OSS, consists of 3 voluntary regulations:

  1. The "Union Regulation" for EU-based companies with at least 1 branch office or subsidiary in an EU country. This regulation applies to intra-EU distance sales and services.
  2. The "non-Union Regulation" for companies established outside the EU without an establishment within the EU. This regulation applies to services.
  3. The "Import regulation" for distance sales of non-EU goods with a maximum value of 150 euros.

The Dutch Tax Authorities will support the one stop shop system from 1 July 2021. The organization has set up an "emergency track" for this purpose. This means that you can use the above regulations, subject to some restrictions:

Manual processing can result in incomplete exchange of information with other EU countries. The tax authorities indicate that any delays caused by the system have no consequences for the VAT payment to the other EU country. For example, a delay will not result in a fine from the other EU country. A declaration via your software package, also called system-to-system, is not possible within the emergency track.

Using the one-stop shop

Your declaration and registration for the aforementioned regulations is done via My Tax and Customs Administration, tab EU VAT one-stop shop. For your registration and declaration you need ‘eRecognition’ (eHerkenning). If you have a sole proprietorship, you can use DigiD. You can register for the Union Regulation and Import Scheme from 1 April 2021.

If you do not yet have eHerkenning for your company, apply for it in time. When you purchase an eH3 login tool for your registration for the new OSS portal, you may be able to claim the "Compensation scheme eHerkenning Belastingdienst". If you are entitled to the scheme, the compensation amounts to 24.20 euros including VAT per year.

Make sure you are prepared for the coming changes

The new threshold amount of 10,000 euros is much lower than the current threshold amounts per country. As a result, you are more likely to owe VAT in another EU country than right now. The new entry rules have consequences for your business operations. You will need to map out in which countries your customers live, how much turnover you achieve in which EU country and which VAT rate applies. EU countries have different VAT rates. This has consequences for your product price per country. Make adjustments to your ERP system for correct administration and invoicing. Also check how you display the different product prices in your web shop. When visiting your web shop, your customer wants to see a correct price including VAT. Consult with your accountant or supplier of the system what options you have for this. Consider whether you use one of the voluntary schemes or opt for a local VAT registration in the individual EU countries. Make sure you have your registration and systems in order before 1 July 2021.

Intercompany Solutions can assist you with any needed changes

If you need to make new calculations, or find out if these changes will affect your company, we can aid you in retrieving the necessary information and personal advice for your Dutch company. We can also assist you with company accounting and VAT registration, the entire financial aspect of your company or branch office in the Netherlands and any other specific questions you might have.

Sources:
1. https://ec.europa.eu/taxation_customs/business/vat/modernising-vat-cross-border-ecommerce_en
2. https://home.kpmg/us/en/home/insights/2021/04/tnf-eu-vat-rules-affecting-e-commerce-sellers-marketplaces.html
3. https://www.bakertilly.nl/

The first thing you need to do is to register your company with the Trade Register via the Chamber of Commerce. Your company information will be automatically transferred to the tax authorities.

When registering the BV with the Chamber of Commerce you will receive an RSIN number. This number is also on the extract of the Chamber of Commerce. This RSIN number becomes the fiscal number of the BV. The VAT number is derived from this number, namely with the addition NL and B01 at the end. However, this number must be activated, and we can perform this process for you.

To assess whether the BV is an entrepreneur for VAT, the following matters are taken into account:

A taxable person for VAT is any person who, in the pursuit of economic activity, provides, regularly and independently, for-profit or not, a supply of goods or services, wherever the economic activity is carried on.

The definition includes 4 essential elements:

Everyone:
Natural person, legal person or associations insofar as they carry out economic activities

Economic activity:
All activities of the producer, trader or service provider are envisaged (except for exempt transactions).

Regularly exercised activity:
To be a taxable person, the transactions listed in the Code must be performed by him/her regularly. Only through succession do actions become an activity. The regular occurrence of the actions in the form of an activity is not clearly defined.
Determining whether an action is part of a regular activity or of an accidental nature is assessed on the basis of the facts.

Independent:
The activity must be carried out on an independent basis and not in employment. There should be no bond of subordination to another person.

The criteria the tax office uses for VAT assessment can include:

If the BV meets the tax inspector assessment, there is a tax liability for VAT, and the Tax and Customs Administration will issue a VAT number. This international VAT number is crucial for international transactions with other legal entities within the EU since a valid number leads to an invoice without VAT. (a so-called intra-community transaction). It is also important to always check the validity of the VAT number of your counterparty since the normal VAT rate applies if the number is invalid. The VAT number can be checked using the European Vies VAT number validation website.

Where to use the VAT number?

Foreign citizens and businesses, as well as local citizens who apply for a VAT number with the Dutch authorities, must display this number on every invoice they provide. They must also file VAT reports with the local tax office. All invoices are required to include certain information about the VAT, such as:

The VAT number of the client;
The VAT ID number of the seller;
Information about the items/services sold;
The amount of VAT (net);
The VAT rate;
The amount of VAT charged;
The total amount including VAT.

In conclusion

The whole process of applying for a VAT number can be completed within 5 working days. Our accounting and VAT specialists file- and consult hundreds of such VAT requests per year. Our specialists ensure the best possible service to represent your company with the tax authorities.

You should also be aware that if your company is dissolved, you must also contact the tax authorities as the VAT number must be deleted and the company will be de-registered.

Over the last few years, the government of the Netherlands has been keen to be seen to be taking decisive action against tax evasion. 1n July 2019, for example, the government announced its plan to close loopholes in which companies avoid tax by taking advantage of the differences in tax systems of countries, the so-called hybrid mismatches. State Secretary Menno Snel sent a bill to that effect to the House of Representatives. This bill was one of the measures taken by this cabinet to combat tax avoidance.

The ATAD2 (Anti Tax Avoidance Directive) bill is designed to stop internationally operating companies from taking advantage of the differences between the corporate tax systems of countries. These so-called hybrid mismatches ensure, for example, that payment is deductible, but is not taxed anywhere, or that one payment is deductible several times.

The most famous example of a hybrid mismatch is the CV / BV structure, also known as the "piggy bank at sea". Companies from the United States have been notoriously able to postpone taxation of their global profits for a long time with this structure. But thanks to the measures from ATAD2, the Cabinet is ending the fiscal attractiveness of this structure.

A follow-up to previous measures

ATAD2 is a logical continuation of ATAD1. ATAD1 entered into force on January 1, 2019, and addressed other forms of tax avoidance. This has led, among other things, to the introduction of the so-called earnings stripping measure, a general interest deduction limitation in corporate tax. The bill was presented to the House of Representatives in July 2019 contained further measures against hybrid mismatches.

The majority of the measures in the bill to implement ATAD2 came into force on 1 January 2020. Other European countries have also introduced ATAD2, which was welcomed by the government. Hybrid mismatches are most effective when done on an international basis.

Background to ATAD2

The introduction of ATAD2 was one of the measures taken by this government to combat tax avoidance. In addition, the method for issuing rulings with an international character was tightened from 1 July. The cabinet is also preparing legislation to levy a withholding tax on interest and royalties by 2021, with a very targeted approach to a cash flow of 22 billion euros to low-tax countries.

And more tax avoidance measures are planned. In 2024, for example, the Dutch government plans to bring in a new withholding tax on dividend flows that will apply to low tax jurisdictions. This will herald another important stage in the fight to stop tax avoidance. The new tax is planned in addition to the withholding tax that will be imposed on interest and royalties from 2021.

The new tax will allow the Netherlands to tax dividend payments to countries that levy hardly any taxes and will also help reduce the use of the Netherlands as a conduit country. The tax will be levied on countries with a corporate tax rate of less than 9% and will also apply to countries currently blacklisted by the EU blacklist. These are not half-hearted measures by any means.

Any questions? Contact our business consultants for more information.

Are you a business owner who is based in a country other than the Netherlands? Do you supply services or goods to the Netherlands? If so, you might be classed as a foreign entrepreneur in terms of VAT. You may need to file a turnover tax return in the Netherlands and you might also need to pay VAT in the Netherlands. ICS can provide you with more information about the latest VAT regulations in the Netherlands as well as calculating VAT, filing VAT returns, paying VAT, and how to deduct or claim a VAT refund.

VAT registration for foreign business owners

In certain cases, a foreign entrepreneur who has to cope with Dutch VAT can opt to register for VAT with the Dutch tax authorities.

This is a possibility, for example, if a businessman does not want to offer bank guarantees, as is a requirement for General Tax Representation. Another benefit is the fact that the latter is more straightforward to arrange than a General Tax Representation permit.

There are certain disadvantages for a non-Dutch national to register for Dutch VAT. This is because foreign entrepreneurs are not entitled to a permit under Article 23 (VAT reverse charge) because it is only for people who live in the Netherlands as an entrepreneur or are established there. Since the VAT cannot be transferred it is a given that it must always be paid.

VAT on foreign receipts

First of all: all expenses must be made for your business can be deducted. If so: you can deduct the costs.

For VAT: on hotels outside the NL, VAT of the country of the hotel will be applicable.
So for example you stay in a hotel in Germany, German VAT will be applicable. You can’t deduct this German VAT in your Dutch VAT declaration. There are possibilities to ask this VAT back with the German tax authorities, but a threshold applies and it is a time-consuming process.

This is therefore only interesting when it concerns large amounts. The costs of the hotel can of course be deducted from the Dutch profit. For airline tickets no VAT is applicable. You can deduct the costs of the profit (if it is a trip for business).

It would good to discuss with your suppliers when it is possible that suppliers do not charge you VAT. If you have an active VAT number in the Netherlands, they can verify that with the EU Vies register. And see that they are allowed to invoice you at 0% reversed charge. For other countries outside the EU, other rules apply.

How to apply for a Dutch VAT number

When foreign entrepreneurs want to apply for a Dutch VAT number, they only have to submit a few documents, but they must first complete an application form from the tax authorities. As soon as the Dutch VAT number is supplied, a foreign entrepreneur is legally able to trade in any country within the European Union.

Adequate VAT administration is needed for this and this is where a company such as ICS can provide valuable assistance. An international company can opt to have this administration undertaken by an administration office based in the Netherlands. The Tax and Customs Administration carries out strict checks, especially when reclaiming VAT so it is extremely important to ensure that the correct paperwork is always in order. If the administration is outsourced to an accounting office, this office is not responsible for the activities with which the foreign company is involved in the Netherlands.

Do you want assistance with applying for a VAT Registration for foreign entrepreneurs? The experienced VAT specialists at ICS will help you on your way.

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