The Netherlands is regarded as one of the most economically attractive European countries for foreign investors. There are several factors for this, varying from national infrastructure to the fiscal climate. As a result, many foreign companies set up a sister company or subsidiary in the Netherlands. As per every national legal framework, the process of setting up a company has specific procedures.
Though an important contributor of attracting foreign companies, the legal procedure will not be discussed in here, but in a separate article. This article will specifically discuss the most important factors that incentivize foreign companies to set up a company in the Netherlands.
Attractive fiscal climate
The Netherlands has an excellent tax climate. There are several reasons for this. Firstly, The Netherlands has a competitive corporate tax rate compared to other countries. The corporate tax rate as of 2022 is 15% up to €395,000 and 25.8% above €395,000. Secondly, there is a fiscal unity regime that provides for fiscal consolidation for Dutch activities within a corporate group. Thirdly, companies benefit from the extensive body of bilateral tax treaties that the Netherlands is party to. Finally, the Netherlands has clear administrative procedures and makes use of effective digitalization to facilitate tax compliance for companies. In short, the Dutch tax system offers a number of fiscally attractive incentives for companies from abroad to establish themselves in the Netherlands or to set up a sister company, subsidiary or branch office.
Local factors and infrastructure
As a result of the strategic geographic position of the Netherlands, companies have access to the major markets in the region including Africa, Europe and the Middle East. In addition, the Netherlands is known for its excellent transportation and telecommunication network, which in turn enhances businesses. Furthermore, the Netherlands is one of the world’s most politically stable countries, enabling businesses and companies to make long-term decisions.
The benefits of a Dutch private company or limited (Ltd.)
When setting up a company in the Netherlands, one must decide upon the type of legal entity. There are several entities one can choose from, but the private company or limited (Ltd.) – in Dutch “Besloten Vennootschap (BV)” – is most frequently chosen by international investors.
Limited liability for the entrepreneur of a Ltd or LLC
A BV always has at least one director and one shareholder. This can be the same (legal) person. The directors can act in the name of the BV, and are responsible for its policy. The shareholders are entitled to the profits. The benefit of an unincorporated company is that the entrepreneur himself is, in principle, not liable. A private or limited company can therefore be equated with a limited liability company (LLC).
Setup procedure is simple and cost-efficient
Additionally, since the BV has no minimal capital requirement and can be effected remotely in a few days, the setup procedure is simple and cost-efficient. This is supported by a recent report of the World Bank, in which the Netherlands ranks high on the ranking that measures the ease of setting up a company.
Flexible (governance) structure
Furthermore, a BV has flexibility in the arrangement of the organization of the company by means of the articles of association. The articles of association can for example limit the transferability of the company shares or differentiate between them with regard to voting rights.
Legal obligations
Evidently, there are strict administrative obligations that a BV must comply with. For instance, it is legally required to report the annual financial statements to the Chamber of Commerce. The larger a company, the more financial information it has to disclose. Also, the BV is required to convene an annual General Meeting of the Shareholders, in accordance with the legal requirements.
Setting up a BV
You cannot set up a BV yourself. There a legal requirements for setting up a BV, which entail essentially four elements:
- Drawing up the articles of association in a notarial deed: this is called incorporation;
- Making a deposit of €0.01 starting capital – cash or in kind;
- Registration in the KVK Commercial Register (Handelsregister) (you remain personally liable until the registration is complete);
- Registration at the Dutch Tax and Customs Administration (Belastingdienst).
Questions or advice on setting up a business? Contact us
Do you have any questions about setting up a business in the Netherlands? The VIOTTA lawyers have extensive experience in advising and setting up various entities for foreign companies in the Netherlands. Please feel free to contact Dirk de Waard.
