If you are thinking about starting a freelance business, you might want to reconsider establishing a company in your own country. Especially if you already happen to reside here, for example when your spouse is an expat stationed in the Netherlands. More and more freelancers and entrepreneurs decide to found their businesses overseas. Why? Mostly due to the fact that multiple foreign countries offer substantial benefits for business owners, making it very profitable to start a foreign business.

The Netherlands is definitely one of those countries. With a very stable political climate, one of the lowest tax rates in Europe and many benefits that come with being a part of the European Union, you can very safely establish your business here for future success. Best of all: starting a company as a freelancer in the Netherlands is not difficult at all! There are some standard procedures you will have to follow of course. In this article you will find more information about the process.

Can anyone start a business in the Netherlands?

The answer to this question is yes. There are no limitations in terms of nationality. However, if you are residing in a country outside of the EU, the procedure will take a bit more effort and time, since you will need a certain permit in order to be able to stay in the Netherlands legally. This will either be a start-up permit, or a self-employed permit. You can find more info about the whole process of applying for the permits on this page about opening a Dutch company.

What do you need when you decide to register your freelance company?

There are several documents you will need to produce when you start the registration process. These contain necessary information regarding the identity of all people involved, as well as accompanying documents about the business itself, possibly an extensive business plan and also your preferred company name. It is advisable to hire a professional firm to guide you through the whole registration process, because it will substantially shorten the timeframe and probably also the total start-up costs.

You will need to think about the company form you will choose. In the Netherlands there is quite a large amount of legal entities to choose from, ranging from a sole trader business to a holding structure with multiple private limited companies. In general a private limited company is advisable, due to the many benefits and securities this legal entity offers. It is also the most chosen incorporated business form in the Netherlands, not just by Dutch entrepreneurs but also by almost all foreign investors.

Why choose the Netherlands to establish your freelance business?

The Netherlands is an extremely safe and stable country for entrepreneurs and foreign investors, with a very high success rate for most innovative businesses. Some of the benefits for your business you can expect here:

• There are ample amounts of successful Dutch businesses in various sectors, proving strength in innovation and ingenuity
• The EU Single Market makes it possible to freely trade services and goods throughout the entire EU
• You can find both Schiphol and Rotterdam port within driving distance, two world-famous logistical locations connecting you to a worldwide infrastructure
• The costs of starting a (freelance) business are fairly low compared to a lot of other countries
• You will find a well-educated and often bi- or even trilingual workforce in the Netherlands, offering you plenty fantastic candidates to choose from should you feel the need to hire personnel
• The Dutch have access to immense international markets and are part of many trade agreements, which works in your favor as a business owner

The Netherlands will offer you a safe and promising environment to establish and grow your business to success. If you want to know more or would like more information about the procedure of starting a business as a freelancer, you can contact https://businessforimmigrants.nl and ask them all your questions. They can assist you every step of the way and offer many extra services.

Updated: 5 October 2021

Is a local Dutch director required to incorporate a Dutch BV?

No, it is not a requirement to have a local Dutch director to set up a Dutch BV. In fact, most of our clients are non-Dutch residents.

If you are a small or medium company, or you have a clear goal for your Netherlands business activities. It is likely not so relevant to consider the substance requirements for corporate income tax. We have not seen a case with our clients where substance requirements affected the corporate income tax.

If you expect a profit of above €250.000 per year, we recommend a consultation with one of our tax advisors to determine the best way of structuring your company for tax, director compensation and dividends. 

Your VAT situation is determined upon application for a VAT number, sometimes this is automatically accepted. Sometimes you need to answer additional questions. In all cases of actual VAT liable activities in the Netherlands, have we seen our clients been granted a VAT number.

Legal information on substance of a Dutch BV (Where is the Dutch BV officially tax resident?)

Article 2 of The Netherlands corporate Income tax Act states that a BV incorporated in the Netherlands is always ruled to have its residency in the Netherlands. That means that the Dutch BV always has to file corporate tax returns in the Netherlands and publish its annual accounting.

The exception is in cases two countries are claiming the same tax. This can happen in certain specific scenario's whereby a company is incorporated in the Netherlands because of lower taxes, while the activities are still performed in the country of residence of the Director. To settle these disputes and provide clarity on the matter, the Netherlands has made agreements with many countries in the form of Double Tax Treaties. 

The Netherlands' tax office is of the general opinion that any corporation incorporated in The Netherlands, is resident here for the corporate tax. We call this the 'principle of territoriality'. Therefore, the seat of the company is always deemed to be based in The Netherlands, even in double tax treaty disputes.

We have not seen any cases before amongst our clients where double tax treaties and substance is relevant for corporate tax. If you earn more than €250.000 per year, we in any case advise a consultation with our tax advisors. Our tax advisors can consult you about: Director fees, tax optimization, the best corporate structure for you, double tax treaties, dividend tax and much more.

Then why do I hear about the Dutch director substance requirements?

Certain Dutch firms cater their services aimed at multinational corporations and companies which use the Netherlands as a holding company or intermediary holding. The holding can be of intellectual property, royalties or shares. One of the primary purposes of such structures often is the usage of the extensive tax treaties the Netherlands has with other countries.

For example: A company, like Starbucks.
Starbucks might decide to collect the dividends from all their worldwide subsidiaries through a holding company in The Netherlands. Since the Netherlands has the most extensive double tax treaty system in the world. Thereby avoiding costly double-taxes when distributing the dividends.

If your firm is not relying on such a double tax treaty. You are likely unaffected for the corporate income tax if you are a non-Dutch resident director.

Many tax advisors have little experience with the day-to-day reality of small- and medium-sized entrepreneurs. Where the substance regulations rarely effect them. The tax legislation is aimed mostly at letter-of-the-law situations where real abuse of the tax treaties occurs, such as with certain multinational companies with tax structures that lack meaningful substance.

In short, if you want to be 100% sure that your company is taxed in The Netherlands, the level of substance and activities in The Netherlands would need to substantiate that. However, you are unlikely to be affected by the substance requirements, unless you make significant profits.

Substance requirements for big corporations (Tax treaty protection)

Some big firms rely for a Dutch entity only on a tax treaty. To be 100% sure that the Netherlands tax substance is sufficient, stock listed and large multinational firms, royalty holdings and similar corporations tend to hire a Dutch director for a minimum of 50% of the board of directors.

In our experience, in 99% or more of the cases, smaller companies, trading companies and others are unaffected by the 'substance' requirement to have a local director. We have worked with over 1000+ companies of all sizes.

If you are in doubt if your firm has to find a local director. It is perhaps best to for a consultation with one of our tax advisor on topics such as  ''Double tax avoidance'', ''Transfer pricing'', ''At Arms Length principles'', and ''Advanced Tax Rulings''.

Other cases a Dutch resident director might be helpful

It may prove useful to have a Dutch resident director for applying for a local bank account or a local VAT number. In by far the most cases where actual business activity takes place in the Netherlands, this will prove successful without a local director.

Substance for VAT

The VAT regulations (to apply for a VAT number) is not covered by the same regulations as the corporate income tax. The tax inspectors will make their own decision based on each individual company. In our experience, this should not prove a problem in case you have actual VAT-liable activities and operations in the Netherlands.

Relevant aspects an inspector will consider for the VAT application:

• What is the company activity? (For example, buying agricultural goods in the Netherlands and shipping them all over the world).
• Where does this activity take place? (Are goods or services sent to or from Dutch suppliers, or to or from Dutch customers?)
• What substance does the company have in the Netherlands? (Staff? A warehouse? Suppliers? Customers? An office? Servers for its website? Etc.)
• Where is the company operated from? (Does it have a (virtual) office in the Netherlands?)
• Where is the director located? (Does it make sense for this company to be operated remotely?)
• Is the company activity considered a risk category for VAT fraud?
• Why is this company based in the Netherlands?

Foreign VAT number registration in The Netherlands

If your company is considered not to be based in The Netherlands, for the VAT. You will be able to obtain a VAT number for foreign (controlled) companies. What this mean and how does this affect your company?

Your foreign VAT number can be registered under the address of your foreign holding company, or the address of your director. 

The foreign VAT number will be treated the same in the following situations:

• Selling goods and services in The Netherlands and Europe
• Buying goods in The Netherlands and Europe for trade

The foreign VAT number will be treated differently in the following situations:

• The foreign VAT number will be treated differently when buying services for your Netherlands company. 
• The foreign VAT number will be treated differently when you are buying (for example) a company laptop.

The result is that your suppliers need to invoice you at 0% VAT when providing you with services.

It has become pretty clear that Brexit has had various effects on businesses currently situated in the UK. A lot of major companies and organizations are already moving their headquarters elsewhere, in order to stay involved with the EU and all its associated benefits. This also means that many start-ups and investors are looking for alternatives to their original plans of starting a UK business. Are you on the lookout for a suitable new location? Then the Netherlands might just be exactly what you are searching for.

Deal or no deal: the UK is withdrawing

The fact that the UK will soon no longer be part of the EU means that businesses situated in the UK will also feel the consequences. In the case of a deal there might be several agreements to stabilize international relations, but the fact still remains that your business probably won’t benefit from all EU regulations anymore.

When there will be no deal, the whole situation becomes even more severe. Without any mutual agreements, the UK basically stands alone. This will be felt in the business sector on various levels, from international trade to customs affairs. There are many different scenarios and every single one of these possibilities definitely involves some kind of restriction for UK companies. Why? Because you will no longer be seen as an EU-member.

Consequences of your company being ‘cut off’ from the EU

The EU offers many benefits for its member states, which are especially beneficial for entrepreneurs and investors. This includes factors like the single market, healthy competition, substantially reduced paperwork, free movement of people, goods and services, harmonized standards and so on. The EU offers you the possibility to trade in a very large market without customs, import taxes nor a long list of complicated regulations. Once Brexit is finalized, you might lose some (or even all) of these benefits. Suffice to say, this will have a negative impact on the flexibility, adaptability and overall success of your (future) business.

How to avoid this? Move your start-up or business to the Netherlands

You definitely won’t be the first! According to The Guardian, the Dutch government states that more than 250 UK companies have already made the move to Holland. The Netherlands supposedly has gained almost 2000 new jobs due to Brexit.[1] These companies are active in several key industries and sectors, such as the health sector, the creative industry, financial services and the logistics sector.[2] Some well-known names that have already established their headquarters in the Netherlands include Sony and Panasonic, Discovery Channel and Bloomberg.

How to proceed with moving your business to the Netherlands?

If you want to know exactly what your options are, contact us immediately. Intercompany Solutions can assist you every step of the way, whether you already own a company or are planning to start a business in the Netherlands. Don’t miss out on all the benefits Holland has to offer and take action now, while you are still in the position to go through the procedure as an EU-citizen.

[1] O'Carroll, L. (2019, 9 February). Brexit: Netherlands talking to 250 firms about leaving UK. Link: https://www.theguardian.com/politics/2019/feb/09/brexit-uk-companies-discuss-moving-to-netherlands.

[2] Pieters, J. (2019, 25 januari). Over 250 companies considering move to NL over Brexit: report. Link: https://nltimes.nl/2019/01/25/250-companies-considering-move-nl-brexit-report.

It has almost been two years since the infamous Brexit referendum. A small minority of Brits then made it clear, that they no longer wish to be part of the European Union. And so Brexit was born. After many negotiations and struggles there is still no clear view about the road ahead, meaning that the UK may or may not become independent on March 29, 2019.

Intercompany Solutions CEO Bjorn Wagemakers and client Brian Mckenzie are featured by CBC News - Dutch Economy braces for the worst with Brexit,  in a visit to our notary public on 12 February 2019. 

In either case, there will be consequences for every single party involved. Of course if there is no deal, the situation can become frantic as there will be no agreements with the EU. The UK might find itself in a very uncomfortable position, and not just with the EU but with many other nations that have trade agreements with the EU. In the case of a deal, there are still many factors that will influence business owners and entrepreneurs who work either from the UK or from an EU-member state.

There’s a rather large grey area between deal and no deal, which will have various consequences depending on the scenario playing out. Plus; the financial losses to sustain the whole process up until now have been severe. The big question for everyone is whether the UK will stay involved with the EU at all, and if yes; in what role? The long-term relationship between the UK and Europe is very unstable and this can have massive effects on your business. It doesn’t even matter if that business already exists, or is just an idea at this moment.

From the UK to a business in the Netherlands

In this article we will inform you about the most important details of Brexit and the possible consequences of all scenarios. You will also find information about the benefits of having a business in an EU-member state, and why the Netherlands is possibly one of your best options. Huge companies like Sony, Discovery and Panasonic are already moving their headquarters from the UK to the Netherlands. We will discuss why this is a solid and smart move that might be beneficial for you too.

Start a business in The Netherlands

Why is Brexit bad for business?

The negotiations between Brussels and the UK have been going on for almost two years by now, and still there is no consensus. Major issues like the border between North-Ireland and Ireland are unresolved up to this date. This leaves a huge amount of entrepreneurs, business owners and foreign investors in the dark about the choices they should make.  In the case of a deal, which means the UK will not be a member state of the EU any longer but with the inclusion of agreements between both parties, there will be losses in terms of national income. The Financial Times assessed the situation and according to their expertise, the outcome would be as follows:

• If the UK stays a member of the single market: 2% loss
• In the case of a free trade deal with the EU: 5% loss
• If trade between the UK and EU is commenced under WTO rules: 8% loss[1]

Needless to say, that a no-deal situation resulting in a hard Brexit may include financial consequences which will be far more severe. Large corporations and companies have already initiated steps towards damage-limitation. Companies like Bentley were slowly returning to profit but might fail anyway, when a hard Brexit becomes reality. Adrian Hallmark, Bentley’s CEO, explained to The Guardian: “It’s Brexit that’s the killer, if we ended up with a hard Brexit... that would hit us this year because we do have a potential to get beyond break-even to do the turnaround. It would put at fundamental risk our chance of becoming profitable.”

In the eventuality that he would need to stop production in the UK-based Crewe plant, this would cost Bentley millions a day.[2] And Bentley is not the only worried company, which is exactly why many multinationals are swiftly moving their headquarters to ‘safer terrain’ like the Netherlands. Because the benefits and profits of staying within the EU are very real for most business owners.

The repercussions of Brexit: More than 250 companies are considering relocation to Holland

Hundreds of businesses are discussing options for relocation with Holland’s government, as they are worried about their trade on the European market after the British exit from the EU. Several popular companies have declared their firm decisions to relocate.

Consequences for businesses

Brexit and the uncertainty about its specifics strongly motivate companies to leave Great Britain and move to Holland. In 2018 Panasonic announced its intention to move to Amsterdam. More recently Sony also communicated its plan to relocate, citing Brexit as the reason for these developments.

The Dutch Agency for Foreign Investment claims that it has been contacted by more than 250 companies to discuss their relocation to Holland. In 2017 the number was 80, and at the beginning of 2018 it increased to 150.

More businesses are expected to express interest in moving to the country of windmills and tulips before the total figure is announced the following month. A representative of the Dutch Foreign Investment Agency stated that every company’s arrival, regardless of its size, is good news.

The United Kingdom loses and the Netherlands wins?

Britain recently lost a major player in the face of EMA (European Medicines Agency), an institution employing approximately 900 highly qualified workers. EMA has decided to establish in Amsterdam. Other countries are also benefitting from Brexit, because a number of companies in the financial sector plan to move their operations and employees overseas to cities such as Luxembourg, Frankfurt, Paris and Dublin.

It may seem that Holland is benefitting much from Brexit because of the rapidly increasing interest in the country as a destination for business establishment. Still, the companies that actually move will only alleviate the negative consequences of Brexit for Holland. The effects of Brexit are still ambiguous but the country has considered a no-deal situation regarding the rights of British residents.

The European Union in a nutshell

Every member state has accepted the four freedoms of the EU, which are basically the pillars of its existence:

• Free movement of goods
• Free movement of capital
• Free movement of services
• Free movement of people

It is obvious how these freedoms are beneficial for companies based in one of the member states. All companies inside ‘the bloc’ can buy and sell products and services freely within the borders of the EU. To keep the market fair for everyone, a regulatory framework exists that prevents a party from gaining unfair competitive advantages.

Member nations also have the obligation to implement EU law into their own national law and to recognize mutually shared standards. Another important role the EU plays, is that of a common customs union. The member states can trade freely within the borders of the EU, though all non-EU countries are bound to common tariffs on imports. All in all, the EU protects its member states in many ways but also limits countries’ autonomy. This is exactly why the UK decided to leave the EU.

What are the benefits of trading within the EU?

The European single market is obviously the main benefit here. Currently the EU is the largest single trader in the world, accounting for 16.5% of the total sum of imports and exports around the globe.[3] The main goal of the EU is not only the possibility for free trade amongst its members, but also the liberalization of world trade. Some tangible benefits of owning a business in an EU member country such as the Netherlands include:

• No internal trade barriers
• Healthy competition in services
• Reduced overall business costs
• No monopolies or cartels counteracting competition
• Reduced amount of paperwork
• Various harmonized standards
• A more efficient way of doing business
• Free movement of people resulting in a multinational labor force
• A single trade currency – the Euro

This is why being a member of the EU has offered key benefits to UK businesses. The EU includes some of the wealthiest and most prosperous countries worldwide, offering every business owner access to an enormous amount of suppliers. You can basically see the EU like a big marketplace, which offers an amount of convenience similar to doing business in your own country. No customs, no import taxes and a lot less regulations to slow trade down.

Fair and open trade possibilities

The World Trade Organization ensures that obligations and trade agreements between countries worldwide are transparent and fair. All EU regulation and trade policy is made on behalf of the EU by the Commission, who work closely within the framework of the WTO in order to ensure fairness and openness. The commission also works very closely with national governments, the European Parliament and global organizations to be able to adapt quickly to necessary worldwide and local situations and changes.

Because the EU has an extensive network of worldwide trade relations, favorable agreements can be negotiated. This is something a country on its own would not be capable of. All these partnerships are aimed at creating and maintaining a stable and fair single market that provides business owners with many benefits. It also makes it safer for business owners to trade outside of the EU, being protected by numerous multilateral agreements.

 

The EU provides safety and stable conditions

Next to creating opportunities for business owners, the EU also strives for better working conditions in poorer countries. The EU trade policy is aimed at reducing and putting a stop to malpractices such as child labor, the use of harsh chemicals and creating environmental hazards as well as combating price volatility. Countries in distress can be actively pushed forward by actions such as temporarily lowering duties, providing governance advice and supporting smaller national businesses. By choosing to establish a company in the EU, you automatically choose safe conditions.

Is a company in the Netherlands a good Brexit alternative for your business?

In general, starting a Dutch business is almost always beneficial due to the large amount of benefits and possibilities the Netherlands has to offer. If you’re still in doubt though, you can ask yourself a few questions first. The answers will determine whether Holland is a good place to start your company:

• What kind of business are you planning to establish?
• Is it possible for you to start such a company in the Netherlands?
• Is there a fitting niche for the services or products you want to offer?
• Would your company be competitive in certain ways?
• Will it be easier for you to trade with a business based in the Netherlands, or would this entail certain financial benefits you currently miss out on?

It’s a wise to answer these questions for yourself beforehand, since you might need to answer them once you decide to start the process of establishing a Dutch business. If you already own a successful UK business but want to move it to the Netherlands, you might also have to explain how your company will be beneficial for the Dutch economy.

''The Netherlands to become the centre for financial trading infrastructure of the EU27

The AFM conducted more than 150 interviews with companies that are interested in applying for a licence. ‘We assume that between thirty to forty percent of the European trade in financial instruments will opt for the Netherlands as a location. Thus, the Netherlands will become the financial trading centre within the EU27’, according to Merel van Vroonhoven, Chair of the AFM. ‘The arrival of these parties will also attract other service providers. Moreover, it strengthens the access of Dutch pension funds and other portfolio managers to the capital market’. '' [4]

How can setting up a Dutch business benefit you?

If you have already been thinking about starting or moving your business, the Netherlands proves to be a fantastic choice for almost every single investor or start-up. A business in the Netherlands offers a wide amount of perks and benefits to foreign entrepreneurs. The Dutch have been ranked 4^th on the Global Competitiveness Index of the World Economic Forum, the 3^rd best country in the world for business by Forbes Magazine due to the profitable business conditions.

A few very good reasons to start a Dutch business:

• One of the lowest tax rates in Europe: between 16.5% and 25% (15-21% from 2021)
• You don’t pay value added tax (VAT) for transactions within the EU
• The Netherlands has the largest number of treaties worldwide for double tax avoidance
• The Dutch have a solid reputation in global (e-)commerce
• More than 90% of the population speaks English and in most cases a second foreign language
• The Dutch labor force is highly educated and ranks 3^rd in the global top
• The Dutch offer an innovative international business atmosphere
• Foreign entrepreneurs and investors will profit from a stable legal and political climate and a plethora of outstanding international relations

The procedure for starting a Dutch business

If you want to be able to enjoy all the benefits the Netherlands has to offer, you will need to follow a certain procedure to establish your company here. This is where Intercompany Solutions comes into the picture. We can help you set up a Dutch business in just a few working days. We can also assist you to transfer your current business to the Netherlands. Our procedure consists of 3 general action steps:

Step 1

You will be asked to send in all the necessary documentation as well as proof of your identity, which we will check thoroughly. If you already have a company name in mind, we will check the availability of that name during this stage too.

Step 2

After all the checks we prepare all the documentation that will be needed to register your company. When these documents are finished, we send them over for you (and possible other shareholders) to sign. Once signed, you send everything back to us so we can start the registration process.

Step 3

With all the signed documents we go to a notary public, who will sign the deed of incorporation and submit the deed of formation to the Chamber of Commerce. You will then receive your registration number as well as your VAT number. Your company officially exists! If you wish, we can also take care of other matters such as applying for a Dutch bank account.

Contact Intercompany Solutions for more information

Intercompany Solutions has many years of experience in setting up businesses for foreigners, as well as handling a great many cases. We can help you with any question you might have related to starting a business in the Netherlands. From the permit you will need to finding the best Dutch bank for your business. Simply contact us for more information, and we will get back to you as soon as possible.

 

[1] Strauss, D. (2018, 9 October). Brexit explainer: what’s at stake for EU single market and customs union. Link: https://www.ft.com/content/1688d0e4-15ef-11e6-b197-a4af20d5575e.

[2] Neate, R. (2019, 23 January). Companies press Brexit panic button in further blow to Theresa May. Link: https://www.theguardian.com/technology/2019/jan/22/no-deal-brexit-panic-grips-major-uk-firms.

[3] European Union. (2018, 13 November). Trade | European Union. Link: https://europa.eu/european-union/topics/trade_en.

[4] Dutch Authority for the Financial Markets (AFM) (2018, 29 October) The Netherlands to become the centre of European financial trading post Brexit. Link: https://www.afm.nl/en/professionals/nieuws/2018/okt/trendzicht-2019

Updated 11-12-2019

The income included in Box 2 for foreign taxpayers includes the eligible Dutch income (calculated in the same way as for residents) from local companies, except in cases where the shareholding belongs to an enterprise’s equity.
Fiscal partners are subject to special requirements.

The income that must be declared in Box 2 includes the capital gains and/or dividends (main income items) obtained by a foreign taxpayer with substantial interests (>5% shareholding) in a resident company minus any losses related to the shareholding and monumental building tax deductions.

The deductions and personal allowances (“persoonsgebonden aftrek” in Dutch) do not apply for foreign taxpayers that only have income qualifying for Box 2.

The Dutch rollover/tax deferral for eligible legal mergers/demergers and share mergers is not applicable to foreign taxpayers in case the surviving/acquiring company is established outside of Holland. If a Dutch corporation changes its tax residence, then its relocation is considered as a (taxable) substantial shareholding transfer.

An entity established under foreign jurisdiction that has qualified as a resident corporation in Holland for a minimum period of five years but has relocated to another country for the purposes of taxation is considered a resident corporation in Holland for another ten years.

In case the total amount in Box 2 is a negative number, the income is considered as a substantial shareholding loss for foreign residents. Such losses are deductable and can be compensated (loss carryforward or carryback) following the same rules as for resident taxpayers. These losses can be aggregated with any qualifying losses from tax liabilities for resident taxpayers.

The taxable base is determined by special rules if the taxpayer emigrates or the Dutch corporation where he/she is a substantial shareholder transfers its tax seat to a different country.

Our Dutch specialists in taxation can provide consultancy on your tax position. We can prepare and submit your yearly income tax report and take care of other matters related to tax compliance. Please, contact us, if you need further information or tax-related assistance.

In Holland a professional investor may use various vehicles on the funds market. UCITS (Undertakings for Collective Investments in Transferable Securities) and AIF (Alternative Investment Fund) are the most common vehicles that can be marketed in the European Union.

Taxation is among the main considerations in investment fund set-up. In this respect Holland is a very attractive jurisdiction.

If you need further information on the taxation of investment funds in Holland, please, contact our advisors in company formation.

Tax treatment of investment funds (IFs) in Holland

Dutch IFs can qualify for one of three tax categories:

1. tax-exempt IFs;
2. fiscal IFs;
3. tax-transparent IFs.

Each category brings particular tax advantages.

Tax exempt Dutch IFs

Under particular conditions hedge funds and open-end retail funds may be exempt from withholding and corporate income taxes. A main requirement that needs to be fulfilled is the issue of a license by the National Authority for the Financial Markets (AFM).

Fiscal IFs taxation in Holland

Fiscal IFs are not subject to corporate income tax. A withholding tax of 15% applies to the dividends distribution, unless provided otherwise by a treaty for double tax avoidance signed by Holland. In order to receive such tax treatment, the fund has to be incorporated as a public or private Dutch company with limited liability.

Our local registration agents can assist foreign investors in establishing Dutch investment funds.

Tax-transparent IFs in Holland

For the purposes of taxation, a Dutch IF may be deemed transparent if:

1.  the IF is not considered a legal entity with respect to withholding and corporate income tax;
2. the IF is a closed-end fund for mutual account (in Dutch : fonds voor gemene rekening, FGR);
3. the IF or its managers do not have a registered Dutch seat;
4. the IF is not licensed by the National Authority for the Financial Markets.

If you need further information regarding the tax requirements for Dutch investment funds, please, contact us

Have you been thinking about starting a company? But has the whole Brexit situation left you confused and a bit unmotivated? Don’t worry; you are not the only one. Many start-ups as well as already existing business owners in the UK are contemplating their next move, figuratively as well as literally speaking.

Most business owners want to avoid becoming detached from the EU, since this would entail a significant loss in various benefits. Just think about factors such as the single market, the free trade possibilities and freedom of movement you would suddenly miss out on. To ensure you can still benefit from owning a business in one of the EU-member states, consider starting a Dutch business. In this article, will explain why this is a good idea.

What do most start-ups and aspiring entrepreneurs deem important?

The New York Times published an article exactly in the middle of 2016, in which was already foreseen that a lot of UK entrepreneurs would be actively looking for a new home for their businesses. They also published a list of criteria that seem to be important during the decision-making process:

• A high proficiency of the English language
• A good regulatory environment
• An excellent transportation infrastructure
• An equally good communications infrastructure
• Possibility to acquire prime office space
• Luxury housing options
• High quality schools
• Excellent restaurants and cultural opportunities
• “An intangible quality that includes a certain energy level and openness to an influx of highly paid, competitive City of London-Wall Street types.”[1]

Not surprisingly, Amsterdam was then named the winning city for relocation!

Why would you choose the Netherlands to start your company?

According to the same article, the Netherlands and specifically Amsterdam really is the best alternative for London: “Not only do 90 percent of the Dutch speak English, many speak it better than the English themselves. Its schools are ranked the best in Europe, and there are plenty of English-language options. The city has beautiful architecture and housing options, picturesque canals, excellent restaurants, music and theater, lively night life, and a cosmopolitan and tolerant attitude cultivated over centuries as a major global trading center. It has one of Europe’s best airports, ranked just behind Frankfurt and Vienna, and an excellent rail network connecting major European capitals, including London. It’s a short train ride to Brussels, the capital of the European Union. Amsterdam is already a center of international commerce and the financial and political capital of the Netherlands.”[2]

Intercompany Solutions can help you with the entire procedure of setting up your business in the Netherlands

Next to the country-specific benefits, the fact that the Netherlands is a highly valued member of the EU will also have a hugely positive impact on your business. Also; until 29^th of March and probably during the transition period too, you will still be able to apply for a self-employed or start-up permit as an EU-citizen. So use this opportunity to start a Dutch business easily. We will help you every step of the way, simply get in touch with us to initiate the process.

[1] Stewart, J. B. (2016, 30 June). After ‘Brexit,’ Finding a New London for the Financial World to Call Home. Link: https://www.nytimes.com/2016/07/01/business/after-brexit-finding-a-new-london-for-the-financial-world-to-call-home.html?_r=0.

[2] Idem

Tax on income generated by substantial shareholding (Income tax box 2)

If a resident of the Netherlands has a “substantial shareholding” (“aanmerkelijk belang”) with respect to an eligible foreign or Dutch corporation, then the income generated by this shareholding needs to be declared in Box No. 2 of the tax return form for personal income.

In case a taxpayer holds directly or indirectly a substantial share of a corporation, then any income obtained from loans or asset provisions to the corporation is taxable and needs to be reported as derived from other labour in Box No. 1 of the tax return form for personal income.

Read more on Box 2 for Foreign shareholders.

What is a substantial shareholding?

Taxpayers are considered as substantial shareholders if they own, indirectly or directly, alone or with their fiscal partners:

1.  a minimum of 5% of the company’s total share capital (except repurchased shares that will be cancelled);
2. have the rights to acquisition of ≥ 5% of the shares mentioned above;
3. profit shares (or “winstbewijzen” in Dutch) giving entitlement to ≥ 5% of the annual profit or ≥ 5% of any liquidation proceeds;
4. a minimum of 5% of the rights to a vote in a Cooperative (or “Coöperatie” in Dutch) or an Association on a Cooperative Basis (“coöperatieve vereniging”).

The criteria listed above are valid both for legal and economic ownership in its various forms.

The rules for substantial shareholdings apply to options to acquire profit shares / shares in the same manner as to underlying profit shares / shares.

The principles of taxation of substantial shareholdings are basically the same for Mutual Funds (FGRs), Cooperations and Associations on a Cooperative Basis: all these entities are treated as corporations.

In case one corporation owns shares of different classes, the 5% criterion is valid for each class separately. Share classes are determined by special rules.

In case a taxpayer is classified as an indirect or direct substantial shareholder, other owned profit shares / shares issued by the subsidiary also belong to the substantial shareholding and therefore are subject to the same rules.

Substantial shareholders’ taxable income

The substantial shareholders’ taxable income is formed by the regular profits generated by the shareholding (e.g. dividends) minus allocable expenditures and by the capital gains obtained through transfers of shares included in the shareholding. Personal allowances can be deducted from this income.

If certain conditions are fulfilled, the income received from inherited substantial shareholdings can be subtracted from the price of acquisition of the shareholding for a period of two years.

Can we help you?

Our qualified tax advisors can provide consultancy on your tax position. They can also prepare and file your yearly income tax report and handle other issues related to tax compliance in your name. If you need further information or assistance, please, contact us.

A characteristic feature of the tax system in the Netherlands is the option to consider the treatment of particular transactions or operations with the tax authorities in advance. The Tax Administration may give you advanced clearance. The National Tax Authorities can conclude two types of agreements with the taxpayers: an Advance Pricing Agreement (APA) or an Advance Tax Ruling (ATR).

APAs are agreements where the Tax Authorities specify the method of pricing that will be applied by the taxpayer to company-related transactions. This programme gives taxpayers the option to resolve or avoid potential or actual disputes on transfer pricing in a cooperative, proactive manner.

ATRs are agreements with the Tax Authorities that determine the legal obligations and rights of the taxpayers in their specific situations.

APAs and ATRs are binding both for the Tax Authorities and the taxpayer. Their conclusion is subject to particular substance requirements. Generally the Tax Administration is able to process requests for ATRs, APAs and other inquiries (for instance for VAT registration, fiscal unity or facilitated merger) without significant delays.

The EU law requires the Tax Authorities in Holland to automatically exchange data on APAs and ATRs with the National Tax Authorities in other Member States. The Tax Administration has prepared standard documents that taxpayers fill in to conclude cross-border rulings or arrangements with respect to transfer pricing. All National Tax Authorities in the EU are required to exchange such information. This improves the transparency with respect to corporate taxation in the Community. Eventually the EU may also start exchanging similar information with National Tax Authorities in non-members.

Cooperative compliance

If certain conditions are fulfilled Dutch businesses can apply for the so-called horizontal monitoring (enhanced relationship with the National Tax Authorities). Horizontal monitoring is a type of voluntary cooperative compliance where the organisation concludes a specific agreement with the Tax Administration. This provides advanced assurance and security and prevents taxpayers from bad tax surprises. Still the scope of horizontal monitoring includes more than legislative compliance: the business needs to demonstrate that it controls its tax risks and processes by using a Framework for Tax Control.

The National Tax Authorities adjust their monitoring intensity and methods with respect to the taxpayer’s tax control level. Hence their audits will switch from reactive (performed for past periods) to proactive (to provide security upfront). The relationship between businesses and the Tax Authorities in horizontal monitoring rests on transparency, mutual understanding and trust.

The main advantage of this arrangement is the possibility to deal with relevant tax positions and risks at the time of their occurrence within plausible commercial deadlines. Companies are expected to behave transparently in their interactions with the Tax Authorities and, in turn, the administration responds quickly with regard to issues brought to its attention by these businesses. Furthermore the horizontal monitoring programme helps to accurately determine taxable cash flows, current and deferred taxes, and guarantees that companies have few, if any, unsure tax positions. This saves businesses both costs and time. However it is worth mentioning that the Dutch Tax Administration has not yet formulated objective principles regarding the requirements for the Framework for Tax Control.

In Holland, a joint venture is an agreement between at least two companies to unite resources in order to pursue a common commercial goal. Each company keeps its identity and carries liability for the losses and profits of the venture.

The investors involved in the creation of a Dutch joint venture first have to establish two companies in the Netherlands. Joint ventures are not specifically regulated for business arrangements of this type. Still, the companies forming the venture must comply with the national corporate law.

Our Dutch agents in company formation can assist you in forming a suitable joint venture meeting the current provisions for corporate control and management.

Joint Venture formation in Holland

A joint venture formed in Holland can be either corporate (between public or private companies or cooperatives) or contractual (of partnerships, limited or not). A corporate joint venture is formed between corporate entities that are legal persons (in contrast to partnerships) and therefore the companies must follow the Dutch Corporate Law. This important factor differentiates corporate from contractual joint ventures.

In Holland, companies and partnerships are subject to different requirements for annual financial reporting and accounting. Our agents in company formation can provide you with comprehensive information on this subject.

Requirements for joint venture establishment in Holland

All incorporated Dutch companies must undergo registration at the National Chamber of Commerce. Any joint venture performing commercial activities has to be formed by registered entities. In particular cases, joint ventures can be subject to the Dutch Act on Competition. On the other hand, contractual ventures must meet the requirements of the national contract law.

Holland has not enforced any commercial restrictions on joint ventures and they can be established in any area of business. This establishment type is not required to comply with specific duration. Still, if the entities forming a joint venture are meant to exist for a certain time period, then the same period will be valid for the joint venture.

If you need information on other legal entities or you want to incorporate a Dutch company, please, get in touch with our specialists in company formation.

If you reside in Holland or receive Dutch income, you need to follow the national laws on taxation. As a resident (living in Holland) or non-resident (foreign) taxpayer receiving Dutch income, you will need to pay income tax in Holland.

Taxable Dutch income types

The Dutch tax laws recognize 3 types of income that are subject to tax. These are classified into boxes. Box 1 concerns income related to home ownership or employment, i.e. salaries, business profit, pension, regular benefits and owner-occupied real estate. Box 2 covers substantial interest income and Box 3 represents income from investments and savings.

The taxation system in Holland is quite complex and you can end up paying up to one-fourth of your personal income in taxes, but all rates depend on the nature of the work you perform and your residency, among other factors. Persons taxable in accordance with the Dutch laws need to submit their returns in digital form by the beginning of April each year. If it is impossible to keep this deadline due to particular circumstances, an extension can be granted upon request.

Taxes levied on Dutch residents / non-residents

In the form for tax return Dutch residents are obliged to declare their income received worldwide, including amounts that Holland is unable to tax by virtue of international or national regulations. Employment income, business profits and capital gains obtained in foreign countries fall in the list of such revenues. Non-residents can choose whether to be treated as residents with respect to taxation. Persons with status of resident taxpayers must declare their worldwide income permitting the option of taxation of this income in another country. To avoid double taxation, Holland offers tax relief (or tax credit) against owned tax. An experienced Dutch attorney can advise you with regard to the most convenient possibilities for your business.

Dutch corporate income tax (CIT)

Companies in Holland and particular entities established elsewhere and receiving income from Dutch sources are liable for corporate income tax (CIT). Companies with capital consisting of shares, cooperatives and other entities conducting business are on the list of company types subject to taxation. All companies need to file tax returns every year. The deadline for submission is five months after the concerned year’s end. All taxes need to be paid within two months of the receipt’s assessment.

Value Added Tax is, per se, a consumer tax incorporated in the price paid by the end customer for a particular service or product. In line with the EU legislation, VAT is applicable to the provision of goods, services, importation and acquisition of goods. Holland has three different VAT rates: a standard 21% rate, a special 9% rate for drugs, food, newspapers and books, and a 0% rate for international trade to allow for VAT-exempt export of commodities.

If you need further information and personal advice with regard to your business, please, get in touch with our local lawyers.

International companies that do not reside in Holland can advertise their business interests and establish a presence in the country by opening a representative (liaison) office. According to the national law liaison offices are not classified as legal entities, since they do not function and exist independently; they are fully subordinated to and dependent on the international corporations that have established them in Holland.

Generally, international companies are interested in settling liaison offices in Holland for the purposes of marketing research: to introduce and promote products on the local market and sign contracts with resident business partners.

Activities of the local liaison office

Being fully dependent and subordinated to the international company that opened it, the Dutch liaison office cannot perform its own activities (it cannot manufacture goods or provide services). It can, however, support different operations of its parent corporation, e.g. commercial activities (advertisement, promotion and marketing). The Dutch liaison office can also collect information for the purposes of scientific research and similar activities that are auxiliary to the international company.

Dutch liaison offices often serve as intermediaries between their international parent companies and commercial partners in Holland, thus representing the parent companies (acting in their name/on their behalf).

Representative offices cannot generate profit, so international investors willing to establish their products and services on the Dutch market may opt for opening branches instead. Branches are also highly dependent on their parent companies but, in contrast to liaison offices, they can carry out actual business activities.

Dutch liaison office registration

Dutch liaison offices do not need to undergo registration at the National Commercial Chamber. They are considered as structures that simply collect and provide information/provide administrative services to their parent companies without involving any commercial activities. Therefore liaison offices are not taxed in Holland. (Read more on Dutch taxes).

Still, a Dutch liaison office can employ staff and, if so, it has to be registered with the appropriate local authorities for personal income tax. The non-resident individual acting as a Dutch liaison officer and representing the international company needs to apply for residence and work permits.

The Value Added Tax incurred by Dutch liaison offices may be refunded under particular conditions. A Dutch liaison office can receive a refund if its international parent company files regular requests with the local tax authorities.

The Dutch liaison office represents an initial step for international entrepreneurs planning to establish themselves on the market in Holland. At a later point the office may become a branch, if the entrepreneur makes a decision to broaden the range of his local operations.

If you need more information about Dutch liaison offices, please, contact our agents in company incorporation. They will answer your questions about setting up a Dutch business and can represent you in front of the respective authorities.