Business entities in Netherlands
The Netherlands has favorable conditions for the incorporation of a company, due to its taxation environment, legal framework and business flexibility. The limited liability company (also known as BV) is the most common way of doing business in the country, however foreign companies can also decide upon incorporating a i) public limited company, ii) a holding company, iii) an IP holding, iv) a cooperative, v) a branch or vi) a representative office. Due to its extensive expertise, Healy Consultants Group PLC can advise our Clients on finding the optimum corporate business structure for their specific situation.
The Netherlands Limited Liability Company (BV)
- An LLC is the most commonly used business entity in the Netherlands, and since the introduction of the ‘Flex-BV’ rules in 2012, it has become more flexible and efficient to better cater the needs of the investors. For example, with these new changes the requirement of € 18,000 issued share capital was dropped, and now a LLC does not require a minimum issued share capital in the Netherlands;
- Annual audited financial statements and tax returns must be submitted to the Dutch Tax Authority after the LLC company is set up. A Dutch LLC is considered resident for tax purpose, so corporation tax on all its net profits amounts to 25%, and 20% for profits above €200,000.
The Netherlands Public Limited Company (NV)
- The PLC is recommended when there is the intention to list the company on a stock exchange (for example Euronext Amsterdam), which is not possible with a BV;
- The process of incorporating a PLC in the Netherlands takes 3 weeks and requires a minimum issued share capital of €45,000. The company must be registered with the Dutch Chamber of Commerce and must submit annual audited financial statements.
The Netherlands Large enterprise (SV)
- Both public limited companies and limited liability companies are considered as large enterprises i) if they have more than 100 employees in the Netherlands and ii) if they have more than € 16 million in issued capital and reserves;
- The main difference between a SV and a medium and small size NV/BV is that for the former a supervisory board is mandatory, while for the other two it is optional. A supervisory board is made up by at least 3 members and it has the power to approve certain decisions made by the management board, such as changes in share capital, mergers and takeovers, changes in article of incorporation, appointment of executive members of directors, among others;
- Supervisory boards in foreign owned SV subsidiaries have the right to approve important management decisions, however they cannot hire or dismiss managing directors. To be considered a foreign owned SV, a company must meet the requirement mentioned above but must have half of the employees located outside of the Netherlands.
The Netherlands Holding Company
- In the Netherlands, participation exemption applies in cases in which the parent company holds at least 5% shares of its subsidiaries, provided that they meet the following three requirements: i) the subsidiaries are not held as just a portfolio investment; ii) the subsidiaries are subject a reasonable tax rate according to Dutch standards; iii) less than 50% of the subsidiaries’’ assets are “passive” assets;
- The existence of resident directors is necessary in order for a corporation to get access to tax reductions and DTA in the Netherlands.
The Netherlands IP Holding Company
- The Netherlands is very encouraging of innovation companies, going as far as setting up a tax reduction scheme (innovation box). Under this scheme, a 5% tax rate will apply for profits and losses on intangible assets for which i) have received a patent (local or foreign) or ii) for which have received a R&D statement;
- Dutch IP Holding Companies can also apply for a R&D declaration through the Dutch Promotion of Research and Development Act (WBSO) to have access to subsidies and further deductions, such as a subsidy of 18% to 64% of employment costs related to R&D process;
- In order to gain access to incentives regarding innovation, the Netherlands government requires evidence of the existence of staff that perform roles related with R&D.
The Netherlands Cooperation Company
- The name of a Dutch cooperation companies must end with B.A (limited liability) or U.A (excluded liability) and must include the word “cooperative”;
- Cooperatives do not have shareholders, but members. It must have more than one member, which can be individuals or legal entities;
- Cooperatives are not subject to withholding taxes.
The Netherlands Branch Office (B)
A branch office is not a legal entity in the Netherlands, consequently the foreign company has full liability over the branch. The branch will be under the same tax obligations as LLC companies, therefore it will also be submitted to a corporate tax rate of 25% and annually audited financial statements.
The Netherlands Representative Office
- A representative office is the best type of entity to i) promote the business of the parent company and ii) to conduct market research. A representative office is not allowed to make direct sales within the Netherlands, and therefore is exempted from corporate tax;
- A representative office will be registered with the Dutch Chamber of Commerce under “Branch (without commercial activities) of a legal entity”.
Table of comparison between different Netherlands business entities
|LLC||PLC||Holding||IP Holding||Dutch Co-operations||Branch||Representative office|
|Operations and Logistics|
|Bank signatory must travel?||No||No||No||No||No||No||No|
|Is doing business in the Netherlands permitted?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to sign contracts with Dutch entities?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to issue invoices to local Clients?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Can rent office premises?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Tenancy agreement required before incorporation?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Allowed to import raw materials?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Allow to export goods?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Accounting and tax|
|Standard corporate tax payable||25%||25%||25%||25%||25%||25%||0%|
|Availability of reduced rate?||No||No||Yes||Yes, up to 5%||Yes||No||No|
|Corporate bank account?||ABN AMRO||Deutsche Bank||ABN AMRO||ABN AMRO||ING Netherlands||RBS Netherlands||SNS Bank|
|Statutory audit required?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Annual tax return to be submitted?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Access to double taxation treaties?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Issue share capital required?||€1||€45,000||€1||€1||€1||None||None|
|Resident director required for company set up?||No||No||No||No||No||Yes||Yes|
|Resident director required for double tax treaties and access tax benefits?||Yes||Yes||Yes||Yes||Yes||No||No|
|Minimum number of directors||1||1||1||1||1||1||1|
|Minimum number of shareholders||1||1||1||1||2||1||1|
|Individual shareholders allowed?||Yes||Yes||Yes||Yes||Yes||No||No|
|Corporate director(s) allowed?||Yes||Yes||Yes||Yes||Yes||No||No|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Public register of shareholders and directors?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Can the entity hire expatriate staff?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|How long to get a work permit approved?||3 months||3 months||3 months||3 months||3 months||3 months||3 months|
|Fees and timelines|
|How long to set the company up?||3 weeks||3 weeks||3 weeks||3 weeks||3 weeks||3 weeks||3 weeks|
|How long to open corporate bank account?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|Estimate of engagement costs||€15,440||€18,440||€15,440||€15,440||€15,440||€14,440||€13,690|