The Netherlands and company formation: what type of company
Do you know that doing an international business has tons of benefits and we are here to inform you further about things you should know in doing business in Netherland
Have you ever dreamed to run an international business in Netherland located at the Europe’s front door ? İf you have not , Why?
Overseas business holders who are looking to start a business in Netherland may establish Netherland operations as a one-man business, a private limited company (BV), a partnership or a limited partnership.
MAIN FORMS OF COMPANY/BUSINESS IN THE NETHERLANDS
The main forms of a company in The Netherlands are the Private Limited Liability Company (BV) and a public limited liability company (NV).
FORMS OF CORPORATION IN NETHERLAND
|Legal||Forms Establishment||Capital required||Liability||Taxation|
|One-man business||Free||none||Private 100%||Income tax, *SME profit dispensation, employer deduction (if hour quota is met)|
|Private Limited Company (BV)||Notarial deed of incorporation||€ 0,01||Board of directors||Partnership tax, income tax over board member salaries and over dividend|
|Public Limited Company (BV)||Notarial deed of incorporation||€ 45.000||Board of directors||Partnership tax, income tax over board member salaries and over dividend|
|Partnership (Maatschap)||Free, preference in writing / (notarial) contract||None||Private for equal amount if partnership does not fulfill obligations||Income tax, *SME profit dispensation, employer deduction (if hour quota is met)|
|Commercial Partnership (VOF)||Free, preference in writing / (notarial) contract||None||All partners privately for 100% if Commercial partnership does not fulfill obligations||Income tax, *SME profit dispensation, employer deduction (if hour quota is met)|
|Limited Partnership (CV)||Free, preference in writing / (notarial) contract||None||Managing partners privately for 100%, Limited partners have limited liability||Managing partners; Income tax, *SME profit dispensation, employer deduction (if hour quota is met)|
|Foundation (Stichting)||Notarial deed of incorporation||None||Board of directors||Possibly partnership tax|
*SME profit dispensation:this is a kind of “tax discount”. One-man businesses and partnerships can deduct 14% of their taxable result, before calculation the tax payable. In fact, they only pay tax on 86% of their taxable profit.
The Dutch BV (Private limited company) is the most popular type of company in the Netherlands for foreign investors. The Dutch limited company can be registered with a minimum share capital of 1 EUR, according to corporate law. A Dutch BV is deemed tax resident by law in the Netherlands.
Required documentation for the formation will consist of a legalized and apostilled copy of valid identification and proof of address. A power of attorney is required to be signed by a notary for remote incorporation. But: it is not necessary to travel to Holland to do this. The shareholders can authorize us to take care of the necessary filings on their behalf.
A personal visit is not required for starting a business in the Netherlands, and the procedure can be completed from abroad. We can also open a bank account remotely. With certain banks, the director has to be present to open a bank account.
A limited company in the Netherlands may have corporate shareholders and directors. For the registration process, the corporate shareholders must be verified and have the authority to sign the deed of incorporation or formation. Furthermore, an extract from the business register of the corporate entity must be received from the entities, which will act as shareholder or director. If registration is performed remotely, a power of attorney must be received and signed on behalf of the shareholder or director.
In the case of corporate shareholders, the Dutch company will be a subsidiary. It is also possible to register a Dutch branch; a branch office has less substance than a subsidiary and may be treated differently by the Dutch tax authorities. Substance may come from appointing a resident director.
Dutch NV company, also known as public liability company is a legal entity most suitable for large corporations and investments. It requires a minimum share capital of EUR 45,000. The Dutch NV company is controlled by a board of directors for day-to-day decisions. The annual shareholders meeting may appoint directors or demand changes in management.
Entrepreneurs in the liberal professions (such as doctors, lawyers and graphic designers) often set up partnerships (maatschap).
A partnership is an arrangement by means of which at least two partners, who may be individuals or legal entities, agree to conduct a joint business. Each partner brings money, goods and/or manpower into the business. Each partner is personally, either jointly or severally, liable for all the obligations of the partnership. A partnership does not possess legal personality. Registration with the Chamber of Commerce is required for a partnership (maatschap), only if it enters into a business.
A public partnership (openbare maatschap) participates in judicial matters under a common name. The possessions of a public partnership are legally separated from the possessions of the partners.
A general partnership can be defined as a public partnership that conducts a business instead of a profession. A VOF and its partners must be registered in the Commercial Register at the Chamber of Commerce.
The Dutch Foundation is an excellent entity for tax planning. Dutch foundations can be used as commercial entities, tax-free family funds, and holding entities. The foundation may hold shares and real estate, it may strive for profits. Dutch foundations can be tax-exempt under certain conditions. Or can even be exempt from accounting or reporting requirements. If the Dutch foundation is concluded under notary agreement, the foundation will be limited in liability.
Dutch CV company, a limited partnership can be formed with at least two partners, the partners can be legal entities (like a Dutch BV) or individuals. The partnership consists of a partnership agreement and an official registration process in the Dutch business register. The limited partnership has limited or ‘silent’ partners and general partners. The liability for the limited partner is limited to the capital contribution put into the company. This is similar as with a Dutch BV. The general partner is fully liable for the company. The silent partner is liable only up to the amount of his capital contribution. He is not allowed to act as an active partner and his name cannot be used in the name of the partnership. If the silent partner enters the business (to provide extra finance for growth) he becomes liable as an active partner.
Taxation in Netherlands
Corporate income tax is charged on the taxable profits earned by the company in any given year less the deductible losses. The following are the applicable corporate income tax rates:
|Profit from||Profit up to and including||Rate|
|More than € 200,000||25.0%|
Corporate Income Tax in the Netherlands
The corporate income tax in the Netherlands is 20% up to EUR 200.000 profit a year, the profit of EUR 200.000 and more is taxed at 25%.
The Netherlands has a 21% VAT rate on goods and services delivered in the Netherlands. Between European countries, goods and services may be offered at a 0% VAT rate. Corporations with a VAT number may claim back the VAT. Many international companies have found the Netherlands to be an excellent country to optimize their global tax rates. This is primarily because of the interesting regulations and tax benefits for international companies.