Establish a Dutch Subsidiary
In the Netherlands, a subsidiary is a normal company – a separate legal entity with share capital partially or fully owned by an international company. This is an important difference from the Dutch branch – an entity that is more strongly linked to its international founder.
The international company established abroad can control its subsidiary in Holland, but, in contrast to the situation with branches, it does not carry full liability for the Dutch subsidiary’s debts, obligations and actions. The subsidiary does not have to engage in the same operations as its parent company and, if necessary, it can register for the performance of more activities. This and the limited liability of the parent company are the two main advantages when opening a subsidiary.
The founders of a Dutch subsidiary are able to choose between 2 very common types of entities: private or public companies with limited liability.
Types of legal forms for Dutch subsidiaries
The private company with limited liability (or BV) is suitable for small and medium businesses. There is no minimum capital requirement for the incorporation of a BV as a Dutch subsidiary – it can be established with 1 Euro. Its share capital has to be split into non-transferable registered shares. The shareholders carry limited liability to the extent of their contributions to the capital of the company. One or multiple directors can be appointed to manage the business. There are different methods for BV incorporation, depending on the main goal: privacy of the directors and shareholders, tax minimization, a holding structure for international business or a BV owned by a special structure, e.g. a foundation.
Entrepreneurs can also open public limited liability companies (NVs) as subsidiaries. The minimum capital required to establish an NV is EUR 45 000 split into bearer and registered shares. NVs can issue certificates of shares with respect to bearer shares, in contrast to private companies with limited liability. Shares can also be transferable. The shareholders carry limited liability covering the capital they have provided to the company. In contrast to BVs, NVs can be traded on the Securities Exchange.
Dutch subsidiaries must have a minimum of 2 managers, forming a management board. A board of supervisors can also be formed to oversee the activities of the managers. Large companies like NVs follow more stringent requirements in yearly reporting, auditing and accounting.
The procedure for registering a Dutch subsidiary
The first step in registering a Dutch subsidiary is to open an account in a local bank, deposit the required capital and obtain a document to certify the deposit.
The subsidiary founders need to check whether the name they chose for the subsidiary is unique. This is done at the Commercial Chamber. A confirmation of the name’s validity is sent by email. If the name is available, the founders can proceed with registration.
Before registration at the Commercial Chamber, the subsidiary founders must obtain a non-objection declaration issued by the Ministry of Justice. For this purpose, they have to file an application and pay the relevant fees.
The association articles, the subsidiary establishment application and the deeds of foundation need to be notarized. All documents mentioned above have to be presented at the Commercial Chamber, accompanied by a deposit certificate and the non-objection declaration.
Taxation of Dutch subsidiaries
Any subsidiary registered in Holland is considered a resident company and has to pay corporate taxes identical to those of any other local company. Therefore, registration at the Tax Office is obligatory. The subsidiary should be registered at the Administration for Social Security in order to hire employees locally.
The corporate tax in Holland is 16.5% for yearly profits up to EUR 200 000 and 21.7% for income exceeding this threshold in 2020, in 2021 the rates will be lowered to 15-21.7%. Local companies pay taxes with respect to any profits generated worldwide. Holland is an EU member, so the EU Directive for parent companies and subsidiaries is applicable to Dutch subsidiaries of international companies. The Directive and the treaties for avoidance of double taxation between Holland and other countries guarantee significant tax relief and incentives.
Other taxes that Dutch companies need to pay include the tax on real property, transfer tax and contributions to social security. The fiscal year usually matches the calendar one. All subsidiaries of international companies need to follow the Dutch reporting and accounting principles. Incompliance with the filing requirements can result in fines and penalties.
The procedure for subsidiary registration for business purposes in Holland is uncomplicated and takes approximately 8 work days.
If you need more information on the procedures for setting up a Dutch business, do not hesitate to contact our local agents. They will provide you with more information on company formation and legal advice.