Time of establishment of the company
The Netherlands has one of the strongest economies in the world, 6th most important in the EU and 16th in the world. Nonetheless, the country is still looking at foreign trade to account for more than half of its GNP. The Dutch economy is seen as an open economy, with little interference from the government.
Types of companies
- Limited liability company – B.V. (Besloten Vennootschap)
Private company Besloten Vennootschap (B.V.) is a limited liability company limited to the value of the shares that have been registered. B.V. can be established with an initial capital of up to EUR 1. A Dutch subsidiary can be established by one or more shareholders who act as natural persons or legal entities – their nationality is irrelevant. If the shares in the company are held by one shareholder, each agreement between the shareholder and the company must be made in writing. The same applies to resolutions adopted by that shareholder. In addition, such a company is required to provide information on the name and address of the shareholder to the register of the Chamber of Commerce in the district where the company is registered. B.V. are usually the best step to create a subsidiary.
The transfer of shares or rights to shares (e.g. through a pledge, warranty) should be carried out in a way of writing a relevant notarial deed before a notary.
- Branch of a foreign entrepreneur
The establishment of a branch for a foreign company in the Netherlands does not require the prior approval of the Dutch authorities. The central office of a company only has to submit certain documents and information to the commercial register of the district in which the branch will be opened. This is done on behalf of the Client by a local partner. Costs related to the generation of income in the Netherlands as well as VAT (21% rate) are paid in the Netherlands. The company may charge for services or general costs made for the branch, thereby transfering the costs. However, the cost sharing has to be pre-determined. The branch must have an address and actually conduct business. It would be advisable to employ of an employee (president) who is a resident of the Netherlands. The need for a CEO can be solved by means of a trust service and the address can be provided by a virtual office. In the phase before the registration of the branch, the local partner either gives its address or appoints it in the place of residence of the President residing in the Netherlands, after which it is transferred to the address of the virtual office.
- Partner company
A partner company with a general partnership (Vennootschap Onder Firma – V.O.F.) or a limited partnership (Commanditaire Vennootschap – C.V.) may be created by at least two partners, who may be natural or legal persons. The parties must enter into a partnership agreement and partnership (not a contract), it must be registered in the commercial register of the Chamber of Commerce. The partners in the general partnership (V.O.F.) are jointly and fully responsible for the obligations of the company.
In a limited partnership (C.V.), the limited partner is liable only up to the amount of the capital contribution, provided that he does not in any way take part in the management of the partner company vis-à-vis third parties. His identity is not registered in the commercial register. There are no restrictions on establishing a partnership between a foreign investor and a Dutch resident.
Company registration procedure
Registration of the company:
- Preparation of the deed of incorporation in the form of a notary and signing it by the shareholders before a notary public. This deed must include details of the founders, board members and the amount of the initial capital.
- Payment of the declared initial capital to the account.
- Submission of documents by a notary to the commercial register of the Chamber of Commerce competent for the place of registration of the company.
No restrictions on the number of shareholders, however, a minimum of one shareholder is required to establish the company. Foreign shareholders are allowed.
The company is managed by one director or a board of directors. The functions of the board may be performed by the shareholders. Anyone can become a director, regardless of origin or place of residence, this function can also be performed by a legal person. Companies with more than 50 employees must establish a works council whose representatives have the right to participate in discussions and advise the management on important matters.
The company must have a registration address, telephone and mail redirection. It is also possible to have a stationary office (prices vary depending on demand).
Time to set up a company:
The time of establishing a company is about 2 weeks.
No minimum capital required.
Taxes and finances
The Netherlands is a tax regime favourable to international holding companies. Thanks to the exemption from income tax of holding companies, it is worth considering setting up a holding company for a capital group there.
Tax residence of the company
A company is resident if it is registered or managed and controlled in the Netherlands. Residents pay tax on income from both domestic and non-domestic activities. Non-residents only pay tax on income earned in the Netherlands. It is levied on the company’s income from both domestic and foreign activities, passive income and capital gains.
The rate is 20% for the first 200,000 euros of income; 25% for income above the threshold of 200,000 euros. These rates are to be gradually reduced so as to reach 16% and 21% respectively in 2021. Normal operating expenses can be deducted. A straight-line method is the most commonly used, although entrepreneurs can also opt for a degressive method. Losses can be deducted from income for a further 9 years and a year back. Some companies may be subject to additional conditions. Profits from the sale of shares are not taxable if certain conditions are met. Other gains are taxed in the same way as ordinary income.
The Netherlands is a party to a number of treaties that provide businesses with an exemption from double taxation.
Counteracting tax avoidance
Transfer pricing: full competition applies. Full documentation related to intra-group transactions must also be maintained. The Netherlands applies the guidelines issued by the OECD. Multinational companies must prepare a report on their activities in each country.
Tax year is a calendar year. A different model of the year may be adopted if such information is included in the instrument of incorporation. It is usually 12 months, although the first year of operation may be longer or shorter. Tax returns are submitted electronically each year, within a maximum of five months from the end of the tax year. At the taxpayer’s request, this period may be extended. Tax payments are made monthly. Consolidated accounts may be submitted. In order to be eligible, a parent company must have a minimum of 95% of the shares of a subsidiary and both companies must have the same tax year. The limitation period is 5 years. In the case of foreign income this period is 12 years. Mandatory annual financial statements, schedules and management reporting based on an estimated number of monthly bills and annual turnover forecasts.
Dividends paid to residents or non-residents are subject to 15% tax unless tax agreements or EU directives reduce it.
The standard rate is 21% (reduced by 0% and 6% respectively). Registration is obligatory for all entrepreneurs making transactions subject to this tax. Declarations and payments are submitted every month, quarter or year depending on the amount of VAT due.
- Real estate tax – rates depend on the location of the property.
- Tax on transfer of real estate – 6% of its value; the reduced rate applies to a residential unit – 2%.
- Customs duty is levied on products originating outside the EU. Excise duty is levied on alcohol and alcoholic beverages, tobacco and fuels.
- Ecological taxes – tax on coal production and import; tax on electricity, gas and water consumption; tax on waste production.
- Tax on insurance premiums – 21%; tax on vehicles – the rate varies depending on the type of vehicle and the fuel it is fed with.
Local labor law
The Netherlands is a tax haven for some businesses.
Customers who carry out projects under copyright and industrial property rights can benefit from a special tax regime, provided that they have created and sometimes purchase a specific intangible right:
- Small taxpayers, i.e. taxpayers whose global turnover (turnover of the capital group) is lower than EUR 250 million and whose intangible rights qualified for a specific qualification bring less than EUR 37.5 million within 5 years, may benefit from a reduced tax rate of 5%.
- Large taxpayers have to meet additional requirements – e.g. to obtain an exclusive patent for an invention.
In addition, it is worth noting the exemption from taxation of dividend income if the Dutch company owns more than 5% of the shares in a daughter company.
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