The Benefits of Starting a Business in the Netherlands
The Netherlands is known worldwide for its beneficial environment for entrepreneurs. Many global investors and entrepreneurs consider starting a business in the Netherlands. In this guide we explore the Netherlands as a jurisdiction to start a company. Here are some of the benefits of establishing a business in Holland:
- Corporate tax rate of 20%, among the lowest in Europe;
- No value added tax (VAT) for transactions between member states of the EU;
- In 2018, Forbes rated the Netherlands as the third best country in the world for businesses
- The greatest number of treaties for double tax avoidance worldwide;
- The Netherlands is among the founding members of the EU;
- Local companies have a great reputation in global commerce. The Netherlands gives a big advantage in representation;
- 93% of the native population speak English; many are proficient in German and French;
- Highly educated labor force (third in the global top for education level);
- Outstanding international business atmosphere;
- Holland is fourth in the global report of the WEF and first in the European top for most innovative and competitive economies;
- According to a recent investigation by G. Thorton, the Netherlands is one of the best destinations for company establishment by foreign investors.
- The country welcomes foreign entrepreneurs and investors: from small enterprises to multinational companies included in the Fortune 500 list;
- The Netherlands attracts international companies from all sectors with its stable legislation and politics, coupled with excellent international relations.
Dutch Limited Liability Company (BV)
The Dutch private company with limited liability (besloten venootschap, BV) issues shares that are registered privately and cannot be transferred freely. This type of Dutch entity is preferred by many international entrepreneurs.
A limited company is established by at least one incorporator, either a legal entity or an individual. The entity or individual, resident or foreign, can act both as an incorporator and a complete management board for the new company. It is not compulsory to have a secretary. If the shareholder is just one, this does not result in personal liability. Still, the name of the shareholder will appear on the registration certificates of the company prepared by the Commercial Registry. Shareholdings are recorded in the register of shareholders maintained at the company’s office.
An incorporation deed is executed in the presence of a public notary and submitted to the Trade Registry at the Commercial Chamber and to the Tax Office. The official incorporation deed must be prepared in Dutch (our company will also prepare an English version for your convenience). This document lists the details of incorporators and initial board members, their participation amounts and payments made to the starting equity. The deed also contains the AoA (Articles of Association) that include, as a minimum, the following details: company name, city location of the registered office, company purpose, amount of authorized capital (EUR), share division and share transfer conditions.
Intercompany Solution will check if the chosen company name is not already in use as a trademark or a commercial name. This is done as the holders of prior registrations have the right to require a name The name of your company must either end or begin with “BV”. In addition to the company name, a BV has the freedom to choose one or several trade names to label the whole business or parts of it.
Incorporators can decide on the amount of share capital; it can be as low as EUR 1. A single share with a corresponding voting right is required as a minimum. Shares can have profit and/or voting rights.
As of January 1, 2006, there is no capital tax with respect to issuing shares.
The incorporation procedure may take two to five days. The timeframe depends on how complex the shareholding structure is and, also, on the prompt provision of papers by the client.
Possibility for a remote formation
A business can be registered remotely.
Corporate shareholders and directors
Dutch private limited companies can have directors and corporate shareholders.
Advantages of the Dutch Private Limited Company
Shareholders carry no personal liability for the debts of the company. In principle, the risks are limited to their investments in the business.
The minimum share capital required to establish a BV used to be EUR 18 000 (before October 01, 2012), but it was reduced to just 1 euro cent. Now it is easy to establish a new business.
The Netherlands offers various entrepreneurial subsidies, e.g. the Innovation Box instrument and WBSO (R&D tax credit).
No taxes on interest, royalties and dividends
The Netherlands has developed a comprehensive network of treaties for the avoidance of double taxation. Thus companies can benefit from reduced rates of withholding taxes on interest, royalties and dividends transferred to companies established in the country and minimum taxation of capital gains arising from share sales in the source country (pacts with close to a hundred different jurisdictions).
The BV Holding Structure
The BV Holding Structure is a secure and cost-effective way to start a business in Holland.
A holding is a legal entity that only holds assets, e.g. trade companies shares. Therefore a holding company does not carry any liability or risk associated with its operations.
A subsidiary is an entity actively involved in services or trade. It performs business activities and, therefore, carries liability for its operations. This means that creditors, suppliers and other parties may file claims against it. On the other hand, the holding entity with its assets is safe from claims.
The combination of a subsidiary and a holding in one structure results in the so-called holding structure. Below are the main characteristics of a Dutch BV Holding Structure:
- the holding structure includes two separate private limited companies (BVs);
- one of the BVs is a subsidiary and engages in business activities;
- the other BV is a holding without any business activity;
- the investor/entrepreneur owns the holding’s shares;
- the holding company owns the subsidiary’s shares.
Reasons to Incorporate a BV Holding Structure
Entrepreneurs prefer to set up their businesses as holding structures for two principal reasons: risk and tax.
First, you reduce risk by operating via a holding structure in the Netherlands. A holding BV provides an additional layer of protection between the business owner, as an individual, and his/her business activities. BVs can also be structured to protect the capital of the active company. Accumulated pension provisions and profit are thus shielded from business risks.
Second, holding structures may provide tax advantages. The most significant one is the so-called participation exemption. It allows the owner to sell the company and transfer the profit to the holding BV without paying profit tax.
When should I consider establishing a holding structure for my business?
- if it is very likely that your company will one day be sold. You can then transfer the profit from selling the company to the holding BV free of tax, by virtue of the Dutch participation exemption.
- if you need risk protection for your capita.
- if you want a fiscally flexible company structure.
Tax Advantages and Obligations
After incorporation private limited companies are registered at the Tax Office and the required tax numbers are issued. Dutch companies have particular obligations and need to submit different tax returns. Find more information below.
Dutch corporate tax
The corporate tax rate in the Netherlands is among the lowest in Europe: 20% for profits up to EUR 200 000 and 25% for profits exceeding this amount. These conditions apply for both NVs (public companies) and BVs. In the next years, the government will reduce the minimum and maximum tax rates.
The participation exemption is among the most commonly used advantages with respect to taxation. This tax regulation exempts from tax holding entities owning at least five percent of a subsidiary in case of transfer of dividends. The regulation is known as “the directive on parent companies and subsidiaries”.
Imagine that a holding owns 100% of the shares of a subsidiary. This subsidiary company makes € 100 000 in profit and transfers 20% corporate tax (€ 20 000) to the Tax Office. The rest of the profit (€ 80 000 after the tax has been paid) is a dividend transferred to the account of the holding. The paid out dividend is exempt from tax and the total taxes due for the whole structure amount to 20% of the profit. The purpose of the exemption is to avoid double taxation of the profit.
If the company that has opened the subsidiary (parent company) turns a profit, the exemption gives a clear advantage. It can also save a large amount of money in the event of selling the subsidiary. The whole profit from this transaction will be transferred free of tax to the parent company. The subsidiary has already covered the corporate tax with respect to its profit (value increase) for the period before the sale. If the profit is taxed again at the time of sale, then it would be taxed twice.
Participation exemption for international companies
The exemption gives an additional advantage to companies operating internationally if the subsidiary company is located in another country. The international subsidiary’s profit is subject to tax in the country where it is established. The profit after tax can then be transferred to the parent company in Holland. This amount, received by the parent company, will NOT be subject to corporate tax in Holland.
Value Added Tax (VAT) in Holland
Holland uses a VAT system, similarly to other EU members. Some transactions are not subject to value-added tax, but it is commonly charged by the authorities. The regular rate, 21%, is charged with respect to almost all services and goods offered by Dutch businesses.
This rate might also apply to products imported from non-EU countries. In Holland, there is also a lower VAT rate of 6% regarding specific services and goods, e.g. medicine, food, art, medicine, books, antiques, entry to sports events, museums, theaters and zoos. The government plans to increase the rate to 9% in 2019.
VAT for international entrepreneurs
When your company is established in a foreign country, but you are also operating in Holland, you need to conform to the national regulations. If you are offering products or services in Holland, in most cases you need to cover VAT there. Still, VAT is often charged in reverse to the individual receiving the product or service, resulting in 0% rate.
Reverse-charging is an option if your clients are legal entities or entrepreneurs established in Holland. Then you can omit the VAT from the invoice and insert reverse-charged instead. Otherwise, you need to pay the tax in Holland.
30% tax reimbursement ruling
International employees hired in the Netherlands can make use of a tax exemption called “the 30 percent reimbursement ruling”. If you meet certain conditions, the employer will transfer to you 30% of your wages free of tax. This allowance is meant to compensate the additional expenses of employees who work outside their home countries.
In order to qualify for reimbursement, candidates have to meet the following requirements:
- the employer is registered at the Tax Office in the Netherlands and covers payroll tax;
- there is a written agreement between the employee and the employer that the reimbursement ruling applies;
- the employee is either transferred or recruited abroad;
- upon hiring, the employee had resided more than 150 kilometres away from the border of the Netherlands for at least 18 months out of the past two years;
- the yearly salary of the employee is equal to or exceeding € 37 000;
- the employee has qualifications that are scarce on the Dutch labour market.
Intercompany Solutions: Your Business Partner
Established in 2013, our company has helped hundreds of clients from 30+ countries to set up their businesses in the Netherlands. Our experience with international entrepreneurs has allowed us to adjust our processes in order to ensure the successful establishment of your company. Customer satisfaction is guaranteed for all the services we offer.
Our scope of expertise:
- Dutch company formation, complete package;
- Assistance with local regulations;
- Application for issue of an EORI or VAT number;
- Opening a bank account for a foreign person;
- Secretarial support: premium package.
Associations and memberships
We are constantly improving our standards of quality to deliver impeccable services.
Frequently Asked Questions Netherlands (FAQ)
- Is it possible to establish a Dutch company if I reside elsewhere?
Yes, a resident of any country can incorporate a company in Holland. For your convenience we also provide procedures for remote company registration.
- Is it compulsory to have a Dutch company address?
Yes, your company needs a registered address in Holland. You also have the option to establish a representative office or a branch of an international business.
- What are the company types in Holland?
The entity preferred by most foreign investors is the private limited company (BV). Other popular types are the foundation (Stichting) and the public company (NV). You can also register a collaborative entity, a solitary proprietorship or a partnership.
- How long does it take to incorporate a business entity in Holland?
Company registration can be completed in several days.
- What is the minimum required share capital?
Limited companies no longer need to declare a minimum capital. Public companies are required to have a minimum of EUR 45 000 in shares.
- What is the procedure for company establishment in Holland?
The procedure includes four main steps: 1) Submission of the deed of incorporation; 2) Submission of the association articles; 3) Tax registration; 4) Bank account opening.
- What are the documents necessary for incorporation of a company in the Netherlands?
The main document you need in order to incorporate a business is the Articles and Memorandum of Association.
- How to register a brand or a trademark?
The usual way for trademark registration in the Netherlands is to first incorporate a company and subsequently register the trademark locally. There might be a possibility to register a trademark or brand in the Netherlands without establishing a company.
- Is it possible to start a business in the international trade through a company in Holland?
Yes, it is possible. International traders set up companies in Holland quite often. Local incorporation brings numerous advantages.
- What taxes do companies pay in Holland?
For annual profit of up to € 200 000 companies pay 20 percent corporate tax. Other taxes, e.g. for real estate or transfer in case of property purchase, are also levied.
- Can you provide further information on Dutch BVs?
Of course. We have prepared a comprehensive brochure about Dutch BVs. If you have further questions, please, contact us.
- Can you explain the requirements for employment in Holland?
The employer-employee relationship is regulated by the national Law of Employment. International employees have to obtain permits for work prior to arriving in the country (EEA and Swiss nationals are excluded from the rule). A written employment agreement needs to be drafted and signed. The agreement can be open-term or with a particular duration. This depends on the nature of the business activities.
- What is the procedure for obtaining Dutch citizenship?
A person may become a citizen of the Netherlands through business immigration, naturalization, option procedure or marriage. Children of Dutch parents can claim citizenship. Our experts can provide you with further detail regarding the procedures and help you follow them.
- Is a visa necessary to enter Holland? What is the procedure for obtaining it?
EU residents are free to enter the Netherlands without any specific document. Non-EU citizens can stay in the country with a Schengen Visa (short-term) for no more than 90 days. For longer stays, you must apply for a visa at the Dutch Embassy in your country of residence.
- Do I have to obtain any special licenses or permits for my newly established Dutch company?
The requirements depend on the nature of your business and your scope of activities. A permit for conducting business ensures that you are able to legally sell, trade, store and engage in financial activities. Few companies need special licenses or permits.
- Can you list the main legal requirements that foreign entrepreneurs must meet in order to make investments in the Netherlands?
Foreign investors have the same rights to establish businesses as Dutch citizens. They must consider the legislation with respect to making investments, applying for licenses, covering the minimum obligatory initial capital and conducting lawful and legal business operations.
- Can you list the main legal aspects of company establishment in Holland?
You need to consider several important aspects:
- Your company’s name must be available and compliant with the laws;
- You need a local office;
- You need to meet the requirements for registration and obtain the relevant business permits.
Are you planning on starting a business in the Netherlands or do you wish to receive more information on taxation, investment or incorporation in the country? Please contact our local incorporation agents.