International companies planning to establish presence on the Dutch market at a low cost can open local branches. The branch does not have a legal personality and is considered an extension to the international company. Therefore the parent company established abroad is liable for all of its actions.
The operations of Dutch branches are managed by representatives of the parent companies by virtue of a PoA (Power of Attorney). The branch has to carry out the same operations as its parent and its name must be identical. Its actions are governed simultaneously by the Dutch laws and the legislation of the country where the international parent company is incorporated.
The branch provides permanent establishment at a lower cost in comparison to other Dutch company types and there are no minimum capital requirements with respect to its incorporation. This is why many international companies prefer this form of business.
Dutch branches vs. local companies
The main defining characteristic of a branch, as compared to other business forms like subsidiaries in Holland, is its full dependence on its international parent company. Therefore the international company carries liability for any obligations and debts of the Dutch branch.
The procedure for branch registration is easier compared to other company types, e.g. the private limited liability company, but it still needs to comply with the legislative requirements for taxation and employment. According to the law, all branch employees should be covered with social insurance. Otherwise, the branch representative may become personally liable in case of failure to pay the necessary contributions. Branches opened in the Netherlands usually have financial obligations identical to those of local companies.
The numerous treaties for avoidance of double taxation that the Netherlands has signed with other countries decrease the branches’ tax burden if they qualify for reduction of the rate of withholding tax for royalties, interest and dividends.
Registration of a Dutch branch
The branch has to be registered in the Trade Registry at the Commercial Chamber with the relevant documents and details before it can commence its business activities. All papers need to be notarized, with a legalized translation in Dutch. The notarization takes place in the state where the parent company resides.
The documents necessary for incorporation can be case-specific, but in general the following are necessary: proof of the establishment of the international company (an extract from the trade registry in the country of residence with registration date and company details), registration certificate, name, registered address, names and details of the directors and the secretary (or other managers), protocol of the discussion where the board decided to open the branch, address and name of the branch, representative’s name, powers of the representative and branch activities.
After the registration, the Company Register in the Netherlands will release the registration certificate recorded under a unique number. Then the branch has to be registered for tax and social security contributions. After all these steps the branch can begin to operate in Holland.
Advantages of opening a Dutch branch
The procedure for branch registration is easy and takes less time than the direct incorporation of a Dutch company. This is why some international corporations prefer to establish branches. Other advantages include low incorporation costs and mild accounting requirements.
The main characteristics of branches in the Netherlands are more or less the same as in other countries. For example, in Hong Kong, the procedures for branch taxation and registration are very similar. Still, it is in your best interest to use the services of a local specialist in incorporation or a lawyer to ensure that you follow the Dutch regulations and rules for company establishment.
If you need more details on starting a Dutch business, please, contact our local agents in company formation.