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Opening a cannabis industry company in the Netherlands

Have you ever considered starting a company in the Netherlands in the soft drug industry? Then there are a lot of things you should know beforehand, as you otherwise might be confronted with the risk of criminal charges. The sale and possession of drugs is technically a criminal offense by law. In order to reduce the illegal production, consumption and sales of hard drugs, the Netherlands has invoked a special toleration policy regarding the sales of cannabis, which includes marijuana and hash. Due to this toleration policy, coffee shops are not persecuted by the public persecution office for selling cannabis.

Coffee shops are companies which are legally allowed to sell cannabis (not to be confused with regular coffee bars), as long as they adhere to the strict rules imposed upon them. Please be mindful that this toleration policy does not apply to hard drugs, and any violation regarding these may lead to persecution. You may find more information regarding soft and hard drugs in the Dutch Opium Act. Furthermore, the public is not allowed to carry more than five grams of cannabis at any time, and will not be persecuted if they carry less than five grams. Public consumption may be prohibited by municipalities though. Consumption of cannabis in these prohibited areas may result in arrest, confiscation of drugs and also punishment by fine.

Gedoogverklaring

To open a cannabis company you will generally need a “gedoogverklaring” (which is a tolerance statement) and an operating license for the catering industry (“horeca”). The tolerance statement is based on a maximum quota of coffee shops which are allowed within that municipality. This amount varies from municipality to municipality. Many of these quotas have long been met, which makes it impossible to apply for a new tolerance statement. You may, however, choose to take over an existing coffee shop if its owner decides to quit.

Some municipalities have waiting lists for obtaining the tolerance statement. Depending on the municipality, additional conditions may be set in order to apply for the waiting list. These may include, but are not limited to:

  • Owning or renting a property feasible for opening the coffee shop
  • Having a license for operating within the catering industry
  • Having a minimum distance to other coffee shops

Bibob screening

When applying for a tolerance statement, the Dutch government may apply a probity screening under the Dutch Public Administration Act. This act is also known as ‘Bibob’, and serves to identify the possible risk of criminal activities. Under this act the government is allowed to investigate your background and/or that of your company when applying for such a license. If the screening identifies any risks, the government is allowed to deny or revoke your license in order to avoid the government from facilitating criminal activities.

The license for operating within the catering industry and its requirements also vary per municipality. The content of these requirements pertain to the area surrounding your company and usually involve rules regarding safety, decency and public order. These may be, but are not limited to opening times, noise and light nuisance, parking and more. If you already have a municipality in mind, we suggest you look at the specific requirements in this particular area to know what you need to abide with.

Rules regarding cannabis companies

If you want to open a Dutch coffee shop, there are many rules you need to take into consideration. There are special policies regarding coffee shops. The basic rules for all coffee shops are abbreviated under the AHOJGI-criteria. Depending on the municipality though, additional rules may apply. It is the sole discretion of said municipality to identify whether coffee shops are allowed to engage their business activities within the given rules of that municipality.

The AHOJGI-criteria are as follows:

  • Coffee shops are not allowed to advertise themselves or their products
  • Coffee shops are not allowed to sell alcohol
  • Coffee shops (and its customers) are not allowed to cause any nuisance
  • Coffee shops are not allowed to sell drugs to people under the age of eighteen
  • Coffee shops are not allowed to sell more than five gram of cannabis per person per transaction and may not hold more than 500 grams of cannabis as inventory
  • Coffee shops may not sell cannabis to residents other than those from the Netherlands

Other rules may include, that coffee shops may not be in close proximity to schools or other coffee shops, or prohibit them from inhabiting certain areas at all. Furthermore, strict rules regarding accounting, terms of sale and public counter sales may apply. An example of such a rule is that coffee shops may not vendor sales directly to the street.

Stricter rules

In 2013 the Dutch government changed their approach regarding coffee shops in order to decrease the nuisance to the surrounding area, by changing the scope of the coffee shop’s focus to the local market. A new rule was introduced on the 1st of January 2013 prohibiting foreigners from entering and buying cannabis at coffee shops. Only Dutch residents are allowed to enter coffee shops and purchase cannabis there. This means, that coffee shops are tasked with identifying whether their customers have Dutch residency and whether they are of legal age to buy cannabis.

Navigating the many intricacies of opening a coffee shop is very difficult. One wrong application may prohibit you from obtaining the needed licenses. Intercompany Solutions can help you identify which municipalities have available tolerance statements, applying for said tolerance statements or waiting lists thereof, fulfilling the requirements of the waiting list, applying for a license to operate within the catering industry, help you with the Bibob screening and many other issues. We can also advise you regarding the rules and regulations of auditing your customers on their residency and age and accounting related matters.

Growing cannabis in the Netherlands

It is currently strictly prohibited to grow Cannabis in The Netherlands. This means that the supply of cannabis to coffee shops goes through an illegal back door, but the sales thereof to the public goes through a tolerated front door (in the coffee shop). The Dutch government has identified that this may cause problems with the acquisition and production of cannabis, which in turn may create problems for the public safety, order and health. This is due to the fact that the production of cannabis is not tolerated, and regulated variation in quality of supplied cannabis may strongly vary.

Individuals may, however, own up to five cannabis plants as this is deemed noncommercial use. However, authorities may confiscate these plants as owning them is illegal, while consumption is tolerated. Owning more than five cannabis plants may lead to persecution. Medical cannabis is regulated through the Bureau of Medicinal Cannabis (BMC) from the Dutch Ministry of Health, Welfare and Sport. Any application to produce medical cannabis goes through this organization.

In 2018 an advisory committee has researched the issue regarding the production and sales of non-medical cannabis and published their findings and recommendations to the Dutch government. In turn, the Dutch government reacted to these recommendations. A decision was made, to do a trial with a closed cannabis supply chain based on the recommendations from the advisory committee. This also contains additions from the government regarding the scope and rules for this trial.

The closed cannabis supply chain

The closed Cannabis Supply Chain is a trial that will run in the Netherlands during 2021, which focuses on the regulated sales and cultivation of cannabis. The government and other (independent research) parties will closely monitor the production, distribution and sales of said regulated cannabis and evaluate whether it is possible and feasible to change the current illegal supply thereof. Based on the recommendations from the advisory committee and additions from the government regarding the scope and rules for this trial, ten municipalities have been chosen to participate in the trial. All coffee shops within these municipalities are required to oblige with the trial. Existing rules regarding coffee shops may be altered during the trial.

Opportunities for new growers

The closed cannabis supply chain opens up opportunities for new growers, as up to ten new growers will be selected during the trial. These people or companies will legally be allowed to cultivate and sell cannabis to the coffee shops, whilst partaking in the trial. Specific rules regarding facilities, quality management, security, record keeping, staff requirements and production estimates will apply for these new growers. Interested parties may submit an application which will be reviewed.

Applicants may be either natural or legal persons, of which both have to be situated in the Netherlands. Cultivation farms need to be located in The Netherlands as well, but are not limited to the participating municipalities. A solid business plan must be presented and will be assessed by all parties involved. Some elements that are required for the business plan are a ground plan of the cultivation site, transportation plan, quality compliance and several other necessary factors in order to adhere to the rules. Additionally, applicants will need a certification of good conduct and undergo a Bibob screening. Intercompany Solutions can help you formulate a business plan adhering to all criteria, which are needed for this assessment and help you with requesting a certification of good conduct. The date for application is not known yet.

Cannabidiol (CBD)

Cannabidiol, abbreviated as CBD, is a substance which can be found in the flower tops of the hemp plant. It can be extracted in a number of different ways and is sold as either oil, capsules, paste, ointment or tea. Unlike cannabis, cannabidiol is legal to buy and sell and does not warrant the use of the toleration policy. As such you can find it in common drug and health stores as long as the amount of THC is below 0,05% and the daily dose of CBD does not exceed 160 mg. Another requirement is that it may not be advertised as medicine. CBD has proven to have multiple health benefits in the last decades, which is why it is being studied and used in order to see whether it might be beneficial to use next to regular medication in many situations. This is a very interesting market that has just come to the surface, it might be worthwhile to research this topic if you have business interests in this particular area.

Production of cannabidiol

CBD is extracted from the hemp plant, which is classified under the Opium Act. In 1999 the Dutch law regarding hemp was adjusted, legalizing the harvest of fiber hemp. This consists of only the seeds and fibers of the hemp plant. Under this law, the production of hemp plants with less than 0,2% THC is allowed for companies which qualify for an exemption from the Opium Act. The production of CBD is illegal, however, as it is not harvested from the seeds and fibers but rather from the flower tops. Since processing other parts than the seeds and fibers from the hemp plant is illegal, companies choose to export these “leftover” parts to countries where it is legal to process them. These countries then extract the CBD from the leaves and create either CBD oil, capsules, paste, ointments or tea.  In turn, this processed CBD is now legal to import and sell within the Netherlands. You can find more elaborate information regarding the production and sales of CBD in this article.

Intercompany Solutions can inform you about all laws and regulations

If you want to participate in the cannabis market, you will need to be informed about all regulations and restrictions in order to pursue the legal road. Any business activities that are considered illegal in the Netherlands might lead to prosecution and, in the worst case scenario, you being arrested. If you want to know more about this interesting market, Intercompany Solutions can provide you with the necessary information and advice to set up your company 100% legally. Feel free to contact us for more elaborate information.

Sources:

https://www.government.nl/topics/drugs/toleration-policy-regarding-soft-drugs-and-coffee-shops

https://www.government.nl/documents/reports/2018/06/20/an-experiment-with-a-closed-cannabis-chain

https://www.government.nl/documents/parliamentary-documents/2018/07/06/government%E2%80%99s-response-to-report-of-the-advisory-committee-on-the-controlled-cannabis-supply-chain-experiments-with-a-controlled-supply

https://www.government.nl/documents/reports/2019/10/31/rules-for-the-experiment-with-a-controlled-supply-of-cannabis-to-coffee-shops

https://business.gov.nl/regulation/public-administration-probity-screening-act/

https://www.government.nl/topics/drugs/documents/reports/2019/10/31/rules-for-the-experiment-with-a-controlled-supply-of-cannabis-to-coffee-shops

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