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When you start a company, there are some details to consider beforehand. Such as the market you want to operate in, the name of your company, the location of your company and, also, the amount of people that will be involved with the company. This last part can be tricky, since not everyone wishes to co-own a business. Often trust plays a large part, either in a positive or negative way. If you start a Dutch BV with multiple shareholders/directors, there are definitely some topics you should discuss together before you establish the company. The good news is, that you can generally put most regulations and agreements between the shareholders on paper, which will make it difficult for any shareholder to ignore the set rules. In this article, you can find more information about setting up a Dutch company with multiple people.

Why start a BV company in the Netherlands?

The Dutch BV is by far the most popular legal entity, next to the sole proprietorship. In the past, it was necessary to own a starting capital of 18,000 euros in order to even be able to start a BV. Since the Flex-BV was established, this amount has been lowered to one cent. Thus, the Netherlands has seen a stable growth of established BV’s during the past decades. A massive advantage of a private limited company is the fact, that the directors of the company are not personally liable for any debts incurred in the name of the company, but the BV itself. When you own a different legal entity, such as a sole proprietorship, you are personally liable for any debts your company makes. Unless it can be demonstrated that you have been negligent or have committed fraud.

You do have to take into account, that certain requirements apply to the establishment of a BV. For example, you must be in possession of a notarial deed that contains a mention of the articles of association. These must then also be checked by a notary. In addition, you must draw up annual accounts and deposit them with the Chamber of Commerce every year. What some consider a disadvantage of a Dutch BV, is the fact that that persons who are both shareholders and directors must pay a minimum salary to themselves on a monthly basis. In addition, with a BV, you are not entitled to certain tax deductions. As a result, you pay a relatively large amount of tax when you have a rather a low income. A Dutch BV becomes interesting, when you intend to make a yearly profit of 200,000 euros or more. If you stay below that sum, a sole proprietorship might be a better option for the first few years of your business.

Setting up a BV with multiple people as shareholders

If you set up a BV with more people, it is very wise to discuss the future company beforehand with your fellow shareholders. Otherwise, you risk potentially negative situations in the future, that might cause chaos within your company. For starters, you have to make mutual agreements about topics such as company control and profit distribution. This will enable every shareholder to have a clear picture in their heads about their role within the company. Often a shareholders' agreement is drawn up, in addition to the articles of association: this is a contract between the shareholders in which you can include agreements that you cannot easily put in the articles of association of a BV.

Owning shares gives shareholders the right to company profit and control

If you start a BV with multiple people, then you will all bring in capital in the beginning phase. This capital is then divided into shares, which are basically separate pieces of the capital. Owning a share gives the holder two basic rights: the right to receive profit and the right to exercise control. When the Flex-BV was introduced in 2012, it also became possible to issue shares that either only have profit rights, or only control rights. This makes it easier to divide rights more equally. For example, if one of the shareholders invests more money than others, he or she can get more control rights. But their voting right will still be the same percentage as the other shareholders, though.

Nonetheless, you should still consider the share ratio to be an expectation. It is in fact an expectation, of how much each of the shareholders will contribute to the company. If the bringing in of capital in the form of money is the most important topic between the shareholders, then it’s fairly easy to calculate each contribution by simply looking at the invested amounts. But it becomes more complicated, when there are investments without a direct reward, such as time. For example, consider a company with two shareholders. They both get 50% of the shares, but one of the shareholders goes on a sabbatical that lasts 9 months. The other shareholder is keeping the company together by himself. Should both shareholders receive 50% of the company’s profits? The same goes for situations in which external help is hired – should they also benefit from shares? If you want more flexibility in this regard, a cooperation might be a better choice, since everyone builds up their share in proportion to their contribution.

A cooperation can be more flexible in some cases

Unlike with a Dutch BV, the profit distribution with a cooperative is much more flexible. For example, you can base it on a multitude of extra factors, such as the actual contribution of all investors, instead of an expected contribution. This offers all parties involved a much clearer picture regarding the contributions. Afterwards, you can periodically assign certificates for each party’s individual contribution in money, as well as time. This is always based on an objective regulation. So the more certificates a person owns, the larger his or her voting and profit rights are.

In addition, an advantage of a cooperation is the fact that you don’t have to go to a notary, when changes are necessary such as new investors or amendments in share ratios. A cooperation maintains its own register of members and certificates. In general, a Dutch BV is surrounded by much more legislation than a cooperation. This also means that the articles of association can contain more elaborate and unique solutions, as opposed to a BV. This will save you a bit of money, as you are not obligated to go to a notary at all. Nonetheless, due to its structure, a Dutch BV is still the most often chosen legal entity for almost every type of business endeavor.

The shareholders’ agreement

Once you decide to establish a BV with multiple shareholders, the notary you pick will create the articles of association. This is often executed according to a standardized model, especially if you choose a notary that offers services for a bargain price. If you want to customize the articles of association to your own preferences, you should probably opt for a more expensive notary that allows for personal input. In general, standardized articles of association only require the notary to fill in basic information, such as the names of the shareholders and the types of shares. If you choose this basic approach, you will have to fill in the details during the shareholders’ agreement.

Once the notary is finished, you can acquire a model shareholders’ agreement via a lawyer or other specialized company. In such cases, it is possible that the model shareholders’ agreement might contain information, that directly invalidate the provisions of the articles of association. For example, the articles of association might stipulate that a new director can be appointed by the majority of votes. Simultaneously, the model shareholders’ agreement can state that a director can be appointed by each shareholder, without anyone being able to vote against it. This can make cooperation very complex and thus, we always advise beingcoherent with both the articles of association and the model shareholders’ agreement. It is therefore wise to discuss such matters beforehand, so every shareholder knows what they are getting themselves into.

What if you want to join an already existing Dutch BV?

Did you know that around 80% of self-employed people state, that they actually enjoy working together with partners? Therefore, often people choose to join an already existing BV, instead of setting up an entirely new company. In such cases, you should think about several factors, like which contracts you should draw up to protect yourself and the BV against possible risks. When you join an already existing company and become a co-shareholder, there is also quite some paperwork involved, which we will discuss below. A BV is more than just the establishment of the company, since more actions are involved. Especially when there are multiple shareholders.

A share purchase agreement

It is not mandatory to draft a share purchase agreement, but it is highly recommended nonetheless. There are situations imaginable, in which you will need this type of agreement. For example, imagine you joining an existing BV. But after a short while, all the shareholders decide to leave the BV and start a new one, to compete with you. In order to prevent such circumstances, a drawn up share purchase agreement can aid by recording different agreements regarding the continuation of the company. This also involves recording the purchase of shares in detail. A very important addition is the non-competition clause, since this will prevent shareholders from leaving and taking valuable information with them to compete against you, or other shareholders.

A current account agreement

A current account agreement enables any shareholder to settle a wide variety of transactions, between the shareholder and the BV he or she owns (partly). In essence, this allows you to transfer funds back and forth. In the case that you might be short of money, it enables you to transfer money to your personal account. By recording this in writing, you make it official and also prevent issues with the Dutch Tax Authorities in the near future. Be mindful that you need to record every transaction from the BV to your personal account, and vice versa.

A management agreement

In some cases, you might decide not to join an existing Dutch BV as a new shareholder, but you will work together with that BV. This is especially the case, if you already own a BV yourself. If you perform certain tasks for the other BV, such as managerial tasks, then you basically ‘rent out’ yourself to that BV. If this is true, then it is essential to draft a management agreement that contains all the necessary regulations in your case, since you are not on the official payroll of that BV. The agreement should contain all rights and obligations that are relevant in this scenario. It’s also advisable to include a non-competition clause and/or a non-disclosure agreement in this agreement too.

Amending the current shareholders’ agreement

Every time someone new joins a BV, it is also necessary to amend all the existing agreements. This also involves the previously mentioned shareholders’ agreement, since the amount of shareholders will change and thus, the way the shares are divided as well. This will legally put the new situation into effect, plus the agreement can prevent conflicts or discussions between shareholders and can be amended at any time. It’s always good to trust each other, but controlling every possible outcome is always the best strategy when it comes to a mutually owned business.

Set up a step-by-step plan for your shared BV with Intercompany Solutions

It has probably become clear that extra work follows, if you decide to join an existing BV. This is also the case when several people establish a BV together. You will need to draw up a number of agreements, next to that, a number of existing agreements must be adjusted. The creation of all these agreements takes up quite some time, but after handling it, you and the BV's involved are protected for nearly all possible future risks. We can imagine that this is not a daily activity for you as an entrepreneur to carry out. Intercompany Solutions has many years of experience in setting up BVs, plus we also advise foreign entrepreneurs on all the steps involved. We can provide you with all the information you need, to set up solid agreements between you and the other shareholders. We can also assist in many other ways, such as with setting up a Dutch bank account. Feel free to contact us any time for more information, or a personal quote.

Whether you want to open a new business in the Netherlands, or branch out your current business, there are many ways in which our company can assist you along the way. We have been active in the company establishment sector for many years, working alongside starting as well as already existing entrepreneurs from many different countries. Our core business revolves around setting up Dutch companies for foreigners, but we actually do a lot more than that! From the registration of your company at the Dutch Chamber of Commerce, to managing your companies tax obligations and assistance in a vast array of legal matters: Intercompany Solutions can help you out with every roadblock you might stumble upon during your entrepreneurial journey. We will inform you about some of our main services below, so you know when to call out for help if you need it.

1.     Establishment of Dutch companies or subsidiaries

When you want to set up a company abroad, there are many national rules and regulations you will have to deal with. This might prove to be very complicated for you as a foreigner, especially when you don’t speak the Dutch language and thus, cannot comprehend our laws. Therefore, we provide an all-in company registration service for new entrepreneurs entering the Dutch market. But not just that; we also help already existing business owners to set up a branch office or subsidiary in the Netherlands. For example, international companies need to choose the appropriate legal entity when opening a branch in the Netherlands, which needs a bit of time and contemplation to choose. There are also secondary necessities such as opening a bank account that you will need to take care of, and we are able to guide you through this process step by step. Our services are aimed at assisting any entrepreneur with the setting up of Dutch legal entities with or without the legal personality. If you are unsure about which type of business you would like to start, we can assist you with the advantages of each before you make your choice.

2.     Obtaining special permits or licenses you might need for your company activities

If you want to become active in a certain niche or business field that requires a special permit to conduct business in the Netherlands, then you need to become acquainted with all the regulations concerning this. If you choose to operate without such a permit or license, you risk receiving hefty fines or even criminal charges. You can read more about such permits on the website of the Dutch Chamber of Commerce and Tax Authorities, but you can also choose to outsource the entire process to obtain this permit to us. These permits can be necessary for a variety of reasons, such as public health and order, financial activities, employment and certain permissions from (local) authorities. We are able to assist you in obtaining such a permit or license. Next to that, our attorneys will be able to give you more information about different business types that operate in the country and which permit might or might not be necessary for your business endeavors. We can take care of the entire application process, which can save you a lot of time and research.

3.     Advice about mergers and acquisitions

If you don’t want to start a company all by yourself but would rather buy or take over an already existing company, then you will need to know about all the laws and regulations covering this specific legal expertise. It can be very hard for a foreign entrepreneur to gain insight into current Dutch companies, especially if there is a language barrier. You need to take into account that there are plural forms of takeovers, and which one would suit your goals and ambitions best. We are able to assist you with any type of merger or acquisition that you are interested in, as well as provide you with solid advice regarding the possible profitability of your choice. Our team has the full knowledge and skills to help you purchase shares in existing Dutch companies and provide you with more information about corporate restructuring in the Dutch market. We are also able to assist you with the necessary paperwork and the finalization of the entire process, so you know everything is done by the book and legally correct.

4.     Liquidation or dissolution of a Dutch company

In some cases, foreign entrepreneurs start a Dutch company that doesn’t do so well in the years following. In such cases, you can choose to either sell your company, or dissolve it. This is never a fun moment, of course, but if you do it right, there is a chance you will lose less than you thought. Since Intercompany Solutions is specialized in all dealings regarding the procedures of company incorporation, we are also able to help you dissolve your Dutch company. Our specialists handle company dissolution cases with the utmost professionalism. We are able to give you advice regarding the path forward in terms of closing down a business entity and drafting an annual statement, performing the tax returns and performing a closing balance. That way, you can enjoy a fresh start and put your goals and ambitions into a new project.

5.     Tax and legal advice

Once you have established a Dutch company, you will need to adhere to all national regulations, especially regarding taxes. This can prove to be a bit difficult if your company is based in a different country as well, since foreigners generally lack the appropriate knowledge to understand Dutch laws. In such cases, you can always seek our advice for several legal and tax related matters. As an entrepreneur, you need to have a sound understanding of the Dutch taxation system, and we can provide you with a fully comprehensive breakdown of it. We can assist you in many ways, such as taking care of your periodical tax return, assist with legal cases, help you with finding personnel and drafting contracts and so on. We will assist you so that your company benefits from the Dutch system, and we can help you find your bearings in the Dutch fiscal system.

Want to know more about Intercompany Solutions?

If you are interested in setting up a Dutch company, or if you would like your already existing company to run more smoothly, then feel free to contact us anytime for professional advice. We can help you with even the smallest things, such as getting the necessary paperwork for a certain undertaking, or opening up a Dutch bank account. We are also a stable partner for larger projects, such as corporate takeovers and acquiring a new company. Our professional team will make sure to assist you every step of the way.

If you would like more insight into the actual profitability of your company, then the term EBIT definitely deserves your attention. This abbreviation is often confused with EBITDA, but those two are not quite the same. We will discuss the difference between both extensively in this article. In essence, there are several ways to analyze and also calculate a (potential) company’s profitability. If you are a starting business owner, it would be wise to inform yourself about such things a bit, since this will make it easier for you to decipher whether your future company has any way of surviving amongst the rest of your competitors. In this article, we will discuss EBIT and EBITDA specifically, but you can look up more information about business profitability calculation methods here. Read on for more information about EBIT and EBITDA.

What do EBIT and EBITDA stand for?

EBIT and EBITDA are both abbreviations. EBIT stands for Earnings Before Interest and Taxes, whilst EBITDA stands for Earnings Before Interest and Taxes, Depreciation and Amortization. These methods are sometimes used interchangeably, nonetheless they are different from each other. These methods basically describe how much money you make, before you deduct all that you have to deduct. So essentially; your clean income as an entrepreneur. We will first look at EBIT, and explain its workings, so you understand how to apply these methods.

Detailed information about EBIT

As explained, EBIT is an abbreviation of Earnings Before Interest and Taxes. Earnings are the revenues, Interest is the interest and Taxes are the taxes. So you get Depreciation and Amortization from here (EBITDA). In general, EBIT measures the operational performance of any company, due to the fact that it literally looks at the amount of success you are able to achieve. This also means, that certain forms of financial income for which you don’t have to invest any energy, such as interest, are not taken into account. This is also seen in its name. Taxes come into the picture at a later stage. For now, the only importance is the revenue of your company. It is therefore best to compare the EBIT with the operational operating result. It is used to analyze the performance of a company's core activities without tax costs and the costs of the capital structure that affect profits.

With EBIT, you basically analyze the results of your normal business operations and activities. This is equal to the actual turnover, plus any costs that incurred in order to realize the turnover in the first place. In this case, you can think of costs such as your purchasing costs, the costs for personnel, rent of an office space and all applicable insurances. Any interest payments or interest receipts and taxes are therefore not taken into account. The reason for this is the fact that interest and taxes are not seen as operating results, since they are not directly related to the costs that you have to incur to achieve a certain turnover. So, after you deduct these costs, you get a certain amount which is your EBIT figure. We will explain how to calculate EBIT below.

How to calculate EBIT, and why is it important?

If you want to calculate EBIT, you can use the following formula:

EBIT = total revenue – your cost of goods and/or services sold – your operating expenses

As you can see, this concerns all costs that are seen as operational here. So, why is this figure so important for any business? EBIT is used to analyze the performance of a company's core activities, without the cost of capital structure and tax burden affecting earnings. By omitting these, you can see what your business performance is. The benefit of knowing this figure is that you can put it in your business plan, which will enable investors and other parties in the financial market to evaluate your business performance. Hence,; if you need a loan, knowing this figure can actually aid you in your chances of success. The result of the EBIT is therefore an important figure, since it gives a clear picture of the earning capacity of your company. In this way, it says something about the profitability of a company and expresses this as a percentage. The higher the result in percentage, the more profitable your company is.

What is considered a good EBIT margin?

When you calculate your EBIT margin, you are probably wondering what a good percentage is all about. In practice, the percentage is often used to be able to compare several companies from the same industry as accurately as possible. Meaning; multiple company’s margins are compared to see who is doing well, and which company could use some extra work. It's also good to know that not a single industry is the same. So, the definition of a good EBIT margin can vary per industry. As a result, these are only average guide values, which often form a basis for the profitability of the company that applies to the future. This way you could increase the EBIT margin in all kinds of ways. Ways to do this, for example, are increasing your prices and looking closely at your costs. An EBIT margin between 10 and 15 percent is generally considered a good value. An EBIT margin between 3 and 9 percent is still seen as solid, while a company with an EBIT margin below 3 percent is not seen as very profitable.

The difference between EBIT and EBITDA

Earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA) are very similar methods to calculate a business’ profitability. The main similarity is the fact that both formulas start with your net income, and later add interest and taxes. In addition to EBIT, with EBITDA, depreciation and amortization are also added. The EBITDA method is often preferred, when comparing companies with a large number of fixed assets. Amortization stands for the depreciation through the use of fixed assets, such as the equipment or machines that you need for your business. If you use a machine long enough, it becomes older and at some point will stop working correctly and loses (part of) its original value. Depreciation stands for depreciation due to certain circumstances. For example, if a better machine comes on the market than the one you use now. This will make the machine you own less valuable immediately. Companies with high fixed assets will have higher depreciation, and therefore generally a lower EBIT percentage than companies with fewer fixed assets. This is because the fixed assets are also taken into consideration with EBIT, as opposed to calculating EBITDA.

Detailed information about EBITDA

EBITDA is your profit before deduction of interest, taxes, depreciation and write-offs. Or even more elaborately: the 'result before interest, tax, depreciation of tangible assets and amortization of goodwill'. In summary, you could say: the profit that your company has achieved with its operational activities. So, this is very similar to EBIT at first glance. By calculating your EBITDA, you can get a good overview of the performance of your company, because with EBITDA you show the actual operational performance (or operational profit). It is the result of your normal business operations and activities, meaning: your turnover plus the costs incurred to achieve the turnover. Again, this is the same with EBIT. Revenue represents the amount you get due to sales of products and services. The costs are the amount needed to effect the sale of these products and services. Think of personnel costs, production costs and selling costs.

How to calculate EBITDA, and why is it important?

EBITDA is a measure of the cash flow of your company, in order to meet your interest obligations and to be able to invest. A formula for calculating EBITDA:

EBITDA = Earnings + Interest + Tax + Depreciation + Amortization

Another formula: EBITDA = Operating profit + Depreciation + Amortization

The reason this is also an important margin? Because you learn about your company’s profitability. Of course, you want to know how your company is doing financially, but banks and investors are also interested in those figures. They would like to gain insight into the cash flow of your company, to see whether investing in your company can be seen as fruitful. EBITDA takes into consideration the activities that you carry out in the context of your daily business activities, such as the production and sale of goods and services. EBITDA makes it easier to compare your company to your competitors in the market. EBITDA is therefore also seen as the true future value of a company. And exactly this is what investors look at too. For example, if you have made large investments that help your company to grow further, this will, of course be at the expense of your profit. Since you do not include such costs in EBITDA, as well as interest costs due to, for example, loans, taxes and depreciation on fixed assets, you give a fairer picture of the cash flowing through your company. It’s a realistic formula to show how your company is operating and progressing.

What is considered a good EBITDA margin?

A good EBITDA margin is mostly dependent on the industry. The average EBITDA margin for the in the first quarter of 2021 stood at 15.68%. Therefore, a good EBITDA margin is somewhat the same as a good EBIT margin. To find out if your EBITDA margin is any good, you should consider calculating the profitability of your competitors as well, and compare the figures. Most information required to be able to do this should be found in the published financial data at the website of the Dutch Chamber of Commerce.

Some extra tips to help you along the way

We have accumulated some extra tips and tricks for you to contemplate, related to EBIT(DA) and the cash flow of your company.

  1. Don't look at EBITDA as an official measuring tool, since it provides no guarantees that you will get a loan, for example.
  2. Your assets will always lose value over time. Sometimes a company invests a lot of money in the purchase of assets in order to grow quickly. Keep in mind that this means, that you will have to write off enormously later on, or you could be confronted with very high interest costs due to loans. This is why it is good to look at other factors and elements as well.
  3. Don't confuse EBITDA with EBIT. The two methods are often used interchangeably, but they do differ. EBIT measures the operational performance of a company and shows the result of normal business operations. You do not take into account financial income (interest) or taxes. EBITDA also excludes amortization and depreciation (also known as non-cash).
  4. An essential indicator remains your cash flow, which is really the blood of your company. Perhaps you want daily insight into that cash flow. As an entrepreneur, you can take all kinds of smart steps for this. Consider, for example, cash flow management. This provides clear and stable insight into a company's ability to have sufficient liquidity, both in the short and the long term. Cash flow management is important for making future strategic choices. A cash flow overview shows you in real time what your available resources are. That way, you know what you can or cannot afford. There is, of course, a lot to consider with a good cash flow overview. You can look into various tools that can assist your company with this, or contact a member of our team for advice on the subject. For a healthy company, it is important that you keep track of your cash flow.
  5. Map your transactions. This entails your expected income as well as all expenses for your business. No matter how big or small your company is currently, this strategy can help you grow your company and keep it healthy. It will provide you with insight regarding the money that comes in and goes out, which is very important if you want your business to be strong and stable. With such a tool, you can keep a good overview of your liquidity and make safer choices.

Intercompany Solutions can provide you with insight into EBIT and EBITDA

Through knowledge and control of your cash flow, you can actually learn a lot about your own company. Once you know how to calculate your EBIT(DA), you should also be able to make any adjustments whenever necessary. Increasing your EBIT means analyzing where you have slacked and what you can use to improve profitability. An essential metric for everyday business is your cash flow - the lifeblood of your business. Daily insight into that cash flow is a solid way to always be up-to-date. As an entrepreneur, you can take all kinds of smart steps for this: think of cash flow management, for example. This provides insight into a company's ability to have sufficient liquidity in the short and long term. Cash flow management gives you an instrument to make future strategic choices.

Intercompany Solutions is here to help you with that. When you link your bank accounts and accounting systems with specific tools, you always use real-time data. This way, you can always monitor your company's cash flow and easily know how profitable your company can be when making various strategic decisions. If you would like more information about EBIT and EBITDA, then feel free to contact us anytime for helpful advice, or a clear quote for one of the services we offer. Next to providing financial and legal advice, we can also assist you during the entire process of company registration in the Netherlands. We can take care of various practical tasks, as well as advise you about important business decisions.

The Netherlands is considered a highly competitive country worldwide, when it comes to doing business. With the port of Rotterdam and the airport Schiphol just 2 hours away from each other, it is considered profitable to open a logistical or drop-ship business here. The immediate access to high-quality infrastructure ensures, that you can import and export goods at a highly rapid pace. Nonetheless, the Netherlands is also part of the European Union and, thus, European and International laws also apply to doing business in this country. With international laws and regulations that determine the way you should handle your business affairs, it’s of the highest importance to become acquainted with some of these international laws. One of these regulations concerns the so-called ABC-delivery. This type of shipping involves at least three entrepreneurs from multiple countries, and is regulated due to tax purposes as well as to avoid fraud. We will outline the ABV-delivery in this article, so you know what you are up against if you consider opening a business in the Netherlands.

Chain transactions explained

If we want to explain a chain transaction, let’s start at the basics. A regular transaction is when entrepreneur or person A sells something (either goods or services) to entrepreneur or person B. This is fairly simple and straightforward, since A only needs to deliver and B needs to pay. However, in a chain transaction, there are multiple parties involved in a single transaction. This is also why the ABC-delivery is named as such: there are more entrepreneurs involved than just A and B, for there is also a C (and sometimes even more parties). In a chain transaction within the EU, goods are delivered to two or more entrepreneurs. If there are three parties involved, the chain goes from A to B, and then from B to C. Please note, that the goods are physically transported directly from A to C, though. Nonetheless, there are still transactions taking place between all three parties.

The important part is, who can deliver via European Intra-Community transport of goods: meaning for a 0% VAT rate. In general, the intermediary is the one who can do this, i.e. the 0% VAT rate can only be attributed to one supply in the chain. This is the delivery to or by the intermediary/broker. The broker is generally never the first supplier in a chain. The way the broker can be determined, is by figuring out who is actually taking care of the transport of the goods. Does an entrepreneur in the chain, who is not the first supplier, transport or ship the goods? Then this entrepreneur is the intermediary. Does a party outside the chain transport or ship the goods? In such cases, the intermediary is seen as the person who instructs that party for the Intra-Community transport or shipment.

What is the ABC-delivery exactly?

As stated in the introduction, an ABC-delivery always involves 3 separate parties: A, B and C. In general, entrepreneur A sells goods to B, which in turn sells to entrepreneur or customer C. But: the goods will be delivered directly from entrepreneur A to entrepreneur or customer C. Due to the fact that the seller isn’t actually the one who delivers the goods, some extra rules apply when it comes to VAT and tax payments. In essence, there are two separate transactions:

  1. The transaction between party A and B
  2. The transaction between party B and C

So, the main question is: who pays VAT if there is an ABC-delivery within the European Union? Entrepreneur A, B or C? We will try to explain this process, by outlining an example of an ABC delivery below in detail.

An example of an ABC-delivery

If you want to know how VAT payment is handled when performing an ABC-delivery, it is prudent to know more about the process itself. Imagine there is a company in Germany (entrepreneur A) that sells steel. You have a company in Holland (entrepreneur B), that resells steel to a company in Belgium (entrepreneur C). You as a company have instructed entrepreneur A to deliver the steel directly from Germany to entrepreneur C in Belgium. This essentially means, that the transport to Belgium is therefore also part of the delivery from A (Germany) to B (Holland). Thus, the transport consists of two separate parts: the first and the second delivery. We will explain this below.

The 1st delivery

The first delivery is considered the delivery from entrepreneur A to B. This means, that the delivery goes to another EU country. Due to the fact that the transport is actually part of the delivery, it is considered an Intra-Community delivery. The regulations regarding Intra-Community VAT are a set of rules, that apply to certain cross-border activities within the entire European Union. This means, that company A can send an invoice to company B with 0% VAT charged. After this has happened, entrepreneur B must register in Belgium as an entrepreneur subject to VAT, and declare his Intra-Community acquisition there. There is also the option of a so-called ‘simplified ABC-delivery’, in which the Dutch entrepreneur does not have to register as an entrepreneur in Belgium.

What is a simplified ABC-delivery?

With the normal ABV-delivery, entrepreneur A sells to entrepreneur B, who then in turn sells to entrepreneur C. The goods then go directly from entrepreneur A to entrepreneur C. If the goods are transported from entrepreneur A to B, then B must register in the country of C as we mentioned above, and file a declaration there. However, this is not required when we speak about a simplified ABC-delivery. If you do not want to register in the country of entrepreneur C (in our case in Belgium), you can also opt to declare your delivery to entrepreneur C in the Netherlands.

In such a case, no registration is required in the country of C. You will have to perform some extra actions, though. As discussed above, entrepreneur B will receive an invoice from entrepreneur A with 0% VAT. As entrepreneur B, you don’t include this purchase in your VAT return, since you don’t have to pay VAT. When you deliver the goods to C in Belgium, this is also considered an Intra-Community supply. This means, that you also send a 0% VAT invoice to entrepreneur C. Please note, that this invoice needs to meet some additional requirements. In essence, you hereby declare this delivery to C in your own VAT return, and you also have to include it in your ICP declaration. Entrepreneur C then calculates the VAT owed himself and declares it in his own country, being Belgium in our example. We will outline the extra conditions and requirements for the simplified ABC-delivery later in this article.

The 2nd delivery

After the first delivery has taken place, it’s time for the second delivery. In our example, there are two separate possibilities:

So: In a regular ABC-delivery, B buys from A and arranges the transport. This means B is the broker. Only the VAT rate for the goods that A supplies to B is 0%. The other deliveries, for example from B to C and possibly from C to D etc., are so-called domestic deliveries that are taxed in the EU country where the goods arrive. Does the broker provide his supplier with a VAT ID of the EU country from which the goods are shipped? Then the VAT rate of 0% applies for the 2nd delivery. We will discuss the terms and conditions for a simplified ABC-delivery below.

Conditions and requirements for a simplified ABC-delivery

It is understandable, that business owners don’t want to register as an entrepreneur in many different countries. For example; if you do business in 7 countries, this would mean you would have to register in every single one. Due to the fact that this is considered unpractical, you can also apply the simplified ABC-delivery scheme if you meet certain conditions. In general, you have fewer obligations when you apply the simplified scheme, such as not needing to register in an entrepreneur's country anymore. The conditions you have to meet are as follows:

Additional requirements for your invoice

Next to meeting the specific conditions to be able to use the simplified ABC-delivery, you also need to take into account some additional requirements regarding the invoice you send. This is particularly important for entrepreneur B. When you create an invoice whilst applying the simplified ABC-delivery method, you need to add the following extra information:

This information informs entrepreneur C about the fact, that they need to declare the VAT in their own country, due to the fact that you used the simplified ABC-delivery scheme. So, entrepreneur B send a 0% VAT invoice, and entrepreneur C declares this invoice so the country entrepreneur C is based in can cash in the VAT, if said entrepreneur C has less VAT to pay than they received. This also informs customer C that he must declare the VAT, because you use the simplified scheme.

Which delivery is the Intra-Community supply in ABC-transactions?

As of January 1, 2020 and 2021, the VAT rules for international trade have changed on a number of important points. In order to find out how an entrepreneur should determine which delivery is the Intra-Community delivery in ABC-transactions, we need to look at the current legislation. From 1 January 2020, the main rule is that the Intra-Community supply is the supply from A to B. In our example above, that would be the German entrepreneur A. But: if entrepreneur B provides entrepreneur A with a VAT identification number of the Member State of departure, the supply from B to C will also be regarded as the Intra-Community supply. The new arrangement only applies if B arranges the transport.

The simplification that will apply from 1 January 2020 can also be applied in the case of longer chains. Suppose, for example, that there is an ABCDE delivery and D arranges the transport. In that case, if D provides C with a VAT number from a country other than the country of departure of the goods, the supply from C to D qualifies as an Intra-Community supply. If said entrepreneur provides a VAT number for the country of departure, then the supply from D to E is the Intra-Community supply, and so on. The simplification has no consequences for the already existing simplified SPC scheme; this will continue to exist. The regulation itself can be easily applied in practice and provides more legal certainty. After all, A can rely on the VAT identification number provided to him. In our opinion, however, there can still be a discussion in certain cases about who has transported the goods, for example when B agrees with A to collect the goods, but an employee of C sends them. Who transports the goods essentially influences whether the regulation applies, and in which link the Intra-Community supply takes place.

Do you need more information about chain transactions within the European Union?

If you want to start a Dutch company and trade goods within the EU, you will have to become acquainted with the many different laws and regulations covering this subject. Otherwise, you risk hefty fines or even incarceration, due to the fact that malpractice can be seen as tax evasion and/or fraud. When you are involved in ABC-transactions, it is important to look at the consequences of the arrangement on the basis of your current conduct. If you have VAT numbers from different countries, you can see whether it is more favorable to use one or the other VAT number for ABC-transactions. This way, you can set up your own supply chain in the best profitable way for your company. Do you need help with some of the regulations? Or do you seek advice about the way you should set up your companies? Of course, we are happy to help you with this. Please contact one of our VAT advisers for more information regarding the subject, or a clear quote.

https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/btw/zakendoen_met_het_buitenland/goederen_en_diensten_naar_andere_eu_landen/export_van_specifieke_goederen_en_in_bijzondere_situaties/abc_levering/abc_levering_binnen_de_eu

https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/btw/zakendoen_met_het_buitenland/goederen_en_diensten_naar_andere_eu_landen/export_van_specifieke_goederen_en_in_bijzondere_situaties/abc_levering/vereenvoudigde_abc_levering/vereenvoudigde_abc_levering

https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/btw/zakendoen_met_het_buitenland/goederen_en_diensten_naar_andere_eu_landen/export_van_specifieke_goederen_en_in_bijzondere_situaties/abc_levering/vereenvoudigde_abc_levering/voorwaarden_bij_vereenvoudigde_abc_levering

Tax Office ABC transaction

We often provide starting business owners with specific advice regarding the legal entity they can choose, once they decide to establish a Dutch business. We generally advise opting for a private limited company: in the Netherlands, this is known as a Dutch BV. Owning a BV has multiple benefits, one of the most important being the lack of personal liability when you make debts with your company. It becomes even more interesting, though, when you opt for a holding structure. When you own a holding company with one or multiple underlying operating companies, you enjoy some extra benefits, such as being able to claim certain tax advantages. Next to that, you can effectively spread risks since the actual work is done in the operating company, which holds all the risks.

The operating company is otherwise as 'empty' as possible, meaning that almost all capital is brought into the holding company. Ultimately, you will want to bring the profit that the operating company makes into the holding company as quickly as possible. Also, it is considered beneficial if you are able to receive this profit personally in a short amount of time, which is what this article is all about. In essence, the actual company is driven in the operating company and this is also where the turnover is realized. Once all the costs are deducted, the remaining profit can then be distributed to the holding company. We will outline this process in this article, as well as inform you about the way the distribution of profits works and what taxes are levied. We will also explain the rules when paying dividends, and how much can be paid out. We will also inform you about the legal consequences, when dividends are paid against current Dutch legislation.

Practical explanation of the dividend payment

A dividend is the payment of a portion of profits to a shareholding company, and then to shareholders individually. The main purpose of paying dividends is to attract investors and new shareholders for your business. Dividends can therefore be seen as a reward, for everyone who holds shares in your company for a longer period of time. Publicly traded companies may decide to distribute a portion of the profits to shareholders., but keep in mind that companies are never obliged to pay dividends. Some companies actually never pay dividends, but rather choose to reinvest their profits. This is due to the fact, that you can also earn money as a shareholder by taking advantage of a rising share price. In the sections below, we will explain how dividend is supposed to be paid, and in which ways this can be realized.

Dividend payment between multiple Dutch BV’s in general

If you can pay out dividends within your current company structure, we strongly advise exploring this possibility. Why? Because dividend payments between Dutch BV's are exempt from dividend tax. This is due to the fact, that the participation exemption applies from holding a minimum of 5% of the shares. By assessing your liquidity, solvency and equity, you make it clear how much dividend you can pay to the shareholding company. In a general sense, it is advisable to distribute as many surplus funds as possible to the shareholding company, and to keep the active company ‘empty’ as we explained above. Needless to say, sufficient liquidity must remain available to achieve your business objectives. However, this can also be realized with  a loan, provided by the shareholding company. In addition, it is important that, if you are dealing with a credit agreement, you check whether there are specific requirements for certain ratios. A dividend payment usually affects this negatively.

Management fee versus salary

Once you set up a holding BV and place it between you and your operating company, it is often the case that these two BV's conclude a contract with each other. This is also known as a management agreement. This agreement stipulates, that you are not employed by the operating company, but that the holding company rents you out to the operating company. You are therefore indirectly employed by the operating company. This means, that you can either pay yourself salary, or the operating pays a fee to the holding company. The difference between these two options is, that income tax is much higher than the corporate tax rate you will pay over the fee. The highest income tax is currently 49.5%, which you will probably pay if you generate enough profit with your company. Adversely, the current corporate tax rate in the Netherlands is either 19% (for profits up to 200,000 euro) and 25.8% for all profits exceeding this amount.

So if you pay a fee to the holding company via your operating company, it is taxed at the lower corporate tax rate. Do note, that you also have to pay VAT on the management fee (VAT in Dutch is named BTW). The only case in which this does not apply, is when there is a fiscal unity for the purposes of turnover tax. Please note that a fiscal unity is not the same for turnover tax as for corporate income tax. To be able to form a fiscal unity for VAT purposes, more than 50% of the shares of each company must be in the same hands. In addition, some extra conditions apply as well:

So, once all the costs are deducted from the amount of money you have made with your company, you have an amount left that is considered to be profit. Regardless of whether the profit is distributed, corporation tax must be paid on this amount. In order to use the profit, all costs must first be deducted from the turnover. Please note that the word ‘cost’ is a broad concept. Company costs include, among other things, the remuneration on a loan that the Dutch BV takes out (interest), salary to employees, the rent for an office building, all amenities, but also, for example, the management fee that the operating company pays to the holding company. You need to deduct all these numbers to be able to truly speak about profit.

The fiscal unity for corporate income tax

For corporate income tax in the Netherlands, it is also possible to apply for a so-called fiscal unity. The holding company and operating company are then seen as one taxpayer for corporate income tax purposes. This is often used if there are several operating companies under the holding company. This is beneficial in many ways, for example, the profits of one operating company can then be set off against the (start-up) losses of another operating company. This can provide benefits for the final profit distribution. The settlement reduces the taxed profit, and, therefore, the tax to be paid. The conditions for the fiscal unity for corporate income tax purposes are different from the aforementioned conditions for turnover tax. If you want your company to be eligible to create a fiscal unity for corporate income tax, the holding company must do the following:

There is also one condition for the operating company, namely that it must be a BV or NV, or a foreign legal form that is comparable to these two legal entities. In general, these are considered private and public limited liability companies.  In addition, the holding and operating companies must:

You need to be absolutely sure that you actually meet all these requirements, otherwise you risk fines from the Dutch Tax Authorities. If you are unsure about certain conditions, please feel free to contact Intercompany Solutions for professional advice on the subject.

Dividend payment from the operating company to the holding company

The dividend payment from the operating company logically ends up in the holding company. The distributed dividend is exempt from dividend tax in connection with the participation exemption, as we already explained above. Oftentimes, the turnover of a holding company consists only of the management fee obtained from the operating company. Sometimes the holding company also owns a business premises or certain intellectual property rights, that are leased to the operating company. The interest or license fee that the holding company receives from the operating company is also taken into account when determining the profit. After deduction of the costs, including the salary of the owner, the taxable profit remains. Before you can proceed to profit distribution to the holding company, you must first pay corporation tax. No dividend tax has to be paid on the distributed profit in connection with the participation exemption. The participation exemption already applies if the holding company holds 5% shares or more in the operating company. The participation exemption basically ensures, that the profit is not taxed twice. The operating company therefore pays corporation tax on the gains, and the profit that remains and is distributed to the holding company is not taxed.

Dividend payment from the holding company to shareholders

Once the holding company has received the profits from the underlying operating company, this profit is then paid out as a dividend to the shareholder(s) of the holding company. At that moment, the dividend tax comes into play. After all, the dividend tax had not yet been paid when profits were distributed from the operating company to the holding company. The holding company must withhold 15% dividend tax on the dividend that is distributed. The shareholder then indicates, in his annual declaration, that a dividend has been received. If you as a shareholder own at least 5% of the shares, the dividend payment will be taxed at a rate of 26.9%. Please note, that the formerly paid 15% will be subtracted from the amount of 26.9% that the shareholder needs to pay, as the 15% dividend tax has already been deducted. So in essence, you pay the remainder of 11.9% privately. If your holding company has a claim on yourself for more than €500,000, you may have to deal with the consequences of the ‘Excessive Borrowing Bill’ in the future. In this case, the timely payment of dividends is a suitable opportunity to (partly) repay the claim.

The main rule is that the general meeting of shareholders is empowered to decide on the profits and on making distributions to the shareholders. It is important that the shareholders can only do so for the part of the equity, that is greater than the reserves that must be held according to the law, and also the articles of association of the company. Once the shareholders have decided that dividends must be paid, the board must approve this. Without approval, no payment can take place. The board only refuses approval if it knows that the distribution will ensure that the company can no longer pay its debts. The board cannot therefore refuse the benefit without good reason.

Regulations concerning dividend payments

The steps we mentioned above are basically the practical steps you need to take, when you consider paying yourself and other shareholders dividend. But there are also Dutch laws and regulations that apply to profit distributions, mainly to ensure this is done correctly and the creditors of the company are protected. We will outline these regulations below, as well as all other things you should inform yourself about to stay within the confines of the law.

Who decides whether dividend can be paid out?

The rules for the payment of dividends are laid down in Article 2:216 of the Dutch Civil Code (BW). This article contains the main rule, that the general meeting of shareholders is competent to decide on the allocation of profits and on the determination of distributions. We already discussed this briefly above. This power can be limited though, for example in the articles of association, or granted to another body, but this is not very common in practice. The profit can be reserved, for example for future investments, or distributed to the shareholders. When you choose to distribute the profit to the shareholders, then the general meeting of shareholders can determine this distribution. The rules apply not only to the determination and distribution of profits, but also to all other distributions from the capital of the operating company.

The use of the balance test

When deciding on whether dividend can be paid out or not, the general meeting of shareholders needs to take into account whether the equity of the Dutch BV exceeds the legal or statutory reserves. This is due to the fact, that dividend should only be paid out when there is actually enough money to do so. In general, any profit distribution needs to be greater than the legal or statutory reserves. It is also the responsibility of the general meeting of shareholders, to check whether this is actually the case and dividend can be paid out. This action is also known as the ‘(limited) balance test’. This test needs to be done every time the general meeting of shareholders decides that profit should be distributed among the shareholders, so both in the case of an interim distribution and a periodical decision. In practice, this test doesn’t have that much significance, though, since most Dutch BV’s have no legal nor statutory reserves. If there even are any reserves at all, these can be turned into capital or cancelled via an amendment in the articles of association. If there are no legal or statutory reserves, the BV can distribute its entire capital by principle, so not just the profit, but also capital paid up on shares and any reserves. Please note that this can only happen, if this decision is justified and approved by the board.

The use of the distribution/liquidity test

Once the general meeting of shareholders has decided that dividends should be paid out, this will need to be approved by the board of directors of the company beforehand. Without their decision to approve, the decision to pay out by the general meeting shall have no effect. In practice, the board of directors generally approves such decisions. The board may only refuse this approval if it knows, or should reasonably be able to foresee, that the BV will no longer be able to meet its payment obligations as a result of the distribution in the foreseeable future. This is the only real basis for refusal of dividend payments. So, if the worst-case scenario is not probable to happen, the board must provide the shareholders with an approval.

The main goal of this mandatory approval is the protection of the company. The board of directors checks whether the distribution is justified and does not endanger the continuity of the BV. This course of action is also known as the distribution or liquidity test. The board is actually very free in determining how it will implement the distribution test, as it is up to the board to decide this. Nonetheless, in practice, often certain standard guidelines are used to make the process more transparent and foreseeable. In order to perform the test, the time of the benefit is used as the reference date. As a general rule, it is assumed that the board, in its assessment, must look about a year ahead from that reference date to make an accurate prognosis regarding the company’s assets and liabilities. However, this one-year period is not considered to be a hard timeframe. For example, a large claim can become due and payable in a year and a half, which will instantly change the entire situation. When this amount will need to be paid, this will lead to a situation in which the company will not have sufficient resources to pay shareholders dividend. This is why the board of directors needs to take such information into account in the liquidity test.

What to do in the case of unjustified dividend payment and any payment problems this may cause?

The two tests we mentioned above exist for a solid reason; namely, keeping your company out of financial trouble. It can happen - and it happens regularly in practice - that a dividend payment is made to the shareholders, but that this distribution has been wrongly approved by the board. If you pay dividends without having the actual money to do so, you can create very risky situations for yourself and potentially even bankruptcy. If it looks after a dividend payment that the BV can no longer meet its payment obligations, then you will have to figure out where exactly it went wrong, and how a decision to pay dividend was made, even if it is now clear that this was not possible to do so. In many cases, either the balance test wasn’t carried out by the general meeting of shareholders, or the liquidity test was not carried out by the board of directors. There is also the possibility that one of the tests was done improperly, or someone falsified the information in the test because they were only following their personal interest. In all such cases, it is of the utmost importance to figure out whether they should have foreseen that this inability to pay would be the result of the benefit that would be paid out. Because when this is the actual case, depending on the specific circumstances of course, they may be personally liable for the shortfall caused by the payment. This situation can have consequences for both the directors and the shareholders. After this, the liability of directors and the liability of shareholders will be examined in turn. It is important that (in principle) there is only liability, if the BV actually gets into financial trouble after the unjustified dividend payment.

It is not always easy for shareholders or directors to determine whether they have to approve the decision to pay out. But on the other hand, they do have a strong responsibility. To be able to avoid liability or discussion about this, our advice is therefore to elaborate any administrative decision to approve in writing. And preferably also to describe well, which principles and figures the board has assumed. Especially if there is any doubt at the time of the decision. If nothing has been put on paper, the directors also have nothing to prove afterwards that they have fulfilled their obligation. But when you take notes and clarify the decision on paper, this might just aid you in escaping liability, when the written statement proves that you could not have foreseen any negative outcomes. Below, we will explain the liability of both shareholders and directors in a bit more detail.

Directors’ liability in the case of an unjustified payment of dividend

The directors who knew, or could reasonably have foreseen at the time of the distribution, that the company would no longer be able to pay its debts, are all privately liable for the shortfall that has arisen. The company itself can actually invoke this liability, due to the fact thatit concerns an internal directors' liability. Not only directors can be held liable: others who have actually determined or co-determined the company's policy can also be held liable in private. The condition is that they have behaved as if they were a director, such as a partner you married under prenuptial agreement as a director, or a titular director. If you can prove, however, that it was not your fault, you will not be held liable, as we already explained above. If your fellow directors make the actual payment while you did not agree with it, you will have to take action. Of course, this needs to be considered on a case-by-case basis. It is highly recommended to engage a lawyer when in doubt. It is important, that you explain to your fellow directors why you feel that no approval can be given and that you demonstrably voted against the decision. This should be recorded in the minutes. The law also stipulates that you also do what you can do in your capacity as a director, in order to prevent the negative consequences of the benefit.

Shareholders’ liability in the case of an unjustified payment of dividend

In principle, shareholders are not liable for any private liability. They only run the risk for the amount for which they bought their shares: after all, the shares can no longer be worth anything. This happens, for example, in the case of bankruptcy. Nevertheless, an exception has been made in the case of the unjustified payment of dividends. The shareholder who received a dividend payment while he or she knew, or should reasonably have foreseen, that payment problems would arise, is also privately liable. This liability applies up to a maximum of the amount he has received in dividends. For example, it might happen that one director has to repay dividends, and the other director does not have to repay dividends. If the directors have already made up the shortfall, the shareholders must pay their received dividends directly to the directors. You should also ask questions, such as whether the shareholders were also aware at the time of their decision that the distribution test was not met. Or in the case that shareholders received a dividend payment, without the board of directors having taken the decision to approve.

Intercompany Solutions can assist you in determining whether dividend payment is beneficial in your case

A holding structure can be very beneficial in connection with the current Dutch tax benefits surrounding private limited companies. Every profit distribution of a Dutch BV is bound by the law and all regulations covering this subject. In the case of non-compliance to these rules, which get the company into financial difficulties afterwards, the directors and possibly also shareholders can he held accountable and liable. To be able to avoid issues about this as much as possible, it is therefore important to act carefully. If you would like to explore whether your company can safely pay out dividends to its shareholders, it is advisable to perform both the balance and the liquidity test. When in doubt, our team of legal experts can assist you in making the most prudent decision. Please feel free to contact us anytime for more detailed information, or a clear quote for our services. We can also aid you in establishing a Dutch BV company, or opening a subsidiary of your already existing company in the Netherlands.

Sources:

https://joanknecht.nl/dividend-uitkeren-naar-bv-of-prive/
https://www.wetrecht.nl/dividend-bv-uitkeren-aan-aandeelhouders/
https://www.schenkeveldadvocaten.nl/bv-en-dividend-uitkeren-dit-zijn-de-regels/

If you are thinking about setting up a new Dutch business or corporation, then it is wise to consider the way in which you would like to organize your company. Every business has a few main components, such as a director and shareholders. But corporate structuring is about more than just the fulfillment of certain roles, since it also defines the way in which you execute your daily business activities. Intercompany Solutions can assist you with your business structure, helping you along the way to create a stable company with solid foundations. A well-thought-out company structure also makes it easier to adhere to applicable Dutch (financial) laws and regulations, aiding you to establish an effective corporate compliance program.

Corporate structuring: the basics

In essence, the corporate structure of any company refers to the way in which the teams and people within it are organized. This can often be seen clearly in a corporate organizational chart, which describes the different roles everyone carries out. There are always several factors that might determine whether a business will fail or succeed, but corporate structuring actually plays quite a large role in this context. A company that is well-structured is often better able to achieve goals and ambitions, thus making it possible to maximize potential profits.

Be mindful about the fact, that every corporate structure varies slightly per company. This is due to the fact that it depends on several unique factors such as the industry the company operates in, and the type of the business. A lot of larger corporations therefore create corporate organizational charts. These charts outline the structure of the company in detail, which ensures that all roles and responsibilities are clearly defined. We will outline on this page what the essential basics and key elements of company structuring are, and why a stable organizational structure is so important for your company. Intercompany Solutions can assist you during every step of the way, making it possible for you to organize your company well and provide you with a firm starting point.

Why start a business in the Netherlands?

The Netherlands offers many interesting opportunities for foreign investors and potential business owners. For example, the small yet influential country has been a gateway to the entirety of Europe for multiple centuries. Due to this, many well-known international corporations have already established branch or representative offices in the Netherlands. Also, many new entrepreneurs seek to start a Dutch business for this very reason. We offer advice to foreign based entrepreneurs and companies who wish to start a business here, making it easier for you to become acquainted with the Dutch landscape. Each business is unique, but all foreign businesses have in common that they need to learn about Dutch laws, regulations and tax obligations in order to succeed. Intercompany Solutions helps you with finding best practice solutions for your corporate structure, and we also help you to set up, execute and maintain your company structure.

What is corporate structuring?

Corporate structuring is all about mapping the different roles and components within a company. A corporate structure basically defines the way any type of business is run, making it possible to assign roles to competent people who know what they are doing. If the corporate organizational structure is mapped out well, then it defines the different roles and teams within a company, and the way these roles intermesh and collaborate. One of the main reasons corporate structuring is necessary, is due to corporate governance. In the past, many businesses were both owned and run by families throughout the centuries. In these times, this is no longer the case, which means you will need to assign roles to people that aren’t related to you whatsoever. In general, there is a separation between the owner of the company and the management. Many companies have also implemented a two-tier company structure, to be able to protect the interests of stock- or/and stakeholders.

The importance of a solid corporate structure

Once, company owners and managers had the same role, but that was mostly due to companies being family businesses. Since that chain broke, corporations have been actively employing people from every imaginable background and sector. Even though we would all like to manage our own company, that is really only possible when one owns a sole proprietorship. But once your business takes off the ground, you will deal with an increased level of demand and supply and, thus, you will have to trust other people to run (parts of) your business. Whilst that might seem scary at first thought, trusting other people might work out well in the long run. Therefore, a solid corporate organizational structure is of the essence to establish governance of an honest and trustworthy nature, because it allows both managers and owners to work together.

Next to that, when you document all the positions in the corporate structure of your company, it aids you to make sure all operations of your company run smoothly. When you have insight into all the separate roles within your company, then you are much better positioned to achieve certain company goals, grow your company in a stable way, and you will also be able to attract investors more easily. There are 3 key reasons why a corporate organizational structure will propel your company forward, which we will outline below.

1.      Better communication within your company

One of the main components of every successful corporation is to be able to communicate well. Clear communication will lead to clear and agreed upon decisions, whereas miscommunication can cause a whole plethora of internal and external problems. If you map out a good organizational structure, then everyone in your business will know with whom they need to share information on a structural basis.

2.      Easier to reach company goals

When a team works well together, goals are much easier accomplished. A smart corporate structure enables your employees and managers to achieve goals in an efficient manner, assuring everyone’s best talents are coming to the forefront. When everyone knows exactly what their tasks and responsibilities are, people can work together to ensure projects and goals are finished successfully. This, in turn, allows your company to continually grow.

3.      Clarity regarding the reporting relationships in your company

Every solid corporate organizational structure needs to outline the way in which different employees and teams work together on a daily basis. This ensures that everyone knows what their exact responsibility within the company is, and whom they can go to if they experience setbacks or issues. This also eliminates any confusion about responsibility and accountability.

Types of corporate structures explained

Corporate structures can roughly be divided into four main types, which are prevalent worldwide. The best structure for you to choose highly depends on your ambitions, the region you would like to operate in and the way you want to do business in general.

1.      Functional Structure

The functional structure is generally the most common type of organizational structure within companies and corporations. In essence, the nature of the work that needs to be done dictates the positions to be filled within the company. New employees are sought out by looking for related expertise and skills to fill a certain position. This leads to departments that work well together, since everyone has a clear view of their jobs and responsibilities. A functional corporate structure enables fast-paced movement of information, as well as efficient decision-making processes. When your company is based in one location and has different departments, then it generally falls under a functional corporate structure.

2.      Divisional Structure

A divisional structure is often tied to a certain region, in which there is a possibility to meet specific demands of clients or the market you operate in. For example, it might be cheaper and more efficient to produce certain products in a specific region, because there is an ample amount of natural resources within that region. A lot of larger corporations have divided their bases of operation throughout the world, in order to be able to cater to their clients needs in the most effective ways. Companies that set up branch offices can be categorized as businesses with a divisional structure.

3.      Matrix Structure

When a company’s structure can be categorized as a matrix structure, it basically means the corporation has characteristics of both a functional and divisional structure. These structures often overlap, hence there is no clear distinction between the two structures. In general, larger corporations choose a matrix structure where the exact categorization depends on factors such as geography, efficiency and quality assurance. This structure offers a lot of autonomy when it comes to the execution of daily business activities, but it can also be costly to maintain. Nonetheless, larger corporations can benefit from a matrix structure due to its flexibility and high adaptability.

4.      Hybrid Structure

A hybrid structure is also a mix of divisional and functional structures. The main difference with a matrix structure is the fact, that the departments within the company can be addressed as both functional and divisional. I.e. there is more autonomy regarding the structure you can choose for each department. The way these choices are made depends largely on the specific needs and requirements of each department and branch office(s). Many large corporations choose this type of structure, due to its flexibility and endless opportunities. If you want to know more about the best type of corporate structure for your company, you can always contact Intercompany Solutions for in-depth information related to your personal goals and ambitions.

A typical corporate structure consists of 3 main components

Even though there are several types of corporate structures, in general, every corporate structure should consist of three components. This is the actual core of the structure, around which different decisions can be made regarding the specific type of the corporate structure you want to implement. There is no ‘one-size-fits-all’ solution or structure, as this greatly depends on ends on information regarding your business. The three components that are common in almost all businesses and large corporations, are a board of directors, corporate officers and shareholders.

1.      A board of directors

The director or board of directors is the entity that is tasked with governing the company. If you aim to make profits with your company, the board of directors represents the shareholders of your company. In the case of a non-profit company, the board is responsible for acting in the best interests of its stakeholders. These can be communities, donors, and the people or institutions that are served by the company. One of the main tasks of any board is to hire the people that will manage the company, such as corporate officers. The performance of such leadership roles is also reviewed by the board, as well as proper compensation. When a corporate officer is not carrying out his or her responsibilities well, the board can vote to install a replacement.

Some other duties of a board of directors include (but are not limited to):

There are typically three types of directors within a board:

The board chair is the leader of the entire board of directors. In some organizations and larger corporations, the board chair is also referred to as the president of the board. Inside directors are people who are actively involved in the company, such as managers and shareholders. Outside directors are people or investors from outside the company, who are in the board of directors. In larger corporations, the board is outlined in an organizational chart.

2.      Corporate officers

Next to the board of directors, corporate officers also play a large role in any corporate structure. They are chosen by the board of directors and often referred to as the management team of a company. The corporate officers are, amongst other things, responsible for the company’s daily business activities. The most well-known is the role of CEO, but nowadays most large companies have several corporate officers, each role tailored to a specific department or expertise.

In general, the following roles can be distinguished:

CEO: The CEO is the ‘main manager’ of every organization, and is therefore responsible for all the operations of a company. The CEO essentially makes sure the business runs smoothly and is responsible for the execution of board decisions. In some cases, the CEU is also the board chair/presidents.

CFO: The CFO is mainly responsible for all financial affairs within the company. This includes tasks such as the analysis of financial data, monitoring all company costs, preparing various budgets for different departments and projects and, of course, also all external and internal financial reporting.

COO: The role of the COO is somewhat comparable to that of the CEO, but the COO handles more practical and hands-on business affairs in general. This encompasses departments such as sales, marketing, human resources and production, if you intend to produce anything. Most daily business operations fall under the scope of the COO.

CTO: Since technology became a big part of our existence, many larger corporations hire a chief technology officer. This executive is mainly in charge of a company's technological needs, and often is head of research and development. A CTO can report to a CIO, but in some cases also directly to the CEO.

CIO: Everything that revolves around information and computer technologies falls under the scope of the CIO. The chief information officer makes analyses about possible technologies and whether implementing these would benefit the company. The CIO also implements new software and hardware to implement business processes.

3.      Shareholders

If you intend to own a public limited liability company, then your corporate structure will also include shareholders. Shareholders are those who own a part of your company in shares, but these are not necessarily always people. Shares can also be owned by companies and institutions. The amount of shareholders a company can have, is determined by the company entity structure. Some companies can have a maximum number of shareholders, whilst other companies can have an unlimited amount of shareholders. Shareholders are generally not personally liable for the company.

When you have shareholders in your company, then they have the ability to vote on issues such as:

A corporate organizational chart

If you want to map out all the roles in your company, it might be a good idea to create a corporate organizational chart, which is often also named a corporate org chart. This is a chart that shows very clearly how your company is structured, including all different components. It should also show in which way these components are related to each other and how they complement each other. When you create a corporate org chart, you essentially ensure that everyone within the company is on the same page regarding your corporate structure. Of course, it can be challenging to create a corporate org chart from scratch when you start a Dutch company. In such cases, Intercompany Solutions can assist you, as well as with many other tasks related to corporate structuring.

Intercompany Solutions can help you define your corporate organizational structure

The multidisciplinary team of Intercompany Solutions has many years of extensive experience in setting up and structuring businesses in the Netherlands. We offer our services to companies from every sector. It doesn’t matter whether you are a start-up or already established corporation; our experts can assist you with all issues concerning taxation, the Dutch law, payroll services, human resources and accounting. Because our primary service consists of the establishment of companies in the Netherlands, we know exactly which corporate structure would fit your company best.

When your company has a solid corporate structure, your business is much better positioned to achieve certain goals and grow naturally. The most important part is to choose a corporate structure that fits your goals and ambitions, and works for your company. Intercompany Solutions can help you with managing the roles and responsibilities within your company, which will also help you with your recruiting efforts. Intercompany Solutions can help you simplify your corporate structure as well, making sure everyone within your company has access to important information and documents.

One of the most difficult things to consider when you just started a business, is setting the rate you want to charge your (future) clients. Many starting entrepreneurs are unsure what to do, since there is a very fine line between undercharging and overcharging.  You don't want to pull yourself out of the market with too high a rate, but a rate that’s too low isn't a smart option either. After all, you must be able to pay all your bills and finance your life from your business income. A good hourly rate depends on several factors, such as the circumstances of the project, the assignment itself, what your client’s wishes are and the sector you are active in. Whilst some markets and sectors have fairly standardized rates, other sectors are more prone to large fluctuations, for example. In this article, we will outline all the necessary information you need, to be able to set a perfect rate for your business activities.

3 basic principles to start with

There are some basic factors that you should take into account, when you start thinking about a good rate. The most important one is obviously the income you require, as a person. You must be able to pay all your monthly expenses, plus save enough to be able to buy all the necessities you need. After the deduction of your operating costs, your hourly rate must be sufficient to keep at least this amount. Another essential factor are the rates your competitors charge, as this will give you a fairly good idea about what is realistically possible. We will discuss this a bit later in the article. The third important factor is your distinctiveness and whether you have many competitors. In general, you can ask for a higher rate when you are unique in some way. We will also discuss this more elaborately in this article.

First determine your business costs

If you want to determine how much money you require, you need to start by providing insight into all the business costs you will have per month. For example, all fixed and variable costs that you incur to start your business and keep it running fall under this category. List these costs for yourself, so you have a clear overview of what is necessary. You should divide the business costs into two separate categories: fixed costs and variable costs.

Fixed costs

Fixed costs are roughly the same every month, meaning these costs will not suddenly change anytime soon. Fixed costs are also not related to the number of sales you make. Some examples of fixed business costs are:

Variable costs

If an expense isn’t a fixed cost, it logically falls under the category of variable costs. Variable costs are generally associated with the number of products or services you sell. The more you sell, the higher these variable costs are. Examples of variable costs are:

Once you have listed all these costs, you have more insight into the amount of money you will need to cover all these costs. You should then also make an overview of all your private costs.

Then determine your private costs

In addition to your business costs, you also have to deal with costs that you have to deal with privately as an entrepreneur. By listing all these costs, you know what amount you need per month to cover all private costs. Examples of private costs are:

If you have finished this list, you should now compare the two lists, in order to have clear insight into the amount of cash you will need on a monthly and yearly basis.

The required turnover to pay all necessary costs

Once you start earning money with your business, then the revenue you need should be enough to cover the business costs from step 1, as well as the private costs from step 2. The sum of the costs from steps 1 and 2 forms the total costs that you have to pay on a yearly basis. Your turnover will therefore have to be at least equal to this amount, but preferably slightly higher. Keep in mind that during life, strange things can happen, like machines breaking down before the ending of their lifecycle. For example, your notebook might malfunction suddenly. If you own an online business, this can seriously hinder you in carrying out your daily business activities. We therefore strongly recommend you to always have a small buffer, to be able to deal with such unpleasant situations swiftly.

Other factors that play a role in determining your rates

Being able to pay all your bills every month is basically the bottom line of determining your rates. But as a (future) business owner, you obviously hope to do better than simply making ends meet! Therefore, it is advisable to do some research into the philosophy of creating a rate, next to which topics you should take into consideration. There are many guidelines that can help you, which we will explain in detail below.

Are you active as a specialist?

We already stated before, that distinctiveness and uniqueness will enable you to ask for a higher rate, since you will have less or even no competition in such cases. This gives you a prime position in your market, and companies will happily pay for your expertise. The assignment itself and your experience and skill in within your niche play an important role in determining your hourly rate. If your work is specialized and few can do what you do, it is logical that you ask for a higher hourly rate. If you are also educated within your line of business, for example a university diploma and/or professional education, then this will also enable you to ask more per hour. The more you know and the more special you are, the easier it will be to ask a substantial hourly rate.

What is the duration and scope of a certain project?

The details regarding the project you aspire to take on, also have a rather large effect on the rate you can charge your client. In general, if the project is long or very big, it is usually correct to charge a slightly lower rate than usual. This is due to the fact, that you have more certainty of gaining income structurally. For smaller and/or shorter projects, however, you can charge a little more. Relatively speaking, a small or one-off assignment costs you more time and energy than a long or large project. Moreover, with a longer-term assignment, you have to spend less time on acquisition to find enough new assignments. In time, you will learn to balance this out for your company.

Look up average hourly rates within your line of business

As we already discussed at the beginning of this article, it is always a good idea to look online at what your competition is charging. You can look this up on various sites that hold such data, but you can also ask around in your direct environment. Maybe you know some people who do the same work as you? It is also possible to contact consulting firms similar to your line of business, in order to know what average rate you are dealing with. Of course, you determine your hourly rate yourself, but it is wise to take into account the current rates in your market.  Never go for a rate that is too low, since this will make you look very inexperienced. But also don’t miss out on good projects, by determining an hourly rate that is too high. Depending on your industry, there are often common rates. Your clients usually know these figures as well. So it is considered smart, not to deviate too much from these.

Find out more about your client

In many cases, it is worthwhile to first find out what kind of client you are dealing with and what the company typically spends on activities such as yours. Is it a small client, or a company that has just been established? Then you need to take into account that they are probably not very successful yet. In such cases, you should not expect to receive a very high rate, as they also need to build their company. It is a good idea to try to work with a lot of smaller firms when you are a start-up yourself, as this will give you both the experience you need. Once you have established a small client database, you can apply for projects with bigger and more successful companies. These will accept a higher rate more easily, as they have the appropriate budget to spend on your rate. But to actually be able to work for such companies, you require the experience to prove you know what you are doing.

Is there a lot of competition for your project?

In some cases, you will get a project directly from a client, who chooses only you. This often happens when you have successfully worked for this client in the past, or they heard about you via positive word-of-mouth. But generally you should consider the fact, that there will be competition. Sometimes your client or clients indicate, that they still have potential candidates in mind. Whether that is true is, of course, difficult to verify. Nevertheless, you will frequently have to deal with competitors who would also like to get the same project handed to them. When this happens, there is often also competition regarding the rate. This means, that you will have to distinguish yourself with your added value, next to keeping your rate in moderation. If someone else with the same experience as you offers a lower rate, chances are rather vast that they will get the project, instead of you.

Do you operate within the private or the public sector?

There is also a difference between the private and the public sector. Commercial companies generally look more at supply and demand, than government agencies. This will give you more space to experiment with different rates, but keep in mind that you should still be realistic with what you ask of your clients. At government institutions there are typically fixed rates or, for example, a rate according to education and experience level. This makes it easier to apply for a project,  if you meet all the conditions. There is less freedom to apply different rates, though. If you want a bit of diversity in the work you do, we advise you to seek for projects within both the public and the private sector. This will also provide you with a wide variety of work experience.

The timing of your quote

Something a lot of entrepreneurs overlook, is that the timing of sending a quote can have a massive impact on the rate you can ask. This is due to the fact that in certain cases, the department in question still has to draw up the budget. Or the contrary is true: the department might be at the end of their yearly budget and they either have extra money to spend, or they have spent it almost all. This is why you should stay reasonable, and don't exaggerate with your rate, unless you know firsthand there is a budget surplus. This way, you prevent yourself from unexpectedly pricing yourself out of the market. It is always wise to ask the client about their budget, but keep in mind that not every client will tell you the truth.

How good are you in negotiations?

Lastly, the topic of negotiating deserves some attention. If you send out a quote with your preferred rate, you will either get a yes or no answer. But if the client says no, it doesn’t necessarily mean that you won’t get the project. Sometimes there is ample room for negotiations. You can also set a slightly higher rate in your quote than the rate you want to receive. If they say no, you can offer them your preferred rate, and chances are they will comply because you lowered it a bit. Practice your negotiation tactics well, because in most cases there is some space between your minimum asking price and the amount that your client wants to pay. If you master this game well, and you can give your clients the feeling that they get a lot for little, then you have done an excellent job.

When should you increase your hourly rate?

One very positive thing about becoming an entrepreneur, is that you can raise your rates periodically. When you receive a salary, this change is generally minimal, unless you receive a promotion. But as a business owner you have much more freedom regarding the rate you charge, next to mainly having more freedom than any employee. If you have been working as a freelancer for a while, it is good to take a periodical look at your hourly rates. Maybe you determined these once, and then never adjusted the rates again. But there are plenty of reasons why your hourly rate should go up, for example:

If you've decided that your hourly rate should go up, communicate this to your customers in a timely manner. For example, announcing your rates will go up in a few months gives the client time to anticipate this. In general, January is a good month to increase your rates. It is good to discuss this in person, so that you can explain why your hourly rate should be increased. But sending an email after changing the rates on your website, is also good, for example when you have a long list of clients and no time to see them all personally. This ensures that your clients won’t be negatively surprised. You can also choose to vary your hourly rate sometimes, by giving longer assignments some discount.

When should you consider decreasing your rate or even undercharge your clients?

In some cases, it is advisable to charge less for your services. This sounds counterintuitive, yet it’s actually pretty logical in a few set examples. Undercharging isn’t always a bad thing. In fact, there are some cases when charging less than the market value for your services can be a strategic business move. One of these cases we already discussed: offering volume discount. This is especially possible, if you have a business model that focuses on volume for profitability. Next to that, it is also acceptable to undercharge when you are breaking into a new market. This basically means you are a start-up again, with little to no experience. Sometimes, in order to gain traction in a new market, it helps to intentionally charge less than market value. By doing this, you begin to attract clients in the market you want to serve and start making a name for yourself.

Another example is building your skill set. We already discussed this in the text above: in order to gain experience, you will sometimes have to take on projects that pay less than your desired hourly rate. In return, you will have more experience that will enable you to charge a higher rate, in the near future. Lastly, some entrepreneurs simply focus on giving back. Maybe you would like to provide high-quality services to underserved and financially challenged communities? In order to do this, you can reduce your prices for this specific client. This is similar to pro bono work, but instead of working for free, you still charge a certain amount. In all of these examples, the decision to undercharge is strategic, and not based on your beliefs about what your market will pay.

Intercompany Solutions can assist you in deciding on good rates for your business

As you can see, there are plenty of factors that play a role when deciding on a good rate for your business. If you do some research, you should definitely be able to come up with a few figures that fit well in your specific market. If you feel you are having a hard time determining rates, you can always contact the team of Intercompany Solutions. We can discuss your business with you, and see whether we can assist you in determining appropriate rates. We can also help you with the entire registration process of your company, financial services and assistance in writing your business plan. Feel free to contact us anytime.

If you aspire to establish a Dutch business, you will need to inform yourself about certain compliance obligations. Every business or corporation that will conduct business in the Netherlands, needs to register itself officially at the Dutch Chamber of Commerce, and subsequently also at the Dutch Tax Authorities. This is due to national tax purposes and the corresponding obligation to report and file taxes, as well as several payment obligations. In practice, this results in a liability for Dutch income tax, corporate income tax and value-added tax (Dutch BTW). In some cases, dividend withholding tax and interest withholding tax may also be levied. In order to be able to adhere to these laws and regulations, a solid and correct corporate compliance program or strategy is considered to be essential for any successful Dutch business.

Why is corporate compliance important?

Corporate compliance means you adhere to the laws of a certain country, in which you establish your business. For example, every Dutch business has a legal obligation to keep a correct administration. You will need to store all administrative files for a minimum amount of seven years, which can be done both in physical and digital ways. If you don’t comply with such laws and regulations, you can expect countermeasures such as fines and penalties. In very extreme situations, you can also face criminal prosecution related to t­ax avoidance and/or embezzlement. Furthermore, if you don’t keep a correct administration or refuse to file tax returns, the Dutch Tax Authorities can reverse the burden of proof regarding the levying of taxes. Thus, the organization will estimate your taxes based on information they do have. Intercompany Solutions can assist you with keeping a solid administration, your tax returns and everything else connected to corporate compliance. This way, you avoid getting yourself in a precarious situation.

Taxation in the Netherlands

In general, the Netherlands is seen as a country with a very effective and efficient tax office. The country itself is highly regulated, with a modern IT infrastructure to complement governmental affairs. Compliance with national taxation laws is fairly easy, since the laws and regulations are straightforward and fairly easy to comprehend. This makes it possible for every corporation and Dutch business to comply to these terms, should they choose to do so. We will explain more about tax compliance on this page, making it possible for you to decide whether compliance is a possibility for your (future) company.

What is the definition of corporate compliance?

Compliance, in general, refers to the methods a company or corporation can use to ensure they are complying to all applicable laws and regulations in relation to their business in a certain country. It also says something about the ways a company follows its own internal compliance structure. The actual definition of compliance refers to the action to comply with existing rules and/or standards. In the world of business, this basically means you have processes in place that ensure your business and all its employees follow all standards, laws, ethical practices and regulations that apply to your company and, in general, the entire industry you operate in.

What is the essential purpose of corporate compliance?

One would believe that corporate compliance is only about following the law of a certain country, but it actually goes a bit beyond that. In a recent study, it showed that almost 70% of all companies and organizations state that certain compliance efforts can aid to reduce issues such as:

Compliance, therefore, is not just about obeying current laws. It is also a safeguard to prevent unnecessary effects, when a company does not obey the laws and regulations in place (by accident). Therefore, you can say that compliance is also about prevention, as opposed to simply obeying the law. A solid compliance strategy will effectively avoid any problems whatsoever, making it easier for you to do business in the Netherlands smoothly and effortlessly.

The difference between external and internal compliance

When we talk about tax compliance, we are referring to external conditions that need to be met. But any company can have an internal compliance strategy or structure, as well. In essence, almost all businesses deal with a mix of both internal and external (regulatory) compliance. Internal compliance is aimed more at maintaining a certain level of quality or a business standard you want your business to meet. Corporate compliance is aimed at reducing compliance risks with the help of compliance functions. A compliance risk is basically anything, that could put your business at risk.

5 types of compliance functions

Corporate compliance is aimed at preventing and reducing certain business risks. These can be identified in 5 separate compliance functions:

1.      Identification of risks

The first and also most important focus of corporate compliance is the identification of potential threats and risks to your company. Ideally, before these even happen. If your compliance program is well-thought-out, you will be able to identify any compliance issues before they happen and manage to sort these out before anything actually happens. A very simple example: you received a letter from the Dutch Tax Authorities, stating your annual tax return is too late. The identification of this risk will urge you to file the tax return.

2.      Prevention of risks

Once you are able to identify risks, you can set up preventive measures to prevent potential issues. This can be achieved by implementing certain control mechanisms to protect your company from identifiable risks. A very simple example: setting a deadline every time you need to file a tax return. This will enable you to file your tax returns on time, so you won’t have to receive any reminders in the future.

3.      Monitoring of risks

In order to learn from past mistakes and work more efficiently, your corporate compliance program should also include risk monitoring. By tracking, analyzing and monitoring potential risks, you can test whether your current program is effective. Monitoring risks also enables you to test whether the risk identification and prevention steps are working well. A very simple example: after 3 fines, you decide to hire a third party, to monitor and assist you with your tax obligations.

4.      Resolution of risks

Once you know about potential risks, it is also very important to implement strategies to resolve these if they come up. Even the best strategy can still hold space for a risk to ‘slip through’, which is why it’s important for you to know how to deal with risks. A very simple example: new legislation has been put in place that forces you to change the way you handle your administration. This urges you to change your compliance strategy.

5.      Advice about potential risks

If you are not very well acquainted with compliance regulations, we firmly advise you to seek the assistance of a third party such as Intercompany Solutions. We can take a look at your business and overall situation, in order to provide you personalized advice about the most fitting corporate compliance strategy. If you want your compliance department to run smoothly, you should utilize all five compliance functions. These work together for you to ensure the least amount of possible risks for your business.

Overview of Dutch taxes

There are several official taxes in the Netherlands, which apply to natural persons as well as corporate entities. These Dutch taxes also consist of direct taxes and indirect taxes. Direct taxes are taxes such as income tax, which you pay directly to the Dutch Tax Authorities. Indirect taxes are taxes such as excise duties and motor vehicle tax.

Direct taxes

When you pay your taxes directly to the Dutch Tax Authorities, then these are considered direct taxes. You pay direct taxes on your income, profit and capital. Dutch direct taxes are as follows:

Indirect taxes

When it’s not you who pays taxes directly to the Dutch Tax Authorities, but someone else, these are named indirect taxes. For example, taxes that are included in the prices and rates of products and services. For this reason, indirect taxes are also named cost-increasing taxes, such as the taxes levied on products like alcohol and fuel. Dutch indirect taxes are as follows:

How does this affect you when you own a Dutch business?

If you own a company in the Netherlands, it is presumed you have either income or wealth from Dutch sources. Therefore, you are also presumed liable for several taxes. The most straightforward taxes are Dutch Income Tax and BTW (VAT), but as we explained above, there are more taxes you should take into consideration.

The Dutch Tax Authorities generally have access to all kinds of personal data via different governmental bodies, but every company owner is still solely responsible for filing a correct yearly and quarterly tax return. If you want to make sure this is done right, we advise you to look for a specialized third party you can safely outsource your tax responsibilities to. Intercompany Solutions has many years of expertise with services such as:

Keep in mind, that all corporations that are subject to Dutch taxes, are required to comply to very specific rules and regulations. This is also directly linked to your country of origin, and any possible tax treaties that exist between your native country and the Netherlands. Our financial advisers can assist you with any question, problem or inquiry you might have regarding the subject. They deal with complex tax and compliance matters on a daily basis and, thus, are able to inform you correctly and substantially. Please feel free to contact us any time for advice, or a clear quote.


[1] https://www.rijksoverheid.nl/onderwerpen/belasting-betalen/overzicht-rijksbelastingen

Some questions are better left unasked, especially when the subject is rather bleak. The passing away of any person or a company succession is never a positive conversational topic, nonetheless it deserves attention, especially in the context of business matters. For example, if you are the owner of a Dutch BV and you pass away: do you know what will happen to your company, assets and liabilities? Do you know who will take over your company? Or do you intend to sell it after you pass away, to leave money for possible heirs? In general, the amount of time you spend on answering such questions and coming up with a well thought out plan, will determine how smoothly the process will go. In this article we will provide more information on the subject, and we will explain what exactly can happen when a director passes away. We will also outline what you can do to secure your future, and the future of your heirs.

Do you know who the heirs are?

One of the most important questions when you pass away, is who will inherit what you left behind. So the question arises as to who the heirs are. This question can fairly simply be answered, if a will has been drafted. In the Netherlands, this can be checked in the Central Wills Register (CTR). The CTR is a register that contains various 'dispositions of property upon death', or other regulations that have consequences in the event of death. You can inspect the CTR yourself when someone has passed away. If a will has been created, it is usually relatively easy to find out who the heirs are. If, however, there is no will at all, it may take longer before there is clarity about this matter. Research must be done into who the heirs are by, for example, writing to the municipality(s) and consulting the population register. Sometimes the heir turns out to be a minor, incapacitated, or no heir at all can be found.

If a will has been made, the heir investigation doesn’t take a lot of time. Nonetheless, reality shows that shortly after someone’s death, those involved do not always take immediate action. In some cases the heirs might not even know that someone passed away. The heirs will have to contact a notary, after which a period of investigation will first follow. During this period, certain persons must be approached, before a certificate of inheritance can be issued. This certificate clarifies who is authorized to represent the deceased person. It is not always clear who is authorized to act on behalf of the deceased director, hence the need for an investigation.

Do the heirs automatically become the new director(s)?

Unfortunately, the process is not that simple. If the will doesn’t state clearly what should happen with the company after its director passes away, there are numerous options that need to be figured out. So once the heirs are found, it does not mean that a new director can be appointed. For example, if one is married in community of property, some believe that the surviving spouse automatically becomes the sole shareholder of the Dutch BV. This is not correct, as before there is a single shareholder, a deed must be drawn up first by a notary.

It is also preferable and necessary that someone takes over the company who knows what to do with it. If there are multiple eligible heirs, it should be researched who the best follow-up will be. Please note, that the follow-up cannot be appointed in the will. This is due to the fact, that this is a task of the general meeting of the company to appoint directors. Even if you are both a director and a sole shareholder, the appointment of directors is reserved for the general meeting. The situation can become pretty messy If nothing is known whatsoever about the person who should take over the company, which is why it’s important to think about creating a will when you own a company.

The certificate of succession explained

A certificate of inheritance is a deed drawn up by a notary, which shows who the heirs and/or executor are. In addition, the certificate of inheritance shows who are competent to settle the inheritance. This involves, amongst other things, the making of payments. If it turns out that there is an executor, a certificate of inheritance will be drawn up in which only the executor is mentioned. An executor cannot perform all actions alone, because sometimes an act still requires the cooperation of the heirs. This can be for practical tasks such as the closure of a bank account. If it later turns out that the cooperation of the heirs is required for certain actions, you can still have an extensive certificate of inheritance drafted.

Appointing an executor in your will

In order to avoid the previously mentioned messy situation, you as a director can appoint an executor in your will. An executor is a person who represents the heirs when someone passes, and can also exercise the voting rights on the shares in his function. He may also appoint a successor director in that position, for an interim period, until the heirs have reached agreement on the subject. Please be mindful about the fact, that appointing an executor in a will is not a real solution, if there are multiple shareholders. The shareholder who includes the appointment of an executor in his will does so unilaterally, whilst other shareholders have no influence on the matter. Moreover, it may be that the executor has no ties at all with the company, and therefore has less insight into a suitable director. In such cases, more involved people should assist. In addition, the blocking arrangement that we will discuss below usually plays a role in a situation of several shareholders.

Can the articles of association provide extra insight?

Many companies include a provision in the articles of association of companies, stating that in the event of death, one person must be appointed to represent the heirs. This arrangement is particularly practical towards the BV itself, because only one person acts as the representative of the heirs and not all heirs. This makes communication especially a lot easier. Moreover, if there is a less good atmosphere within the family, for example, due to disagreements about which of the family members should be appointed as a director, this arrangement puts the (possible) problem solely with the heirs. Instead of the question of who should be appointed as a director, the question now is who should be appointed as a voter. Thus, the provision can actually cause more confusion than solutions.

The Dutch law lays down the obligation to regulate how the management is (provisionally) provided for, in the event of absence of a director. This should be clearly stated in the articles of association of a BV. In addition, the articles of association can also describe which cases qualify as absence. Usually, articles of association state that in the absence of all directors (in the case of just one director, the sole director), the general meeting needs to appoint a person. In such cases, the general meeting is formed by the heirs. So if the heirs do not manage to figure out whom they want to put forward as a director, then problems arise. One possibility to avoid this impasse is to include in the articles of association that an independent third party is granted the power to appoint a director.

It is, of course, advisable that this third party knows the company, and that any wishes of the deceased director are known to him or her. This will enable the right person for the position to become director. Another possibility is to appoint an intended successor as director, in advance, by the general meeting if someone is absent. At that moment, the general meeting is still formed by the director, since the director is still alive. The director can therefore provide for his – provisional – follow-up in the event of death. This last option seems most preferable, since the director himself knows more about the company, its ideology and employees than anyone else.

The benefits of the articles of association

The big advantage of regulating the succession of directors in the articles of association of any Dutch BV is, that the arrangement in the articles of association takes precedence over a possible testamentary arrangement. This also goes for a possible blocking arrangement in the articles of association.  This ensures the certainty, especially for other remaining shareholders, that they do not have to fear a confrontation with an heir who wants to sit in the director's seat. Furthermore, the decision of appointing a director is made by the incumbent directors themselves. Whilst a will can only be made by one director, and can also be revoked.

What happens when there are multiple shareholders?

Until now, we discussed the situation in which there is only one director. But it is also possible, that a Dutch BV has multiple shareholders/directors. Is the aforementioned regulation in the articles of association also practical in such cases? It is usually not desirable, that any surviving shareholder is confronted with a director appointed by the heirs of the deceased shareholder. When something like this happens, it seems advisable to have the shareholders appoint a successor director together, before the situation arises at all. It is also possible to suffice with a regulation that, if one of the directors is absent or deceased, allows the surviving director to form the board. In other words: there will be no replacement for the deceased director. This provision is also often included in the articles of association.

What is the Dutch blocking arrangement exactly?

Especially when the situation arises with multiple shareholders, the so-called blocking arrangement is typically declared applicable in the articles of association. Although this blocking is no longer self-evident with the introduction of the Flex-BV, the regulation itself can still be encountered in practice. This regulation blocks the transfer of the shares, meaning that if a shareholder wishes to transfer one or more of their shares, they must first be offered for sale to a co-shareholder. This blocking arrangement makes the Dutch BV a private company, since there is only a closed circle of shareholders.

The regulation ensures that in the event of the death of one of the shareholders, the shares held by that shareholder must be offered by the heirs to the remaining shareholder(s). In this way, it is ensured that the voting rights – and therefore also the right to appoint a director – remain with the (original) shareholders themselves. Of course, the recipient will have to pay for the shares. However, if the financial means for the surviving shareholder(s) to finance the acquisition of the shares are missing, it is very well possible that the package of shares of the deceased shareholder does not end up with the remaining shareholder(s).

In order to prevent the remaining shareholder(s) from arguing with the heirs about the director's position, it is strongly advisable to provide for a regulation in the case of absence at an early stage by the general meeting. In this context, it might be desirable to include a safety net in the articles of association, which states that the directors are only jointly authorized to represent the BV. This will ensure that a director, appointed by the heirs, cannot simply act without engaging the other director(s). This joint competence can also be included for 'certain' actions.

What if you own a holding company?

If you own Dutch BV’s with a holding structure, it gets a little more complicated. If you do not hold shares in a BV directly but through a holding company, it is important that the articles of association of both BV's take this into account. For example, if an absence scheme is included in the articles of association of the subsidiary, it is wise to include whether it also applies to the shareholder of the subsidiary, if he or she is not a natural person but the BV itself. The same also applies to the blocking arrangement: a BV as a shareholder cannot die, but if the shareholder of the holding company dies, which in turn holds the shares in the subsidiary, it must be clear that the blocking arrangement also applies in that case. It is therefore good to indicate whether it is intended that the remaining shareholder should acquire full control, if the control over another shareholder changes due to the death of that shareholder.

Dismissing a director

Please note that the general meeting has the power to appoint, but also to dismiss directors. This means, that if a director has already been appointed before death, he or she can also be dismissed again if the shares with the voting rights ultimately end up with the heirs. A solution to avoid this problem can be found in the provision in the articles of association, that a reinforced majority is required for the appointment and dismissal of directors. However, under the law, this majority may not exceed a two-thirds majority. In addition, it is advisable to include further wishes with regard to the successor board in the decision of the current directors: is it the intention that the successor director only temporarily performs his function and looks for a suitable candidate himself? Or should the successor stay indefinitely? Drafting up such provisions can save you a lot of work and trouble, in the event that someone passes away.

What can Intercompany Solutions do for you?

Intercompany Solutions can assist you with every aspect of company formation in the Netherlands. This also includes legal and financial advice, especially about subjects that can be hard to understand for foreign investors and/or entrepreneurs. We strongly advise any business owner to think about topics such as succession in the case of death. You should also record your wishes in the articles of association, or in a formal decision. Afterwards, a notary can take care of the official registration. The advantage, registering this information officially, is the clarity you will have in the event of a death. If you would like to know more about the subject, please feel free to contact our team. We can also inform you about good notaries in the Netherlands, who can help you further.

Sources:

https://vbcnotarissen.nl/news/de-bv-in-geval-van-overlijden-durft-u-erover-na-te-denken/

Have you ever considered setting up a foundation? Most businesses are mainly focused on generating profit, whilst foundations generally serve a higher and more idealistic purpose. A foundation is a completely different legal entity, than, for example, a sole proprietorship or Dutch BV. The establishment of a foundation therefore also involves a different set of rules. There is a lot of information on the internet about setting up a foundation, but this is often in the form of disguised advertisement for third parties who can benefit from anyone setting up a foundation. We will provide you with an extensive checklist regarding setting up a foundation, including information about NGO’s and other specific ‘types’ of foundations. You can thus inform yourself about what you should pay attention to, when establishing a foundation in the Netherlands.

Why start a foundation in the Netherlands?

There are many reasons to decide to set up your own foundation. In a lot of cases, people travel and see poverty in other countries with their own eyes, urging them to provide some kind of assistance. Maybe you are dissatisfied with certain living conditions in your own country? Or perhaps you would like to help residents in a country that’s currently at war? Or maybe you want to help preserve the planet and its wildlife? In all such cases, a foundation is the corresponding legal entity to assist you to raise money for this cause. With a foundation, you can look for donors and raise money to actively change the current situation.

One thing you should probably know, is that the Netherlands already houses a vast array of foundations and charitable institutions. The country currently has around 30,000 registered foundations, but it is not entirely clear whether these are all active. A foundation is not obliged to submit an annual report, which is why it’s not always clear if a foundation is carrying out its activities. Around half of these foundations are also registered with the Dutch Tax Authorities as an ANBI (Algemeen Nut Beogende Instelling), which means something like an Institution of Public Benefit. We will discuss this later in the article.

This means, that it is rather likely that there is already an organization active in the area in which you want to provide help. It is advisable to research this first, since knowing this information can save you a lot of time and money. If you have decided to start an entirely new foundation yourself, there are plenty of things that need to be arranged. For starters, it’s important to come up with a well-defined name, that clearly states what you aim to accomplish with your foundation. The next steps include, but are not limited to:

We will outline all these steps in detail below, including all extra information you might need to start your own Dutch foundation.

What exactly is a foundation?

A foundation is a form of enterprise that is not primarily aimed at making a profit, due to the fact that its social or societal goals predominate. You can make a (small) profit, but it must be used for the intended social purpose. The foundation is an independent legal entity, which means that the board itself has only limited private liability for the consequences of the actions of the foundation. So even in the event of bankruptcy, the founders and director(s) of the foundation are safe. Anyone who works for the foundation may receive compensation for their work, but they cannot be employed. A foundation is therefore a useful instrument, if you want to fulfill a certain (idealistic) goal, but do not want to be liable for it yourself. Foundations get money through donations, inheritances, loans and sometimes also subsidies. Some very well-known foundations are Greenpeace, Save the Children and Amnesty International.

A foundation has a board but no members

If you want to set up a Dutch foundation, take into account that the organization of a foundation differs slightly from other legal entities. For example, any foundation can have a board, but it is not possible to be a member. Another difference is the fact, that directors cannot be employed by a foundation with an ANBI status. Nonetheless, they can still receive compensation for their work, but this needs to be proportional. A similarity between the Dutch foundation and other legal entities, is that you are still able to hire employees if you would need to do so. In such cases, you will have to perform actions like regular companies: payroll taxes and social contributions are requested.

How to set up a Dutch foundation?

Once you decide you want to start a foundation, the first official step you need to take is to go to a Dutch notary. You should definitely shop around for notaries, since the rates can vary enormously. The costs for a notarial deed, which are in essence the statutes of your new foundation, can vary between 300 and more than 1000 euros. You can make an appointment with a notary and discuss the set-up with them. They then draft the articles of association and make a new appointment with you when they are ready. They know exactly which matters for a foundation should be addressed in the articles of association.

During this meeting, you declare that you want to set up the foundation, and then have the purpose of the organization recorded in the articles of association. It is therefore very important that you are able to voice your ambitions for the foundation clearly, since this will be incorporated in the articles of association. You may set up the foundation alone, or together with others. These others can be both natural and legal persons. This incorporation must take place by notarial deed, so if you are starting a foundation with others, you will all need to go to the notary. This can be either a deed in which a foundation is immediately created, or a will in which the foundation only arises after the death of the testator. If you are unable to physically come to the Netherlands, Intercompany Solutions can take care of this entire process for you.

Registering at the Dutch Chamber of Commerce

Once you have been to the notary and the articles of association have been drafted and signed, you can register your foundation in the Dutch Chamber of Commerce. You will need a company name, a well-formulated goal, the location of your foundation, a procedure for appointing and dismissing the directors and a destination for possible money if the foundation is dissolved in the future. You can also draft internal regulations for your foundation, provided these do not clash with the articles of association. These regulations can contain information about the number of meetings per month, the dress code and other relevant details that are not discussed in the articles of association. You also need to elect a board, which usually consists of a chairman, a treasurer and a secretary. If you are setting up the foundation by yourself, then you are the board.

The liability of your foundation

A Dutch foundation is a legal entity that compares to a private limited company regarding personal liability. This means, that as a director you are not jointly and severally liable for any debts that have been incurred, unless there is (proof of) maladministration. Even if your foundation would go bankrupt, you as a natural person are still safe if the bankruptcy is demonstrably not your fault.

Do you have to pay taxes if you own a foundation?

A lot of people believe that no foundation whatsoever has to pay taxes, but this is not entirely true. If you clearly intend to not make any profit with your foundation, you will need to state this when registering for a VAT number. If you don’t make a profit, you also don’t have to pay VAT. Nevertheless, there are multiple situations in which your foundation will be obliged to pay certain taxes. For example, if you suddenly start selling merchandise, this can fall under profits and as such, the Tax Authorities won’t agree with a VAT exemption. Next to that, if your foundation falls under the corporate income tax, the anti-abuse laws apply. This means that you cannot abuse your exemption in a maleficent way. As a director, you can then certainly be held liable under certain circumstances.

The same is the case if you do not register the foundation with the Chamber of Commerce. If the foundation itself runs a business, you must file a corporate tax return on an annual basis. Business activities are seen as a company, if there is a more or less sustainable organization of capital and labor, and you try to make a profit by participating in the economy. Any profit from the foundation must go to the (social) goal. For example, it is possible that a foundation organizes meetings with which money is earned. These meetings can then levy an entrance fee. Tax must be paid on this. This is called limited tax liability. An organization must file a corporate income tax return:

There are also some standard foundations that need to pay taxes. According to the Dutch Tax Authorities, these are the following:

It also depends on your personal situation whether and how much VAT you have to pay to the tax authorities, on behalf of the foundation. It is best to consult a tax advisor for this or contact the tax authorities yourself. If you would like professional advice on the subject, don’t hesitate to contact Intercompany Solutions.  

Name of the foundation and graphic design

Since there are already so many foundations in the Netherlands, it is very important to come up with an original idea. The name of your company matters a lot, as well as your website and all other channels via which you advertise the existence of your foundation. We strongly advise hiring a professional for the design activities, unless you are a graphic designer and marketing professional yourself. Also, invest in a good hosting company, so your website runs smoothly. You should also figure out whether the domain you wish to own is not yet occupied. Next to that, be mindful of the colors you choose for the logo and website. If possible, try to incorporate symbols and colors that match your foundation’s goal and ambitions. If people are naturally drawn to the logo and website, chances are far greater that you will find donors and volunteers.

Donors and volunteers for your foundation

A foundation cannot operate without donors. You can start recruiting in your own environment, for example by networking during meetings and events. Your reach increases with your own website and social media, of course. Through advertising or interviews on radio and TV, your foundation will become even better known to a larger audience. A foundation runs well thanks to its volunteers. So you will definitely need volunteers, if you really want to make an impact within the field you chose to aid. Try to use all media to reach them, even through traditional channels such as leaflets and advertisements or word of mouth through your board members or donors. In short, make it known everywhere that you are actively searching for people to volunteer for your foundation. The more donors and volunteers you have, the bigger the positive impact you can make on the world.

What is an ANBI?

If you set up a Dutch foundation, you can also opt to make it an ANBI. An ANBI is an Institution of Public Benefit, The Dutch State determines what exactly this is. An institution can only be an ANBI if it is almost entirely committed to the public interest. ANBIs pay no tax, or significantly less than any other legal entity. This is due to the fact that they are committed to the public interest. The advantages of setting up an ANBI are mainly in the financial field, such as:

For more extensive information about ANBIs, you can look here.

Applying for an ANBI status

Applying for an ANBI status is done via the Dutch Tax Authorities. As an ANBI you have a publication obligation. The following information must be published on your foundation’s website, or any other common website of your foundation, such as a branch organization:

This obligation is enforced by Dutch law, meaning you can be fined if you don’t comply.

What conditions must an ANBI meet?

In order to be designated as an ANBI, the institution must meet all the following conditions:

Extra information about the ANBI status

A difference between only a foundation and an ANBI foundation, is that the board of an ANBI must always consist of at least 3 members. These members do not have to be related to each other whatsoever. With a foundation without ANBI status, there are no rules regarding the number of board members or their relationship with each other. There is also the matter of the profit exemption. Do you expect to make a profit, somehow, with your foundation? Then you will have to pay corporation tax, unless you fall below the limit for exemption. In practice, you will often stay well below that, because you do not have a profit motive as a foundation. The limits for exemption are a maximum of 15,000 euros annually in profit. Next to that, you should have not made more than 75,000 euros in profit during the previous 4 years.

What is an NGO?

If you want to start a foundation, you can also consider establishing an NGO. NGO translates to Non-governmental organization. It basically means it’s a non-profit company, that doesn’t fall under the scope of the government. An NGO essentially is a non-profit organization with a social, social or scientific goal. That goal can be both nationally and internationally oriented. For example, for development aid or development cooperation between various nations in order to help people. NGOs often have one clear theme that they deal with, such as environmental protection, protection for animals or the protection of children.

In most cases, NGOs are organizations without a profit goal, which are usually committed to the environment, poverty and human rights. An NGO is therefore not a governmental institution. They are non-profit organizations that work with volunteers and receive money from donors. Nonetheless, NGOs can also be discussion partners for governments. For example, for advice or mediation in case of problems of child labor or human rights. Some NGOs focus specifically on developing countries, development cooperation or development aid. Well-known examples of NGOs are Greenpeace and Doctors without Borders. Greenpeace is scattered all over the world; in some cases they are a foundation, in other cases an NGO.

How to establish an NGO?

Starting an NGO always starts with setting up a Dutch foundation or cooperation. A foundation is the legal entity that you must register in the commercial register of the Dutch Chamber of Commerce.[2] Intercompany Solutions can assist you with the registration process, making it possible to register your foundation in just a few business days. Once your foundation is set up, you will start carrying out various activities, such as acquiring donors and looking for certain causes you would like to help. In essence, once you are actually doing something, you can also refer to your foundation as a Non-Governmental Organization (NGO). An NGO is not a legal entity and as such, it is not protected by law. You therefore don’t have to register your foundation as an NGO. If you want to name your organization an NGO, you are free to do so, provided the daily activities of the foundation are fitting for an NGO as well. It’s comparable to the fact, that a Dutch BV is also a private limited company. All Dutch BV's are also private limited companies, but not all private limited companies are Dutch BV’s. The same goes for the Dutch foundation and the NGO, since the latter is internationally recognized.

As an NGO you can receive various subsidies and cooperate with large organizations

A positive aspect of doing business with developing countries, is that it brings an ample amount of opportunities for Dutch companies. For example, in some developing countries, certain markets are only just now emerging. This means that any company, already established in that market, can expand their business. Even though you won’t make much profit with an NGO, you can still benefit from all the opportunities. You can create better services and/or products, help with technological advancement, invent new ideas to do things faster and better, create employment opportunities and in general, help a country or region to develop at a faster rate. There are plenty of schemes and subsidies that are aimed specifically at NGOs, in order to contribute whatever they can.

NGOs are also often engaged by the United Nations (UN) to participate in projects for, amongst other things, development aid or development cooperation. The UN buys in multiple billions per annum through tenders. This money is then used for various developmental goals, such as goods and services for war zones, disaster areas and developing regions in general. The UN can also be considered a discussion partner for development cooperation in the field of education, agriculture, the environment and human rights. You should check whether the UN can assist you with your non-profit organization.[3]

How to dissolve a foundation?

If you started a foundation, but it didn’t achieve the goals you had in mind, you can dissolve it whenever you wish. Any foundation can be dissolved without any problems. In essence, you need to determine all information regarding potential dissolution in advance in the articles of association. If there are multiple people on the board, you should determine what you like to do with the foundation if it doesn’t work out between yourselves. Otherwise, you risk possibly tedious situations in the future. Is there a possibility that the foundation might go bankrupt? Then a Dutch judge can dissolve your foundation.

What else do you need?

Next to all the formal terms and conditions and laws you need to adhere too, there are also some practical matters you should consider, before establishing a foundation. We always recommend every entrepreneur to create a good business plan for their business ideas. Why? Because you will have everything you need on paper since the start. Once your business is up and running, you can use this document to measure your growth and establish new goals. An added bonus of having a business plan, is that it makes it much easier to apply for financing or subsidies. Nearly all investors and banks require a business plan, for them to even consider granting you money.

Furthermore, there are basic necessities you will need such as an office space, or at the very least a Dutch business address. Nowadays, you can register companies at special registration addresses, if you are unable to physically work in the Netherlands. A Dutch address is essential for the official registration process. You must also be able to make and receive payments, so you will also need a Dutch bank account for your business. This will allow you to pay invoices, receive and deposit money and also collect donations and contributions from your donors or members.

Register your foundation in the Netherlands with the assistance of Intercompany Solutions

If you are enthusiastic about starting a foundation in the Netherlands, we urge you to put your ideas on paper. This will enable you to see, whether the foundation has any added value. You should also check if similar foundations don’t already exist. Next to that, remember to check the name for duplicates, as well as a possible domain name. Once you are set and have acquired all the information you need, you can register your foundation in just a few business days. Intercompany Solutions can take care of the entire process for you, including extra services such as opening a bank account and receiving a VAT number, if you plan to make a small profit. Please feel free to contact us anytime for advice, or a clear quote.


[1] https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/bijzondere_regelingen/goede_doelen/algemeen_nut_beogende_instellingen/aan_welke_voorwaarden_moet_een_anbi_voldoen/aan_welke_voorwaarden_moet_een_anbi_voldoen

[2] https://ondernemersplein.kvk.nl/wat-is-een-ngo-en-hoe-start-u-er-een/

[3] https://ondernemersplein.kvk.nl/wat-is-een-ngo-en-hoe-start-u-er-een/

If you are currently the owner of a crypto company, or plan to establish one in the near future, then launching an ICO can be an interesting way for you to raise funds for your business. It can also allow you to create a new coin, service or app. An ICO is essentially a profitable way to raise money, for services and products that are somehow related to cryptocurrency. An ICO is somewhat derived from an IPO, with the difference that an ICO is mostly aimed at software services and products. In some cases, ICOs have been massively successful with a high amount of returns for all investors. In other cases, ICOs failed or turned out to be fraudulent. This means, that we do strongly discourage people with no knowledge of cryptocurrency at all, to launch an ICO. You will be better off investing in some already established coins instead. To launch an ICO, you need at the very least a basic understanding of cryptocurrency, exchanges and wallets. Due to the fact that ICOs are mostly unregulated, investors should be cautious and diligent when investing in any ICO.

What is an ICO exactly?

ICO is an abbreviation of Initial Coin Offering. When someone starts a new crypto project, they launch its own coin (token), which is then sold to early investors. This model is very similar to the first round issue of shares of a regular company, which is named Initial Public Offering (IPO). One major difference is that the issue is accessible to the general public, on the contrary to solely being reserved for venture capital. Most ICOs are taking place on Ethereum (ETH). The offered tokens can also sometimes be purchased in a regular currency such as euros or dollars, but in general investors pay with already established cryptos. When you can find a handful of investors who believe in the new project, they will pay you in ETH, and get the new tokens in return. The investors can use the coins in the new app, or simply sell them at a profit at a later stage. ICOs are internationally purchasable, since anyone with internet access and a digital wallet can buy the tokens.

So in general, ICOs are a profitable way for (new) companies to finance the development of their products or services. Via the use of blockchain technology, the provider issues new digital tokens during an ICO. All crypto tokens differ greatly in design and function, and you are fairly free in the development stage. Often tokens constitute a right to the service to be developed, or a (future) reward, and sometimes no value whatsoever. It is also possible that you entitle investors to a share in a project, or a predetermined part of the expected returns. ICOs are structured in a way that they often fall outside the scope of financial supervision, as we already explained above. As a result, the general protection that Dutch financial supervisory legislation offers to investors is absent. With a few exceptions, the AFM cannot therefore supervise ICOs.[1]

More about blockchain technology

If you are fairly new to crypto, it’s advisable that you inform yourself about the technology that backs it: blockchain technology. Blockchain technology is based on the principle of a decentralized system and openness. A blockchain essentially consists of a network of computers, but these computers are not the exclusive property of solely one participant. Via algorithms, all participants in the network are able to decide which information is valid and which is not. This involves factors  such as transactions that are carried out on the network. Then, this information is stored in ‘blocks’, that together form a chain. Hence, the term blockchain. This means, that all participants in the network have access to the same information in the blockchain, simultaneously and at any time. This is made possible in the form of a shared ledger, that any participant can access.

One of the main benefits of blockchain technology is, that it’s completely impossible for any participating individual to manipulate information. Due to the fact that everyone has access to the same information, the information doesn’t become tainted with redundant or fraudulent data. There are many possible variants of a blockchain. At this moment, bitcoin is the most famous application. Many blockchains have an open character, so this means almost anyone can participate. If you have access to the internet, then you can use such a blockchain, for example, to carry out transactions. All participants in the network then verify these transactions, and record the valid transactions in the blockchain. Information about all actions is stored securely and truthfully.

What is the difference between cryptocurrency and an ICO?

People often ask what the difference between an ICO and crypto is. Currently, there is not really a very clear distinction between tokens in an ICO and regular cryptos, since these terms are mostly used interchangeably. Nonetheless, they are definitely not completely the same. Once important difference is the fact, that anyone can create and spend tokens, if they have a bit of programming knowledge. In crypto, though, this is carried out by an algorithm that has a predetermined set of rules. The regulation of the creation of units, which is called mining, is possible due to certain cryptographic techniques. These also play a part when transactions on the decentralized blockchain network need to be verified.

This means, that the issuance of the units involved is determined in advance. This relates to, for example, how many and in which way the tokens will be issued. If you take Bitcoin as an example, you see that miners receive tokens as a form of reward for finding blocks in the chain. Then, the transactions are recorded as Bitcoins in these blocks. After that, the block will be added to the already existing blockchain. This actually requires a very high amount of computer power. On the other hand, digital tokens can be seen as units that can be created on an already existing blockchain. If you are the designer of such a token, you basically can decide a lot of details for yourself. This entails the amount of tokens you would like to create, how to issue these, and other functionalities you want to assign to the token. The Ethereum blockchain is actually specifically designed for this purpose.

ICOs create new and exciting opportunities

One of the main benefits of an ICO is the fact, that it makes it very easy to raise a substantial amount of funds very quickly – if it succeeds, of course. This enables you to start up new crypto projects, plus you are obviously also rewarded for your work in the process. A reason that tokens are so popular, is due to partial ownership. This also plays a role in the issuance of shares, since owning a token or share might bring in money at some point. As long as you still own the token, there is a possibility of making a large profit. Therefore, it is fairly easy to encourage people to join your network. Furthermore, ICOs open up many possibilities for investors who don’t have that much to invest. Not everyone is a millionaire: most people have to live with regular wages. But even with a regular salary, you can easily invest in tokens. It sounds like a dream, which it can be, but it is very important that you also inform yourself about all the risks involved with starting an ICO. We will outline these below.

Are there any risks involved with launching or investing in ICOs?

If you consider launching or investing in an ICO, you should be acquainted with the various troublesome scenarios that currently flood the market. For example, there are many cases known in which people bought tokens with money they actually needed, and thus, this got them into trouble. The same applies to people who borrow money to buy tokens, in some cases these amounts are staggeringly high. Why do people do this? Because they feel they might miss a great opportunity, since they believe that the price of the token will yield as much profit as Bitcoin did. This anticipation of extremely high profits can blind people to the risks associated with an ICO, whether you are the one launching it or investing. You genuinely risk losing your entire investment. Please keep in mind that the crypto market is still speculative in nature. Therefore, you should never invest money that you cannot miss at the moment, or might need for later. There are other factors that might negatively impact your investment, which are explained in detail below.

Be sure your knowledge about the market and topic is sufficient

One of the main ingredients of a successful investment, is prior knowledge about its specifics. If you don’t know what you are investing in, you are basically giving others the power to scam you. Especially in a volatile and fast-paced market such as crypto, it is essential to educate yourself about the coin you want to invest in. In the past, due to this reason, the possibility of investing in a start-up was generally reserved for professionals with plenty of knowledge and expertise. Nowadays, it is possible to privately invest due to blockchain technology. Anyone with a bit of money, an internet connection and a wallet can invest in tokens. A lot of private investors get carried away with exaggerated promises of almost impossibly high returns on investment, and thus, underestimate their own experience and knowledge. Without this expertise and in-depth knowledge, actually meaningful revenue models are almost not distinguishable from projects with no added value. Make sure you know what you are doing and spend time reading information, before you spend money.

Do not overestimate possible returns beforehand

Crypto has mesmerized millions of people, especially after Bitcoin skyrocketed during recent years. This has led many investors to believe, that their investment will also yield enormous returns. Please be cautious, though, since crypto is still in its infancy. The promise of fancy new revenue models always attracts plenty of investors, but only experienced investors should actually put money into something so new and volatile. If you want to invest, it would be wise to seek assistance from someone who knows the ropes. New technology always creates new revenue models, but can also lead to expectations that are overoptimistic. There is a big chance, that your personal expectations will not be met. Especially ICOs are in very early stages of development, and thus, it is highly unclear if any plans or expectations can be fulfilled in reality. Blockchain technology in itself is very new and still in development. Errors in the code can pose a threat, as well as theft of your tokens. Even a great idea can tumble sometimes, so make sure you can miss the money if you decide to go for it. Because there is also a chance, that the value of the token will be much lower than your initial investment.

A general lack of transparency

Another issue with ICO’s is the fact, that certain providers aren’t always transparent regarding the information they provide to potential investors. Often, basic information is hard to find, and important parts are even left out completely. This can include information such as the rights that the holders of the tokens are granted, the risks involved with a specific project, and the way the financing of the project is spent. If you don’t have all the essential information, it’s almost impossible to be able to value an ICO correctly. Furthermore, it is also very difficult to distinguish good projects from fraudulent ones. Next to that, a lack of transparency can also lead to inefficient pricing of tokens. Always try to provide as much information you are able to, when you launch an ICO. If you are an investor, make sure you have all information you need. If this information is not provided, you should try to contact the provider and ask for extra information before you invest.

ICOs attract scammers

One of the largest problems with ICOs is the fact that it attracts scammers internationally. Blockchain technology allows for cross-border investments, which means that everyone can participate worldwide. But there is also the topic of anonymity surrounding crypto. Even though it’s generally a positive feature of crypto, it inevitably also attracts criminals and fraudsters. Due to it’s worldwide reach, some have taken advantage of this fact in a very negative way, by creating very advanced pyramid schemes. These are sometimes hard to recognize for people who don’t know much about ICOs and crypto, so there are a lot of very easy targets for fraudsters to hit. The hype surrounding crypto makes it easier for them to make investors believe, that they might miss a fantastic opportunity by not investing. There are also fraudulent ICOs, aimed at misleading investors to get rich themselves. The intentions of providers are generally good, but keep in mind that some others might outright scam you too. Some of these scams are known as exit-scams, where the provider and developers suddenly disappear after they have sold their own coins. Be mindful and watchful when you invest.

Massive price fluctuations

Last but not least: keep in mind that all tokens are subject to enormous price fluctuations. Most people who invest in ICOs generally step in with a speculative purpose. They essentially invest, because they expect they will be able to sell their tokens quickly for a higher price. This speculative nature surrounding ICOs leads to extremely volatile prices of traded tokens, on various platforms. Since these platforms do not fall under the scope of financial supervision, this is something that cannot be regulated. Sometimes a token can fluctuate up to 100% per day. This can be exhilarating when the price goes up, but at the same time disastrous when it goes down. On top of that, the trading of a lot of tokens is limited. This makes it possible for fraudsters to manipulate the process, if it suits them.

Is it wise to even consider launching an ICO with so many risks involved?

The list of possibly negative scenarios within this business is quite severe. It might put a lot of people interested in ICOs off, which is not exactly a bad thing. As we already stated above, it is of the utmost importance that you inform yourself about the entire market. If you don’t, you can easily fall into the hands of experienced scammers. We generally advise investors and start-ups to read information and acquire substantial knowledge, before taking action. You can also seek aid from more experienced parties, such as companies and individuals specialized within the market. Intercompany Solutions can definitely assist you, in order to make sure that you don’t make any mistakes. This can have very serious consequences, ranging from losing all your money to going to jail.

When does an ICO fall under the Dutch Financial Supervision Act (Wft)?

As previously discussed, a large portion of the worldwide crypto market falls outside the scope of financial supervision institutions such as the Dutch Wft. Most tokens can be structured, for instance, in the form of a (prepaid) entitlement to a future service of the issuer. In all these cases, they fall outside the scope of the Wft. One exception to this, is if the token, for instance, represents a share in the project or if the token gives entitlement to part of the (future) returns from the project. In these circumstances, the token may qualify as a security or a unit in a collective investment scheme, as defined in the Wft. The Dutch Authority on Financial Markets (AFM) assesses each case separately to determine whether the Wft applies, and will also closely supervise whether the Wft might apply. Potential issuers need to properly analyze the extent of any overlap with financial regulation and supervision, before launching their ICO. It would be prudent to investigate properly what the definitions are, that the AFM uses to determine the security status. It is a possibility to approach the AFM with a clear prospectus (offering), and get a ruling in advance. This way you limit risks on your end.[2]

The qualification of a security (effect)

In each separate case, it has to be determined whether a token qualifies as a security as defined in Section 1:1 Wft. This is done on the basis of the token’s legal and other features. In line with the definition in this section, it is important to establish the extent to which the token qualifies as a negotiable instrument that is equivalent to a negotiable share or other negotiable instrument or an instrument equivalent to a right. A token may also qualify as a security, if it represents a negotiable bond or other negotiable debt instrument. A token additionally qualifies as a security, if a share or bond can be acquired through the exercise of the rights attached to a token or through conversion of these rights. Lastly, a token meets the definition of a security if it is a negotiable security that can be settled in cash, where the amount to be settled depends on an index or other measure.

For a token to qualify as a security equivalent to a share, one important consideration is whether the token holders participate in the company’s capital and receive any form of payment for this. This payment must correspond to the return achieved with the invested capital. Any controlling rights are not decisive in this respect. The AFM moreover uses a wide and economic approach for the term negotiability. Further information on this is available in the Negotiability Policy Rule of the AFM. If the tokens qualify as a security, a prospectus approved by the AFM is compulsory – to the extent that no exception or exemption applies. Further information is available on the AFM website. In any case, investment firms facilitating trading in such securities must observe the requirements with respect to the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.[3]

Qualification of a unit of participation in a collective investment scheme

An ICO is subject to financial supervision, if it concerns the management and offering of units in a collective investment scheme. This is the case, if an issuer of an ICO raises capital from investors in order to invest this capital in accordance with a certain investment policy in the interests of those investors. The funds raised have to be used for the purpose of collective investment, so that the participants will share in the proceeds of the investment. An increase in net asset value also qualifies as the proceeds of an investment. In this connection, amongst other things, the AFM applies the guidelines published by ESMA on key concepts of the Alternative Investment Fund Managers Directive. Under Section 2:65 Wft, a license from the AFM is required for the offering of units in a collective investment scheme, unless the issuer is eligible for the registration regime. Further information is available on the AFM website.[4]

Trading of tokens falling under the Wft

So what happens to certain platforms, when tokens are traded that fall under the Wft? We discussed before, that most platforms don’t fall under any financial supervision. Nonetheless, when platforms facilitate the trading of tokens that fall under the Wft, these specific platforms will also require a license from the AFM. This is necessary for the provision of investment services, pursuant to Section 2:96 Wft. If you want further information about this topic, then you can find it on the AFM website. Potential issuers considering an ICO, and wishing to issue it subject to financial supervision, may contact the AFM for any questions. The Intercompany Solutions team can also help you with any questions you might have regarding this topic.

What to think about when you want to launch your own ICO?

If you have read all the information and still want to launch an ICO, then we can definitely assist you with your plans. It is smart to research other providers. This is undoubtedly a requirement for the coin offering. If you really want to start, it’s essential to make a list of everything you need to do beforehand. Especially for ICOs you will have to look into various aspects. The following questions can help you sort out the most important information:

Once you have accumulated all this information, it will be much more clear to you, as well as your investors, what it is you are trying to accomplish. When you are ready, you can contact our team to help you further with your ICO.

Intercompany Solutions

Intercompany Solutions has assisted in the establishment of hundreds of different companies in the Netherlands, ranging from small businesses to large multinationals. Currently, Intercompany Solutions is also assisting several other crypto firms. One of our clients is starting an initial game offering, whom we are assisting with all the legal paperwork and regulations. The initial game offering is quite similar to an ICO as an idea, however the products that are sold vary from tokens. We have also extensively researched the legal and tax status of cryptocurrency in the Netherlands, so we have quite some information readily available. If you want to launch an ICO, please make sure you can provide us with all the information we need, for a smooth process. When we receive the relevant information, we can discuss your case with our Authority of Financial Markets specialized lawyer. We can always schedule a phone call and give you a quick estimation of the scope of the requirements, the best course of actions and timeline. Feel free to contact us anytime.

Sources:

https://www.afm.nl/professionals/onderwerpen/ico

https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp

[1] https://www.afm.nl/professionals/onderwerpen/ico

[2] https://www.afm.nl/professionals/onderwerpen/ico

[3]funds for your business. It can also allow you to create a new coin, service or app. https://www.afm.nl/professionals/onderwerpen/ico

[4] https://www.afm.nl/professionals/onderwerpen/ico

Ever wanted to operate as an independent consultant? In the Netherlands, you can benefit from many possibilities to achieve this dream. Starting a consultancy business involves a lot of thinking on your part though, before you actually establish the business. So where do you start? Whether you are an independent communication consultant, a legal consultant or an ICT consultant, this article will help you on your way to starting your own business. Do colleagues and friends often ask you for advice? Then you have probably already  thought about setting up a consultancy firm. We will outline some of the most important factors you should consider, in order for your business to achieve potential success. We will also provide you plenty of examples and extra details to think about.

Why would you start a consultancy business?

Some people have worked as a consultant for a larger firm, and decide they want to jumpstart their career by opening their own business. In other cases, maybe the profession of consultant simply appeals. The Dutch consultancy market is a very vibrant and demanding one. During the past decade it has grown exponentially. One of the main reasons for this development is the improved flexibility of the Dutch labour force. Not only do people work more from home, but many previously employed consultants started their own smaller businesses. This lead to an increase in the amount of Dutch freelancers.

The fact that these smaller firms now exist, has put some serious pressure on some very well known larger firms. A large firm has a lot of expertise and experience to offer, but due to the amount of employees, the firm can sometimes put a consultant on a project who doesn’t fit there at all. This has led to many clients preferring somewhat smaller consultancy firms. A smaller firm offers a more personal approach, often with a very clearly defined niche. Next to that, the rates of a smaller consultancy form are often lower than the rates the large companies offer. This makes consultants also affordable for smaller businesses.

Which basic knowledge do you need to start as an independent consultant?

If you want to start a consultancy business, experience and knowledge about this field of work is essential. No client will hire you, if you cannot prove your worth. In general, consultants are very proficient at conducting research and analyzing the results they have obtained from the research. Consultants collect a lot of (related) data, which will help them come up with workable solutions for the client they work for. A consultant is able to identify behavioral patterns, production bottlenecks, market trends and of course customer preferences. With those and other factors, they can create standard business processes that can help the organization achieve its goals and objectives.

As a consultant, your core responsibility is to improve your client's operations or business activities, by making changes based on your analysis. You must be able to implement the changes for your client within an agreed time. Companies are willing to pay very high rates, as long as they get the preferred results. A very specific trait of the consulting industry, is that there is a readily available market for such services, simply because clients naturally want to improve their performance on an annual basis. Companies always strive for evolution and more success. So if you are well positioned, knowledgeable and know how to deliver results, you can achieve very good results with a Dutch consultancy company.

Consultants are good in one thing: problem-solving

If you want to know whether you can keep your head above water as a consultant, you should look into your personal problem-solving skills. As a consultant, you are constantly solving problems for your clients. When a client offers you information about an internal issue, you create a business case out of this. It is very important to know which problem you are actually solving. One way to look at the bottleneck from all angles, is to interview many employees who are involved in the same business process. The business case generally consists of three steps: determination of the problem, finding out why it exists at all, and offering a solution to fix the situation.

Determining the problem

There are many possible business cases, since every company has its own personal problems. One issue that very often comes up, are outdated business processes. Since technology evolves very rapidly, businesses need to update and refresh their business processes on a structural basis. In such cases, you should find out exactly which processes need updating and how you will achieve this.

Figuring out the reasons for the problem’s existence

In the case of business processes, the fact that these have not been updated is mainly the issue. But with other problems, you should dig deep and find out how the internal issue originated in the first place. Maybe some employees are behind on work? Or maybe management hasn’t provided enough information to its employees? Maybe the employees need training? Every problem has its own solution, and it’s your job as a consultant to expose the core of the difficulties.

Offering a solution to the problem

Once you know the problem and the reasons for its existence, you need to come up with solutions to solve it. Obviously, that is what your client is paying you for. In the case of the previously mentioned business processes, the best solution is to implement new and updated processes. Make sure that you are good at solving problems, before you start a consultancy business. Otherwise, you should not expect to earn a lot of money.

Choosing the specialization or niche of your business

If you want to open a  small or medium-sized consulting company, then we usually recommend clients to choose a well-defined niche. In the consultancy world, a niche usually means specializing in a certain type of client and/or subject. To determine your niche, you should look at what skills and knowledge you have that could benefit clients in the Netherlands. Of course, you need to have the necessary expertise to be able to give advice at all. Do you know a lot about a certain subject? Then you can start a consultancy business within this field it. The most chosen niches in the consultancy world are:

Marketing consultancy

A lot of start-ups are marketing consultants. This is also one of the easiest niches to enter, since you can rely much more on your expertise, than your education. Marketing is something that can be very easily learned online, without the need of formal education. You will need to have a knack for marketing subjects, and it’s imperative that you build a solid reputation during the first years of your business. Marketing results can very easily be measured via a wide variety of marketing tools and apps. If you are also a graphic designer, then this is an added bonus. If not, take into account that many clients will ask you to design new company logo’s and similar things. You will need to outsource this, if you don’t know how to create material. Keep in mind that the marketing consultancy industry in the Netherlands is extremely fierce. You will have to be able to stand your ground, in order to succeed.

Communication consultancy

The communication consultancy market in Holland is also booming. Clients are always looking for new ways to deliver the same message. Communication consultancy also involves writing, so if you are a good writer and have a talent for solving marketing issues too, this might provide a good start for your business. It can help to join the Dutch Association of Recognized Advertising Consultancies (VEA). This is the association of communication consultancies in the Netherlands. There is also a lot of competition in the communication consultancy industry, so you will need to stand out and offer something that others don’t.

Management & strategy consultancy

The management and strategy industry is mostly aimed at larger companies, in which there is also high-level decision-making involved. In essence, if you are a management consultant, you will help your clients with managerial problems. This means you will also act as a company executive in some cases. Large corporations often hire external parties to solve executive issues, due to the fact that external parties can look at problems independently. It is imperative that you have experience with management consultancy before you start a business, because you will be dealing with high-level problems that require a solid amount of experience and knowledge.

Operations consultancy

The operations consultancy industry is specifically aimed at the optimization of operational and business processes. A good example is advising on the supply chain of a logistical company. But as an operations consultant, you can have clients from all industries. Often, governmental organizations are looking for operations consultants, to streamline the vast amount of processes within the organization. This niche requires you to be adept in logical thinking, and seeing where processes are failing.

HR consultancy

Human resources is mainly concerned with the personnel policy and the organizational policy of the client. In Dutch, HR consultants are also referred to as P&O consultants. This means you will help out clients with hiring employees, training employees and all kinds of administrative matters. You will generally need to show education within this field, if you want to start a successful company.

I(C)T consultancy

ICT is currently one of the consultancy industries with the highest growth. This sector includes information and communication, and the space where these two overlap. In general, as an IT consultant you advise companies on the solutions they want to achieve in the field of digital work processes and services. This can be system development and system integration, but also the introduction of entirely new systems. Proficiency with information and technology is a must to be able to be an IT consultant.

Legal consultancy

Last, but certainly not least, there is the option of becoming a legal consultant. In the Netherlands you do not need a law degree, to name yourself a legal consultant, since the title is not protected. It is essential that you have experience with and knowledge of the Dutch legal system, otherwise you will not be able to help any single client. You can also start a legal consultancy business based on the legal framework of your home country, and help expats and people who might need your specific expertise in the Netherlands.

The necessity of market research

So you want to start a consultancy company, and you know which niche is best for you? Then it’s time you do some market research. This involves creating a target audience that you will research first. You can do this by looking up demographics about your niche on the internet, and finding out which area might have potential clients. You can also schedule interviews with people from your target audience, in which you talk about your plans and their wishes. It is also possible to start a conversation with people from your target group in focus groups, or to send out online questionnaires via social media. The most important thing to find out, it whether there are clients in the Netherlands who are willing to pay for your services.

How do you acquire new clients for your business?

The Netherlands houses a very wide array of consultancy businesses. The best thing you can achieve, is to stand out to your specific type of client. A potential client will be looking for a certain type of expertise, and it’s your job to know when someone is looking. The way you present yourself is also just as significant, since first impressions are very important in the consultancy industry. You should pay a lot of attention to the overall look and feel of your website and marketing material, but also the clothes you wear when you have a meeting with a potential client. Finding clients can be tedious sometimes, but the Netherlands offers an enormous amount of networking events for all industries. You can also join a certain type of business club, or look at online platforms aimed at freelancers. Once your business is up and running, and your clients are satisfied, you are sure to get new projects via referrals.

Explore the competition in your region or field

Once you know what your market is waiting for, it's important to investigate what the competition is doing. The best things to do is to look up at least ten competitors within your region, including large as well as smaller firms. We also advise to map out the ten best firms within your specific niche. Examine the strengths and weaknesses of each competitor, so you can quickly see where your opportunities lie. You can also request the annual accounts and extracts of your main competitors from the Dutch Chamber of Commerce. Also research what prices they charge, since this will help you in determining a realistic rate.

Choosing a legal Dutch entity for your business

Every entrepreneur must choose a Dutch legal entity, to be able to register in the trade register of the Chamber of Commerce. Which form is most suitable for your company, depends on factors such as your expected turnover and number of board members. The Netherlands offers the following legal entities:

We strongly suggest establishing a Dutch BV, whether it’s a new firm or a subsidiary. This legal entity offers limited liability, plus it is also seen as a professional choice to select a Dutch private limited company. If you would like some advice on this matter, feel free to contact the team of Intercompany Solutions anytime.

Creating a solid business plan

If you have a clear idea of what you are going to do, you can create a stable basis for your future consultancy company. That is why it is highly advisable to draw up a business plan. Your business plan is essentially a tool that will keep you on the right track. You can save your plan and update it yearly, when you look at your business results. A business plan makes it very clear what you want your business to be, and how you will achieve this exactly. There are many templates on the internet regarding a business plan, you can browse around a bit to find a template that resonates with you. Keep in mind that you can also use the business plan, to convince potential investors.

A business plan should always answer the following questions:

Many starting entrepreneurs find writing a business plan quite difficult. Intercompany Solutions can assist you with this process, if you feel you can use some help.

Contracts and legal documents you might need for your consultancy businesses

Once your business is established, you will need to prepare some standard legal documents for projects. One of the most important documents is the assignment agreement between you and potential clients, which is also called a freelance contract. This contract arranges the specific terms under which you will work for your client(s). This will inevitably vary per client, as every consultancy project will be subject to different terms and conditions. There is no legal requirement that obliges you to create an assignment agreement, we strongly urge you to do this, though. Because an agreement makes it easier to resolve any issues that might come up in the future. You can make a draft for your first client, which you can then use for any consecutive client as well.

Next to the assignment agreement, we also advise you set up general terms and conditions for the services you offer. These terms and conditions apply to all business activities you get involved in, as well as all clients. You can describe various standard conditions, such as payment and delivery conditions. Another document you should have at the ready is a non-disclosure agreement (NDA). A lot of the work you will do might entail sensitive information. Signing an NDA will make the relationship between you and your client feel more safe and trustworthy.

If you choose to establish a Dutch BV, you will also have to sign an employment contract between yourself and your company. This is due to the fact, that you are employed by your own company as a managing director. You can also choose to set up an account agreement between your BV and yourself. This enables you to establish a loan between you and your company, without having to set up a loan agreement every time you do this. The last mentionable document concerns a shareholders’ agreement, in the case that your Dutch BV will have multiple shareholders. This document describes the exact relationship between the shareholders, to avoid any misunderstandings in the future.

The registration procedure

Do you feel like a Dutch consultancy business might be something for you? And have you read all the information above, still feeling like this could be a possibility for you? Then you should inform yourself about the Dutch company registration procedure. You can find more information about it here. This will enable you to prepare some necessary documents, that you will need to make the registration final. Intercompany Solutions can assist you during every step along the way. Once we receive all documents, we will validate these and send them back to you to sign. After we receive the signed documents back, we start the official registration procedure. We can also help you with extra tasks, such as setting up a Dutch bank account. The entire procedure can be realized within just a few business days. Feel free to contact us anytime for more information, or a clear quote for your future business.

Dedicated to support entrepreneurs with starting and growing business in the Netherlands.

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