When an foreign company decides to conduct activities in the Netherlands, some choices need to be made regarding the company structure. The choice of legal form is important, as that will significantly affect tax obligations and other responsibilities. And even if the company is already established, deciding on structural changes may give a considerable competitive advantage, in fiscal terms or in other areas.
At DB Tax & Legal, we help you make the choices that suit your business. We study your company’s needs, so we can help you optimise your business situation.
- Learn more about opening a branch in the Netherlands
- Learn more about establishing a legal entity in the Netherlands
- Sole proprietorship (Eenmanszaak)
- General partnership (Vennootschap Onder Firma (VOF))
- Private limited company (Besloten Vennootschap (BV))
- Public limited company (Naamloze Venootschap (NV))
- Professional partnership (Maatschap)
- Ordinary limited partnership (Commanditaire Vennootschap (Comm. V.))
- Association (Vereniging)
- Cooperative (Coöperatie)
- Foundation (Stichting)
- Learn more about the conditions regarding liability (bestuurdersaansprakelijkheid)
Establishing a presence in the Netherlands
Many Italian companies wanting to conduct business activities in the Netherlands establish a subsidiary and opt for the besloten vennootschap (or BV), which corresponds to the Italian S.r.l. or a naamloze vennootschap (NV), which can be compared with the Italian S.p.A. But there are more options for starting a business in the Netherlands. We will be happy to assist you in assessing what suits your business needs best.
Opening a branch
There are no specific restrictions for foreign companies wishing to enter the Dutch market. Of course, you can opt to set up a fully-fledged BV or NV as your Dutch subsidiary, but you may prefer to conduct business through a branch. Also note, as a branch is not an independent entity, the parent company abroad is fully liable for all debts of the branch itself.
Generally speaking, the corporate forms BV or NV are the cheapest and easiest way to start your own business in the Netherlands. All new activities, whether conducted in the form of a branch or a legal entity, must be registered in the Business Register at the Dutch Chamber of Commerce. All significant changes affecting the company must also be recorded there. In addition, all activities started in the Netherlands must be registered with the Dutch Tax Authorities, by submitting the so-called information prospectus for establishing a new business. Based on the information provided in this form, the Dutch Tax Authorities will state which taxes to which the business is subject.
Sole proprietorship (Eenmanszaak)
Setting up a sole proprietorship is very simple. You do not need a notarial deed, you just need to register in the Business Register at the Dutch Chamber of Commerce. With this type of company you can even hire staff. You can only create one sole proprietorship per person. However, despite the low costs of setting it up, as the owner, you are liable with all your personal assets. In other words, there is no separation between your own assets and those of the company, which means you stand to lose everything in the event of bankruptcy. Note: if you are married with marital community of property (no separation of assets regime), your partner also becomes liable.
General partnership (Vennootschap Onder Firma (VOF))
The VOF is an associative form that can be useful when you know straight away that you want to manage the company with more people. With or without a notarial deed, several parties contribute capital and assets within the company, and there is no minimum capital requirement. Any creditors will first try to recover debts from the company’s assets, then if this is not sufficient, in the second instance, creditors recover debts from the shareholders personal assets. However, if a shareholder has a personal debt, creditors cannot recover from the company assets or those of the other shareholders. You can establish a VOF with your partner. In this case, as both are entrepreneurs, there is a tax advantage for each, but legal liability for debts must also be borne by both parties. Any community of property restrictions established via a separation of assets regime are not applicable in such cases.
Private limited company (Besloten Vennootschap (BV))
In many respects, the BV form is comparable to the Italian Limited Liability Company S.r.l. It can be founded by a single individual or by several partners. It is possible to hire an external manager, but in smaller BVs, the General Manager is usually one of the owners. A notarial deed of incorporation is required, however since the Flex-BV was introduced on 1 October 2012, you can found a BV with 0.01 euro. Unlike the sole proprietorship, it is a true legal entity. This means, in principle, that the owners are not fully liable, in contrast to the VOF company form. However, there are some exceptions, such as if the BV declares bankruptcy within the three years due to irresponsible conduct, or if the company contracts excessive debts in an inconsistent manner.
The director’s liability regime for BVs and other limited liability companies deserves a separate mention. Because of the nature this liability, it can influence different legal forms.
There is an annual reporting obligation for BVs, and the actual contents of the report depends on the size of the company. Another interesting opportunity for companies wishing to invest in the Netherlands, is the option to use a BV as a holding company which controls the shares of another legal entity, and so protect the capital from management risk.
Dutch nationality is not a requirement for a BV’s director, nor is this person obliged to be resident in the Netherlands. However, if one or more directors are resident in Italy, they run the risk of the BV being taxed under the Italian IRES regime, which is usually less advantageous than the equivalent Dutch tax regime. Sometimes, an entrepreneur will prefer a NV, even with the 0.01 euro minimum requirement for a BV. Reasons for this include the ease of transferring NV shares, whereas extensive documentation via a notary public is required for transferring BV shares. Moreover, the BV’s shareholders have strict preferential rights over the shares with regard to external subjects.
Public limited company (Naamloze Venootschap (NV))
The Dutch NV, public limited company is similar to a joint-stock company in Italy (S.p.A.). The capital in an NV is represented by shares, but unlike a BV, a minimum capital of 45,000 euros is required (in Italy: 120,000 euros) and the shares are freely transferable to other parties.
Because of these capital requirements, NVs are a good instrument for large companies which use shares as a means to finance debt. The Dutch naamloze means ‘no name’, indicating that the shareholders do not have to be individually registered. The legal nature of the NV certainly prevails over a personal company form. Listed companies choose this legal form of business.
Professional partnership (Maatschap)
A professional partnership is suitable for groups of professionals or self-employed. For example, medical professionals often join forces in a professional partnership. This legal form does not require a deed of incorporation. However, it is advisable to put key points in writing, especially to clarify rules, authorisations, and remuneration, after all, a professional partnership is based on the equality of the partners. Contributions to the partnership are based on income. Tax benefits and deductions applicable to the self-employed are allowed. Legal responsibility is usually relegated to the individual member, however there are exceptions.
Ordinary limited partnership (Commanditaire Vennootschap (Comm. V.))
This form of partnership, similar to the Italian limited partnership, is considered a particular form of VOF. It consists of one or more partners who are responsible for the administration, and others who are involved only at a financial level. No articles of association are required to establish a Comm. V., but it is advisable to put the key management principles to be followed in writing. The administrative shareholder is considered responsible for the company’s debts. If the Comm. V. goes into bankruptcy, liability is extended to the shareholder responsible for the administration. The shareholder who paid up the capital, literally known as the ‘silent shareholder’ stands to lose no more than the paid-up capital. However, if the latter actually acts as administrator, liability is extended to their personal assets.
Association (Vereniging)
An association is formed when several individuals wish to achieve a common goal. There are two types of associations, those with full or limited power, depending on whether or not the association was established by notarial deed. This means that if the association is established with limited authorisations, the management board is fully liable.
For more information about liability, please refer to the section on liability (Bestuurdersaansprakelijkheid)
Cooperative (Coöperatie)
A cooperative is mainly formed when an individual wishes to benefit from privileges that are linked to groups of individuals. The two most common forms are cooperatives of companies and cooperatives of entrepreneurs.
A cooperative is subject to an income-based tax regime, each member participating with individual shares. Legal liability is usually shared equally among the members.
Foundation (Stichting)
A foundation is usually established for social and/or philanthropic purposes. It must be founded with a notarial deed. A foundation may even be established by a legal entity. The shareholders are usually not legally liable, however there are several exceptions, such as the intuitive case of mismanagement. A foundation is managed by members rather than not directors.
Liability (Bestuurdersaansprakelijkheid)
It is important to pause and reflect on the liability of BV and NV directors. As these companies are limited by definition, in order to better protect creditors, the legislator, in line with previous experience (jurisprudence), has considered broadening the scope of guilt for directors of companies with limited liability regimes if an objective error is clearly configurable. In the same way, this form of responsibility (Bestuurdersaansprakelijkheid) is equally applicable to directors of associations vested with decision-making power and responsibility for the organisation’s tax regime. This is particularly important for construction cooperatives and associations providing insurance services or credit insurance. The same applies to a foundation, and also to directors of non-Dutch legal entities which are subject to Dutch Tax Law.
Considering the above, if a company cannot honour its debts, the directors become jointly and severally liable. It is important to note that according to Dutch law, once a person is appointed as a director, it does not matter if they do not fulfil a financial function. The fact that the person is listed in the register means they are liable. And in some cases, even without being officially listed, being a de facto administrator of the company makes them liable for acts undertaken in the name of the legal entity.
Finally, even a company liquidator may become criminally responsible in particular cases because, in the Netherlands, the Tax Authorities take precedence over all other creditors.