The flourishing city of Utrecht is famous for being creative, healthy, talented and smart. Its residents, knowledge institutes, local authorities and companies work in collaboration to achieve social sustainability. This is the ideal location for establishing a business, thanks to its central position on the map, accessibility, favourable business atmosphere and highly qualified workforce. Furthermore, Utrecht offers various office and business locations in its historic inner part and its innovative Science Park.

One of the most competitive regions in Europe

According to the EU Regional Competitiveness Index Utrecht is the second most competitive region on the European continent after London. The region offers excellent business climate, qualified workforce and a strong economy. The region achieves regular high ranking, much better than the indices for Paris, Frankfurt and Amsterdam. Utrecht is famous for its superior digital infrastructure, institutions for higher education, job market, innovation and technology, and healthcare.

Healthy city life

Utrecht is the healthiest and fastest growing city in Holland. It has achieved outstanding results in combining economic growth and rapid urbanization with the ambition of healthy living. Health, prosperity and well-being are the main points in the development of a sustainable and healthy environment for living. The region cooperates for innovative, creative solutions, services and products to guarantee that the environment remains liveable, healthy and green.

Central location, excellent accessibility

Many consider Utrecht as a central intersection point. It offers great accessibility by any means of transport. All important Dutch highways lead to the city. Schiphol Airport is 30 minutes away. Utrecht boasts the biggest railway station in Holland that offers transport to any destination, both in the country and abroad. The business park of Lage Weide accommodates a large inland port. Furthermore, Utrecht has an outstanding digital infrastructure.

Young, qualified labour force

The smart, vibrant Utrecht has young and bright residents. The city hosts many students and every year it attracts a new flow of smart, talented, young individuals. Many of them decide to remain in Utrecht and work here after their graduation. In general, it is fairly easy to reach ambitious entrepreneurs and innovative talents in the area of Utrecht.

High living standards

Utrecht is a compact metropolis, welcoming, open and accessible. Due to its relatively small size, the city can easily be explored by bicycle or on foot. Utrecht is popular with its charming historic inner city, various cultural amenities and extensive shopping area. It offers lively festivals, gorgeous parks, inspiring museums, exciting architecture and unique events. The city offers an excellent environment for living, working and studying and takes the second place in the countdown of the most inviting cities in Holland (Dutch Councils Atlas, 2017).

International communities

The region of Utrecht hosts sixty thousand international professionals and 900+ foreign companies. Its International School has a diverse range of European Baccalaureate programmes for secondary and primary education. For international students pursuing higher education, Utrecht has an International Campus and a University College. The Centre for Expats in the city welcomes newcomers to obtain practical information on studying, working and living in Utrecht.

In case you are interested in establishing a business in Utrecht, contact our incorporation agents. They will lead you through the process of starting a company in the Netherlands.

The Netherlands has a rare combination of characteristics that encourage international investments and form the country as a competitive and highly popular business centre.

Holland is strategically located in Western Europe, allowing investors to establish suitable bases for their shipping and trade operations. Furthermore, the outstanding infrastructure and accessibility make the country an extremely popular destination for European, American and Asian investors who have opted for setting up an office in the Netherlands.

Advantageous taxation principles

The tax system in the Netherlands offers international investors a 15% income tax for profits up to EUR 245 000 per year and 25% for amounts exceeding this threshold. It also ensures certainty and clarity regarding future tax liabilities. Investors can take advantage of certain benefits related to royalties, interests, debts, taxation of dividends and loss structuring. Holland offers various investment deductions and tax reliefs. A special tax regime called “innovation box” provides for preferential tax rates for income generated as a result of the development of intellectual property. Furthermore, freight companies benefit from a tonnage tax regime.

Holland has concluded numerous treaties for the avoidance of double taxation (>95 agreements). Therefore entities deriving income from Holland and a country that has signed a double tax treaty with Holland can be taxed using preferential rates.

Sound legal and financial systems

In addition to the abovementioned tax benefits, the Netherlands has a straightforward legal system allowing international investors to efficiently deal with legal issues arising from different transactions, e.g. patent/trademark or tax. Judgements from other countries can be enforced in Holland under specific conditions. As an EU member, Holland conforms to all European laws relevant to trade and business.

The area of Amsterdam hosts numerous globally acknowledged financial institutions and banks. Various banks have established branches in Holland, thus contributing to the good financial climate. Many investors of private equity and managers of trust funds have chosen the Netherlands as their base of operations.

Highly educated labour force

In case you intend to establish a business in the Netherlands, you are free to choose from different types of companies. If your scope of activities includes shared services, customer care or distribution/logistics, Holland is the perfect choice as it offers an unparalleled business environment for such operations.

Furthermore, Holland’s workforce is among the most qualified, motivated and flexible in the world. Most Dutch employees have good knowledge of two foreign languages, so they are a perfect match for foreign companies in any industry sector.

Great logistics and infrastructure

The Netherlands is a popular European destination for companies thanks to its superb transportation network. The country boasts the largest port in Europe, the Port of Rotterdam, and the best European airport for transport of cargo, Schiphol Airport.

As regards innovation and technology, Holland has made investments in e-commerce, communications, outsourcing and high-speed digital systems for communication and internet. The country has adopted the latest cell phone and computer technologies, creating ideal conditions for companies needing modern technologies for their operations.

If you intend to establish a Dutch company and take advantage of the opportunities for business offered by the country, please, contact our local agents in company formation. They will assist you in completing the necessary procedures.

Last year the Dutch electronic commerce was worth €22.5 billion and can grow to approximately €25 billion before the start of 2019, showing an 11% increase. This rate of expansion is a bit slower compared to the 13% increase in the Dutch electronic commerce turnover reported for 2017.

These conclusions are based on the report of the E-commerce Foundation on the Netherlands for 2018. Wijnand Jongen, chief executive officer of Thuiswinkel.org - a Dutch electronic commerce association, stated that online shopping in Holland is steadily increasing its share. This trend has to do with the recovery of the Dutch economy, as well as with the growing confidence of the consumers. According to him, both omnichannel and online retailers can benefit from the situation.

Read here in case you are interested in starting an online shop in the Netherlands.

81.5 percent of the Dutch population buys products and services online

Reportedly, 97% of the 17M Dutch residents use the internet and 84% of them shop online. Therefore 81.5% of the whole population shop on the internet.

The average amount of money a shopper spends online is on the increase. In 2016 the average spend was €1200 per person, while in 2017 this amount increased to €1700. Electronic commerce in Holland currently comprises 24% of the national market. Nevertheless, only 27% of the people prefer making purchases online. This percentage is lower than the estimates for other countries in Europe, such as France (35%), Germany (41%) and Great Britain (45%).

According to the forecast for this year, the Dutch electronic commerce industry is expected to grow by approximately 11%. This means that the online sales industry can reach almost €25 billion before the beginning of 2019.

Most popular category: Clothing

Considering the amounts of money that Dutch people spend online, the leading category of products is clothing. Consumers have spent approximately €2.3 billion on clothes. Other popular categories are Information Technology (€1.5 billion), telecom (also €1.5 billion) and food & near-food (€1.3 billion). Currently, there are around 34,000 websites where businesses offer their products and services directly to consumers. According to the forecast, this year the number may increase to 38,000+.

Are you still doubting where to start your E-commerce business? Read here 5 reasons to start a business in the Netherlands. 

A Netherlands-based company may decide to sell shares due to the expansion of the business or as a plan to accumulate larger income. The acquired capital may be directed towards debt repayment or reinvestment in the business.

A Dutch company can sell or transfer shares only in accordance with the provisions of the Association Articles. Share transfers also require the preparation of notarial deeds. Companies can become public by entering the stock market and offering shares publicly. Only certain company types can use this option. Our Dutch experts in company formation can provide you with detailed information on the features of different commercial entities in the Netherlands.

Are you interested in buying Dutch company shares? Read here

Selling company shares in Holland

Only some types of Dutch companies are able to sell shares publicly. NVs (public limited companies) can list their shares in the Stock Exchange. BVs (private companies with limited liability) do not have this option, as their shares are registered privately and cannot be transferred freely.

The best way to sell stocks for most Dutch public companies with limited liability is to go on the exchange market. In Holland company owners go public using Euronext.

Transfer of shares in Holland

In the Netherlands, registered shares are transferable through notarial deeds. The process must take place in the presence of a Latin notary. Any developments or limitations regarding the share transfer are noted in the association articles of the private or public Dutch company with limited liability.

Dutch companies can be acquired through purchases of shares or assets. The two mechanisms are different with respect to the transfer of liabilities. In share purchases, the buyers also acquire the obligations and responsibilities of the respective companies.

Our Dutch agents specializing in company formation will be happy to provide you with further information on buying and selling company shares, and on the possibilities open to investors.

Holland has signed numerous treaties for the avoidance of double taxation. These bilateral pacts ensure tax relief by avoiding double taxation with respect to income of individuals derived from both a source in Holland and another country.

The Netherlands has signed close to 100 double tax avoidance treaties. Investors planning to establish local businesses should obtain information regarding the advantages offered by these treaties, in case they are applicable to their home countries. For example, Holland has signed such treaties with the United States, the United Kingdom and the Arab Emirates.

Our Dutch specialists in accounting can provide you with details regarding the treaties for the avoidance of double tax concluded with your home country or any other countries you may be interested in.

Double tax avoidance treaties

The treaties for double tax avoidance determine which countries may levy taxes with respect to income generated under Dutch jurisdiction. Persons living outside Holland but deriving income from Dutch sources are taxed just once on capital and income, in accordance with the provision of these treaties.

Thus persons deriving income from Holland but living abroad pay less tax on income in Holland. Our local tax specialists can provide you with more details on the taxes that foreign residents must pay in Holland, including the thirty percent reimbursement ruling for international employees.

You may also benefit from the participation exemption rule to avoid paying tax on dividends.

The significance of the double tax treaties for international investors in the Netherlands

The treaties for avoidance of double taxation are beneficial for both individuals and companies opening branches in Holland. These bilateral conventions provide for reduced rates of withholding taxes for royalties and dividends agreed between the countries.

Companies and individuals residing in countries that have not yet concluded agreements for double tax avoidance with Holland can still take advantage of the Double Taxation Decree that, to a certain extent, reduces the tax burden.

If you need further information on the Dutch taxation system or professional audit and accounting services in Holland, please, get in touch with our tax specialists.

See also the tax office website about the Double Tax Treaties.

In the Netherlands, local companies and branches are subject to the same general taxation regime in accordance to the national law. Still, there are particular differences as branches are not obliged to cover certain taxes required for other business entities. In case you own a Dutch branch our local administrators can check which tax liabilities are applicable in your situation.

Dutch tax regime for branches

The tax regulations in Holland provide for equal taxation of branches and companies with respect to the rates for generated profits. Therefore, if you own a foreign company and decide to establish a Dutch branch, the tax you will need to transfer will be 19% for profit under EUR 200 000 and 25.8% for the amount exceeding this threshold in 2024.

The national government provides incentives for international investors opening branches in Holland. They are not subject to withholding tax, while resident companies pay 15% withholding tax. It is also possible to have clarity on the matter and receive an advanced tax ruling from the authorities.

Our Dutch financial administrators can give you more information about taxation of branches in the Netherlands. Please, do not hesitate to contact them with any questions on this subject.

Branch tax obligations in the Netherlands

In contrast to representative offices, branches allow international investors to perform business operations in Holland. Therefore, branches have to be registered at the Commercial Chamber and the Tax Office. They are not subject to tax for capital registration, even if they receive contributions to their capital.

In Holland, the value added tax and wage tax rates for branches are identical to those applying to local companies. The amounts vary with respect to the scope and volume of the commercial activities. The hiring of employees and their actual number may be associated with specific tax liabilities.

Do you have questions regarding the tax regulations applicable to your company’s Dutch branch or the amount of employee taxes that you will need to cover? Please, do not hesitate to get in touch with our Dutch bookkeeping specialists.

Investors who have decided to buy shares of Dutch companies are able to purchase them either directly or via a plan for dividend reinvestment. They can acquire the ownership shares of a particular company or implement a larger plan for stock investment in multiple companies.

Holland welcomes international investments and foreign companies are free to open headquarters in the country. The business climate is equally appropriate for making large investments and opening Dutch companies with the perspective to sell shares to investors from outside.

Are you interested in selling Dutch company shares? Read here

Direct purchases of stocks in the Netherlands

A widely used method to purchase shares in Dutch companies is to deal directly with the entities issuing them. Big international corporations are among the most attractive businesses and most of them provide plans for direct purchase of stocks. One of the advantages of this mechanism is that commissions are avoided, even though a minimal deposit is usually required.

Stock purchase is beneficial for both the buyer and the issuing company. This is a way for investors to maximize their earning, while companies raise additional budget at reduced costs. Companies allowing direct purchase of shares publicize this information. Our Dutch agents specializing in company formation can assist you with details about local companies offering shares publicly and on the Euronext listings.

Purchasing shares in the Netherlands

There are two other options open for investors: to purchase stocks through a plan for dividend reinvestment or brokerage.

Some companies offer plans for reinvestment of dividends, allowing investors to reinvest the amounts accumulated in dividends by buying additional shares.

Brokerage is the other method to purchase Dutch company shares. This is a preferable option for entities that want their investments in Holland to be managed by experts. The extra management of accounts is more costly compared to other options.

Would you like to learn more about establishing a business or investing in Holland? Please contact our Dutch agents specializing in company formation.

The labour force in Holland is an essential factor for the country’s progress. The strong Dutch economy is growing rapidly, relying on well-developed infrastructure and skilled, productive employees. Undoubtedly the superior training and adaptability of the Dutch employees contribute significantly to the welfare of the Netherlands in the long run.

Our local consultants in company registration can give you details on the legal procedures for hiring employees in the Netherlands.

Highly qualified professionals

Dutch employees are ready to embrace changes and to acquire new skills and competencies. The national labour force is among the most flexible worldwide. The same applies to the local employers who readily make investments in their staff and motivate them to take up new challenges.

The Dutch labour force has one undeniable advantage: most people speak two or three languages. This is important for the role of the Netherlands on the European economic scene. Dutch employees are constructive, skilled and productive. They are well educated and open for cooperation. As regards the level of qualification, Holland is third in the global top for higher education.

The labour market in Holland

Foreigners who have moved to Holland only a few years ago with the aim to work for local companies now possess the skills to establish their own businesses. Regions such as West Holland offer great opportunities to entrepreneurs intending to create start-ups.

The labour market in Holland has evolved accordingly and the current demands are mainly focused on engineers and technicians. West Holland contributes significantly to the workforce qualifications because many of its universities cooperate with local companies to educate prospective employees.

Our agents in company formation in the Netherlands can help international investors planning to start Dutch businesses.

The law on employment in Holland

The Dutch law on Labour and Employment is quite complex. A contract for employment in the Netherlands may be concluded in oral or written form. In any case, the employer has to clarify certain aspects to the employee. Some of the key aspects are:

1. job description and position;
2. hiring date;
3. place of work;
4. temporary or permanent employment;
5. salary;
6. working hours;
7. rights to pension (if relevant).

Employment contracts can be concluded for a particular or indefinite time period. Employment agreements often include restrictive clauses related to confidentiality and non-competition. Read here on appointment and dismissal of staff in the Netherlands. 

International employees in Holland

The Netherlands has its own skilled labour force, but also attracts international talent. Foreign employees need residence permits to work in Holland. Highly qualified individuals can take advantage of the visa program for skilled migrants facilitating the procedure of hiring foreign staff in the Netherlands. The employer also needs to obtain a special employment permit. Swiss and EEA nationals are excluded from the rule.

Would you like to receive more information on the employment legislation in Holland? Contact our experts.

Thanks to its history of innovations and exceptional digital infrastructure Holland hosts the largest ecosystem for start-ups in Europe. In fact, as reported in the 2016 Start-up Scoreboard of the EDF, the country has the most beneficial business climate for start-ups in the European Union. With 10+ start-up and technology centres in a ninety-minute radius, the Netherlands provides many options for the establishment of innovative companies operating in any sector. The Netherlands is also referred to as ''The European Silicon Valley''. The Dutch cities offering the best conditions for start-ups are listed below.

The Hague

The international centre of justice and peace is currently the largest security and safety cluster on the European continent due to its many embassies and international organizations alongside some four hundred security companies. The Security Delta Campus in The Hague supports specifically start-ups in the field of cybersecurity by providing living laboratories, office spaces and training facilities.

HackerOne is among the most interesting start-ups in Den Haag’s security cluster. The company is an American-Dutch venture conceived by security leaders working for Microsoft, Google and Facebook. In 2015 this resourceful start-up established a centre of operations in Den Haag, after raising USD 25 million Series B funding. Until now it has provided services to fifty companies, including Twitter, Uber, Slack and the US Defence Department, finding more than 21 000 bugs.

Read more on the city of The Hague

Rotterdam

Rotterdam is the largest city in Holland, after Amsterdam. It boasts the biggest and most active shipping port in Europe. In recent years Rotterdam has been acknowledged as an excellent location for start-ups. Last year it was featured in Financial Times as a suitable location for launching new ventures. As a shipping centre, Rotterdam has encouraged the development of start-ups specializing in port-related technologies. They are aided by a dedicated Innovation Lab, established jointly by the YES!Delft incubator and Rotterdam’s Port.

Last year the Cambridge Innovation Centre (CIC) based in the USA opened its first international hub in Rotterdam. The city is located close to numerous renowned universities and the CEO of CIC, Tim Rowe, compared it to Boston, USA.

Read more on the city of Rotterdam

Utrecht

Utrecht is located at the heart of Holland and strives for healthy people, minds and environment. It is maintaining one of the most sustainable and healthiest living environments in the world and provides exceptional quality for business and life. The EC has recognized it twice as a leader among the competitive regions in Europe.

Utrecht hosts approximately 400 start-ups that benefit from the local institutions and resources. It is the home of UtrechtInc, rated in the top 10 for European incubators, and a Science Park fostering innovation in cancer research, stem cells, sustainable urban planning and bioprinting.

Read more on the city of Utrecht

Amsterdam

Holland’s capital is a global destination for businesses, famous among visitors with its scenic canals. Dubbed the capital of start-ups in mainland Europe, it offers all the necessary ingredients to transform an idea for a start-up into a business generating billions. Amsterdam hosts top European accelerators, such as Startupbootcamp and Rockstart, and establishments of giants like Salesforce, Uber and Google.

The unicorn company Adyen operating in the field of financial technology was started in Amsterdam. It was established in 2006 and is currently valued at USD 2.3B. According to Fortune, it is certainly a unicorn that you can bet your money on.

Read more on the city of Amsterdam

Eindhoven

Utrecht is the heart of the Netherlands, while Eindhoven with its region of Brainport is undoubtedly the country’s brain. In 2011 the Intelligent Community Forum rated it as the smartest region in the world. Eindhoven, a centre for high technology development and design, boasts a huge network of R&D and academic facilities, e.g. the High Technology Campus and its Holst Center dubbed Europe’s smartest square kilometre, as well as Eindhoven Technology University. The active collaboration within this network has enabled Brainport to generate USD 2.8B in innovation spending by private organizations.

The lucrative technology environment in Eindhoven attracted the interest of the Singularity University based in the Silicon Valley. As a consequence SU opened its first international department there: an innovation centre bringing together representatives of leading research institutions, start-ups, businesses and the government to work on new revolutionary technologies, such as food scanners, DIY drones and self-driving automobiles.

Read more on the city of Eindhoven

Are you intending to establish a start-up in Holland? It is easy to do so with the special Start-up Visa for international entrepreneurs. Get in touch with our team to receive further information and consultancy on start-up establishment in Holland.

Import of products to the Netherlands

The import of products originating in non-EU countries to Holland is generally taxable for VAT purposes, regardless of whether the import is performed by a private, taxable, non-taxable or exempt entity. Therefore VAT is usually due at import and is normally transferred to the Dutch Customs. In case you are interested in starting an import/export business in the Netherlands contact our local incorporation agents, who will guide you in the process.

License for VAT deferment

Holland has adopted a special system in connection to Art. 23, Act on VAT, resulting in the issue of Article 23 licenses. These licenses enable importers to postpone the VAT payment, rather than transfer the amount upon import. The system shifts the VAT liabilities to the recurrent VAT returns. Therefore the import VAT is declared in the respective periodic return but may be deducted as well in case no full deduction of VAT is applied. So VAT is not actually paid on import, which brings interest and cash-flow advantages. The license for VAT deferment is only issued to taxable, non-taxable and exempt entities (not issued to natural persons).

Requirements for VAT deferment license

Generally, the following requirements must be fulfilled in order to apply for a VAT deferment license:

• the candidates should either reside in Holland or have fiscal representatives / permanent establishments in the country;
• the candidates should regularly import goods;
• the candidates should keep transparent records with respect to the goods for import.

The importation of delivery trucks and private cars is subject to different conditions.

Application for VAT deferment license

Below is a non-exhaustive list of the information that must be included in the VAT deferment application:

• VAT/Tax ID number of the importer/applicant;
• Importer/applicant name;
• Type of product for import into Holland;
• Quantity of product;
• Envisaged frequency of import (annually);
• Price of the products for import (annually);
• Country of origin of the product (non-EU).

The tax authorities in Holland must process the application in an 8-week period.

Frequently asked questions

• I am based in the Netherlands with a BV. My supplier in Netherlands has Article 23. What VAT am I paying? And anything I should look out for?If your supplier has a permit based on article 23, then he can import goods in the NL without paying VAT. He has to declare this import in his VAT declaration. After the goods are imported he can sell these goods to a Dutch BV. When the imported goods are sold to you (Dutch BV), 21% VAT is applicable over the price of the goods. So if you buy the goods for 100 Euro, you pay VAT over 100 Euro. If you use the goods for your company and you pay VAT over your revenues, you can deduct this VAT.
• What advantage do I have with an Article 23 license?
  The advantage of an article 23 license is liquidity.Vat is not a cost for the entrepreneur. So you do not ''gain'' any profit by the license. However, you save financing cost. When you import big quantities of goods with an Article 23 license, you do not have to wait until the tax office refunds you the VAT you have paid over the goods. As the tax is deferred. This advantage can amount to your total monthly of quarterly purchases (multiplied by 21%).

Our agency can quickly make the necessary arrangements for issue of Article 23 license for VAT deferment. Contact us for more information or read here for more on the advantages of the Dutch tax system.

The Dutch credit system can be broadly defined as the relationships between persons (legal or natural) who provide loans and persons who take them. Therefore the system operates with credits provided by both non-banking and banking institutions for use by legal or natural persons.

Parties involved in credit transactions

Credit transactions take place between a lender (the person providing the credit) and a debtor (the person benefitting from the credit). Usually, the credit is a monetary amount that needs to be repaid in a particular period of time, including interest, i.e. the benefit (gain) that the creditor receives for lending money to the debtor using the loan. Creditors have claim rights to the loans and can demand their return, including interest, according to the provisions of their agreements with the debtors. The debtor carries the obligation to pay back the loan and interest within a certain time period specified in the agreement.

Loan types in the Netherlands

A PL (personal loan) is a type of credit in the Dutch credit system where the amount, interest rate and term of the loan are specified in an agreement between a bank institution and a debtor. Therefore personal loans have fixed monthly payments consisting of principal and interest.

Dutch revolving credits have a limit indicating the maximum possible amount available as a loan to the debtor. The interest and principal are transferred monthly. In most cases, they are calculated as a fixed percentage with respect to the limit.

Dutch real estate owners can use property tax credits based on the appreciation of goods. Property values (WOZ values) determined by municipalities establish the amounts that may be loaned in property tax credits. Such credits are usually characterised by sharp interest rate increases.

Business loans for financing are concluded between Dutch bank institutions and legal persons. Postbank, Rabobank, ING and ABN AMRO are the most popular banks offering such loans. Business loans are usually concluded by a limited business entity such as the BV company. In such cases, the company is liable for repayment of the loan, not the director of the BV. Read more on directors' liability.

Supplier credits are the most commonly used credits for the purposes of financing businesses. Suppliers provide credits as payments for months or years. These credits have the benefit of not compromising the companies’ liquidity.

In subordinated loans creditors are subordinated in case of debtor bankruptcy, i.e. they are last in the priority order. Such subordination needs to be agreed in a contract.

Credit contracts

The Dutch credit registration agency (BKR) is a significant institution in the framework of the national credit system. It keeps important information with respect to all debtors, creditors and credits in the country through the Credit Registration Database (CKI).

BKR receives all details provided in credit contracts: credit amount, date of conclusion, planned month for full repayment, actual month of full repayment, credit type, details on repayment, the debtor’s personal information (name, birth date, residence, address, personal ID details) and the credit institution’s details.

If you would like to know more about the Dutch credit system, the available loan types and the criteria for eligibility, please, call our business consultants.

Holland has strict rules that regulate the liability of public and private limited company (NV and BV) directors, both prior to and after a declaration of bankruptcy. The liability of director(s) in BV and NV companies is limited if the company capital is paid up by the shareholders. The public notary will then legalize the statutory capital as 'paid in full'. The company will be liable for all actions, with a few exceptions which we will explore in this article. To advise you on the matter, it is of the utmost importance to have an experienced notary and incorporation agent.

Civil liability with respect to the company

When a company director makes choices that, at a future point, prove to be destructive to the business, this does not necessarily mean that he/she will carry personal liability for the outcome. A certain degree of calculated risk is inherent to operating a business. Therefore the Dutch corporate laws give business directors considerable freedom in fulfilling their job responsibilities.

Still, according to Art. 2:9, Civil Code of the Netherlands, directors should fulfil their tasks with appropriate attention and care. Failure to do so shall result in personal liability for any subsequent damages to the business. According to the Supreme Court of the Netherlands, a director can be held personally liable in case of gross misconduct. The court also gives guidance for measuring the extent of misconduct. If a fully experienced, reasonably acting director would never take such actions then the behaviour is considered as serious misconduct. Some examples include:

• Adoption of illegal or fraudulent practices;
• Taking unsubstantiated financial risks;
• Stripping of assets;
• Diversion of company funds for private use;
• Inadequate insurance of tangible assets.

In case the company has two or more directors, all members of the Directors Board share equally the liability for any damages. A director can avoid liability only if able to prove that she/he did not know of the serious misconduct or took all reasonable measures to stop the detrimental actions. Therefore, if a director disagrees with the course of action chosen by the Board, it may be in his/her best interest to step down and avoid accountability.

Civil liability with respect to creditors

Under particular circumstances, company creditors can hold separate directors liable for damages resulting from decisions made in their course of duty. Some examples include the provision of inaccurate financial data or taking impracticable initiatives on the company’s behalf that are evidently impossible to fulfil.

Post-bankruptcy liability

When bankruptcy is declared, the Civil Code provides the trustee with the option to hold the directors of the company personally responsible for the fund deficit that has occurred as a result of the bankruptcy.

According to Art. 2:248, Civil Code of the Netherlands, in case of bankruptcy the directors share equally the liability to the estate as regards the portion of the bankrupt entity’s debts that would not be covered by its asset liquidation. This applies in cases of manifestly improper management on behalf of the directors when it can be concluded that their actions represent a significant cause for the bankruptcy.

It is automatically considered that the Board of Directors has performed its duties improperly if the next circumstances are ascertained:

• The management has not submitted the company’s annual financial reports at the Dutch Commercial Chamber within the specified period following the financial year’s end;
• The company’s accounts were not kept in line with good practices and the records give a false impression of the company’s actual financial position.

In these cases, it is the directors’ responsibility to prove that the inability to submit the company reports or administrate them correctly is not among the important causes of bankruptcy. Under such circumstances, it may be very difficult for them to avert liability.

On the other hand, the trustee may hold them liable due to gross misconduct (as indicated in the point on civil liability with respect to companies). Then, however, the trustee must prove that gross misconduct on behalf of the directors led to the declaration of bankruptcy.

If the trustee has reasons to believe that individuals who are not official directors but have presumably controlled the business are mostly responsible for the misconduct or failure to fulfil the company’s duties, the Civil Code (Art. 2:248) gives the trustee the right to hold these individuals liable, as if they were actual directors. In case a company director is a legal person, the Dutch law allows for piercing of the corporative veil, so that the actual individuals behind the entity are reached. Then these individuals are held responsible for the bankruptcy. Therefore appointing holding companies or foreign legal entities as directors cannot protect the individuals behind the entities.

Fiscal liability

The directors of legal entities can be held responsible for overdue tax liabilities, provided that they have failed to report the entities’ inability to transfer the respective payments (e.g. outstanding payments for Value Added Tax, withholding tax, etc.) within the legal period after the tax liabilities have become due. If the Tax Office declares a director responsible for outstanding tax payments, the director carries the burden of proving that the failure to pay the tax liabilities resulted from reasons outside of his/her control. Fiscal liabilities often arise after bankruptcy since companies become unable to pay their own taxes and the tax authorities focus on the individuals behind the companies.