How to establish a foundation or NGO in the Netherlands?
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:
- Creating the articles of association with a Dutch notary
- Registering your foundation with the Chamber of Commerce and Tax Authorities
- Applying to the Tax Authorities for a VAT exemption and/or ANBI status
- Creating a website and logo
- Finding and keeping donors
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:
- If it participates in the course of trade with an organization of capital and labor and thereby makes a profit or strives for a profit, and no exemption applies
- If it engages in an activity with which it competes with economic operators and no exemption applies.
- If the foundation receives an invitation from the Tax Authorities to make a declaration.
There are also some standard foundations that need to pay taxes. According to the Dutch Tax Authorities, these are the following:
- Sports clubs
- Organizers of sports events
- Cultural institutions
- Public benefit institutions (ANBIs)
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:
- The foundation itself does not pay gift or inheritance tax
- Donors to the foundation may deduct this gift in their income or corporation tax
- ANBIs may be able to recover (part of) the energy tax
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:
- The name of the foundation
- Legal Entities and Partnerships Information Number (RSIN) or the tax number
- The contact details of the foundation
- A clear description of the foundation’s objective
- The main theme(s) of the policy plan
- The functions and names of the directors
- The remuneration policy
- A report on the activities carried out
- A financial statement
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:
- The institution must be fully focused on the public benefit. This must be apparent from, among other things, the statutory objective and the intended activities.
- The institution must serve the public interest with almost all of its activities. This is the 90% requirement.
- The institution is not for profit, with all of its activities that serve the public interest.
- The institution and the people directly involved with the institution meet the integrity requirements.
- No natural or legal person may dispose of the institution's assets as if they were its own assets. Directors and policymakers may not have a majority of control over the assets of the institution.
- The institution may not hold more capital than is reasonably necessary for the work of the institution. Therefore, equity must remain limited.
- The remuneration for policymakers is limited to an expense allowance or minimum attendance fees.
- The institution has an up-to-date policy plan.
- The institution has a reasonable ratio between management costs and expenditure.
- Money that remains after the institution has closed down is spent on an ANBI, or on a foreign institution that focuses for at least 90% on the public benefit. For a cultural ANBI, the positive liquidation balance must be spent on an ANBI (or foreign institution that focuses for at least 90% on the public benefit) with a similar goal.
- The institution complies with the administrative obligations.
- The institution publishes specific data on its own or joint website.
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. 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.
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.