In the Netherlands, the Dutch BV is the most commonly employed legal entity for doing economic activity. In this post, we will discuss the incorporation process of a Dutch BV and focus on the essential topics to consider while establishing a Dutch BV.
The most common type of corporation in the Netherlands is the BV (Besloten Vennootschap) or the limited liability company (Besloten Vennootschap with beperkte aansprakelijkheid). The Dutch BV is the counterpart of the German GmbH and the American LLC. The formation process for a Dutch BV has been simplified, and the costs associated with company formation in the Netherlands have been lowered, as a result of the latest modifications to the Company Law. Also, as we mentioned earlier, the BV is also the most commonly used form for establishing a holding company in the Netherlands.
Why start a BV in the Netherlands?
Many foreign entrepreneurs are drawn to the Netherlands, sometimes we know it as Holland. The key reason for the country’s attraction is its economic climate. International trading partners are a hallmark of the Dutch open economy. Nonetheless, the Dutch economy is unaffected by global economic changes. The country is well-known for its above-average economic stability, which helps to ensure the profitability and solvency of its corporate community.
Furthermore, the Dutch economy deploys appealing tax structures. The well-known 30 percent rule is one example. The tax strategies help both domestic and international entrepreneurs. Dutch tax rates are generally low and competitive. Furthermore, the Netherlands has tax treaties with more than 100 nations. This creates a network of double taxation for the benefit of business owners with worldwide aspirations.
The Legal Form of a Dutch BV
A “BV” is a private limited liability corporation; in Dutch, “Besloten Vennootschap met beperkte aansprakelijkheid.” In relation to other jurisdictions, the BV has characteristics with the German “GmbH,” the American “LLC,” and the English “Ltd.”
A BV can only have listed shares, but these shares can be freely transferred; since 1 October 2012, transfer limitations (such as the “blocking clause”) are no longer required, but they are still conceivable and authorized.
In general, the shareholders of a BV are not personally accountable for activities undertaken in the name or on behalf of the BV, nor are they obligated to make more cash available than the portion of the capital for which they have bought in.
Statutory directors can be held liable for “maladministration” (“onbehoorlijk bestuur”), or the BV’s failure to meet certain legal obligations, such as applying certain tests before distributing dividends (statutory directors can also be held liable if the BV distributes reserves (dividends) or paid-in capital while the BV is unable to meet its financial obligations in the year following the distribution).
BVs can have their share capital denominated in a currency other than the Euro.
Shares with no voting rights or profit rights are examples of special classes of shares.
Evaluate Your Needs
It is critical to evaluate what type of business best meets your goals. If profit is the primary goal, a limited liability company, or BV, is most likely the best option. A foundation, on the other hand, is more appropriate for social or ideal purposes.
Requirements for Opening a Dutch BV
The requirements for forming a Dutch BV are as follows:
- The Dutch BV might have one or more founders, who might be individuals or companies. The new Dutch Business Law permits a limited liability corporation to have a single shareholder who may also function as the firm’s management. One of the advantages of a Dutch limited liability company is that there is no need for a minimum share capital. The founder was only obliged to issue one share with voting rights under the Company Act. The sole need for the BV is that you have a Dutch address.
- A deed of consolidation and articles of association should be written before a public legal authority before the Dutch local responsibility organization is registered. The data on the investors, the administration board, the enrolled address, and the authorized offer capital will be included in these archives, which will be in Dutch. The articles of affiliation should also provide a brief description of the Dutch BV’s business activities.
In the Netherlands, there are no actual legal requirements for a BV to have substance. The only legal requirement is that the BV be registered in the Netherlands.
From a moral standpoint, it is strongly advised to comply with the substance requirements. The following are the essential requirements to consider:
In the Netherlands, there are five steps to starting a BV
Would you want to start a private limited company (BV) in the Netherlands? We’ll show you how to accomplish it step by step!
Stage 1: Verify if the company’s trademark is available.
A previous enrollment of the equal or related company trademark may pose complications due to licensed invention rights. In this way, you’re all on the same page.
It’s a good idea to see whether the trademark you want to use is already being used by another company.
Stage 2: Consolidation deed draught and confirmation
The preparation of a notarial deed of merger which will be completed by a common law public accountant is the fundamental action in the fuse system. The articles of affiliation are included in the deed of the fuse. The articles of affiliation are the BV’s guidelines for establishing common relationships inside the organization. The content of the articles of affiliation should be carefully reviewed. As a result, it is appropriate to seek legal advice. The incorporator(s) – or an authorized delegate acting on their behalf – as well as the ordinary law legal officer, must sign the deed of consolidation.
Stage 3: Pay the smallest amount of start-up capital.
In order to have the option of forming a BV, 1 Euro Cent must be paid into the organization.
Stage 4: BV registration
The BV must be registered in the Chamber of Commerce’s Trade Register when the deed of consolidation has been signed and the basic starting up capital has been resolved (KvK). The BV may participate in the exchange before enrolling. It will be considered a BV in development until it has been registered. Individuals are, however, keeping an eye out for the BV in development. Ordinarily, leaders are expected to fulfil agreements made by the BV in growth on a basic level. The BV will be obliged after enlisting.
Stage 5: Come to an agreement with investors.
Do you have at least one investment in the BV? It’s a good idea to agree on cooperative arrangements and write them down in an investor’s agreement.
Engage an attorney if at all possible
If you want to set up a BV, you should make certain that it is grounded as soon as possible. Careful planning is essential, especially when it comes to the future success of another firm. In this way, even before taking stride 1, get advice from a legal adviser who can assist you.
Detailed, The majority of global business visionaries choose a limited liability company, or BV (‘Besloten Vennootschap’). They want to carry out a Dutch BV in international projects on a regular basis. As a result, the Dutch BVorks authorized the BV to be administered globally as an eminence, holding, or monetary element.
The second benefit of a BV in the Netherlands is the legal restriction it provides. Personal responsibility means that a limited risk organization is treated as a legal person under Dutch corporation law. The BV’s resources, such as these, are vulnerable to claims. Whatever the case may be, the resources of BV’s investors or executives must be claimed in proportion to their stake in the company.
The Basic Processes for Registering a Dutch BV
After the deed of merger and articles of affiliation has been written, the Dutch BV enrollment process may commence. The following are the methods to use:
- Reserve a business name
- Provide the articles of formation and the document of incorporation,
- Obtain a commercial registration number in the Netherlands
- Register with expense experts, and
- Register with the social security authorities.
Organization registration in the Netherlands should also be achievable by appointing a legal team and an agency, such as Tax and Service Solutions.
The Potential Dual Tax Residence Issue or “Effective Management”
It is preferable to have a majority of Dutch resident directors from a tax standpoint. This is typically regarded as the minimum substance needed for Dutch Holding BVs in order to avoid dual tax residence concerns and qualify for treaty benefits, but for operational firms, this danger is generally more remote, given the business’s local presence in the Netherlands.
The primary criterion for defining a BV’s tax residence is its official registration as a tax resident. The BV will be regarded as a Dutch tax resident by the Dutch tax authorities after it is formed (incorporation principle).
However, if a foreign tax authority can demonstrate that the BV’s “place of effective management” is truly located in their country, they may attempt to tax the BV as if it were a tax resident of their very own nation. This is a widely acknowledged principle of international taxation.
Most tax treaties concluded by the Netherlands state that if both treaty countries claim tax residency of the BV, it will be declared a tax resident of the country where its “effective management” is located for the purposes of the tax treaty.
The word “effective management” is a technical phrase that refers to the location where essential management decisions for a firm are made. This is not always the location where the business is run and managed, and it is not always the location where the corporation’s day-to-day (regular) management decisions are made.
The place of residence of the decision-making director, and in the event of more than one director, the place of residence of the majority of the directors, is a significant consideration in deciding where the location of efficient management of a corporation is located. This is a significant feature, but it is not the most significant: the place of efficient management is the location of real management, which does not have to coincide with the director’s residence (s).
Senior management can be based anywhere and visit anywhere for any organization that works on a global scale. It is consequently unavoidable that management decisions must be made remotely, by e-mail, phone, and so on. However, in order to avoid the above-mentioned dual tax residency concerns, it is critical that the centre of all BV-related activities be located in the Netherlands.
Other essential considerations for evaluating the effective place of management include:
- Country of incorporation
- Registered office address
- People assigned to the location
- The actual location of the office
- Primary bank account
- Bookkeeping
As previously established, the BV can only have foreign-based directors. Ideally, (one or more of the) directors would become Dutch tax residents. If this is not practical or desirable, the “effective place of management” will still be regarded in the Netherlands, provided that the foreign director is in the Netherlands on a regular basis to handle the activities of the BV and attend board meetings, shareholder meetings, and so on.
Involvement of Public Notary
The incorporation of a BV necessitates the involvement of a Dutch public notary.
Under normal conditions, the incorporation can be completed remotely, eliminating the need for the directors or shareholders to attend in person.
Most Minor Capital Necessary for a Dutch BV
A Dutch BV does not need any basic capital.
Pre-Incorporation Period
It is permissible to conduct business in the name of the BV as soon as the incorporation procedure is initiated. The BV should subsequently be registered with the Chamber of Commerce as a “BV in incorporation” The “BV in incorporation” is actually a branch/partnership of the incorporator until the incorporation procedure is completed (s).
Upon incorporation, the company must confirm all transactions engaged by the founders during the pre-incorporation period. The directors/incorporators are personally and jointly accountable for acts undertaken before incorporation until the BV ratifies them.
Can I incorporate a BV without visiting The Netherlands?
Yes. Foreign investors can establish a Dutch BV without making a personal visit to the Netherlands by hiring a corporation or an individual to operate on their behalf. This type of formation, however, necessitates a somewhat different technique, about which we are delighted to enlighten you. Contact us for a detailed guide on this matter.
Can anyone set up a BV even if they are not located in The Netherlands?
Yes. The Netherlands is extremely welcoming to foreign investors. A Dutch BV can be owned by anyone from any country. However, in order to become a resident firm (to have local substance), investors must meet specific standards.
For what reason would it be a good idea for me to consolidate a Dutch BV?
Some of the primary reasons why companies chose the BV entity in the Netherlands are as follows:
- Tax advantages: The Netherlands is a great place to lawfully reduce your tax burden when doing business in the EU and around the world.
- Good local market: The Netherlands is one of the most prosperous countries in the world, with a thriving local market.
- Good transport system: The Netherlands boasts some of Europe’s major ports and transportation hubs.
Setting Up a Foundation in The Netherlands
A foundation is a good choice when pursuing social or ideal importance. The most significant distinction between a BV and a foundation is the lack of a profit-driven mindset. A foundation does not have shares or stock to distribute among its founders because profit is not its aim. As a result, a foundation is distinguished by the absence of stockholders and members. However, it does have a board of directors.
Dutch Foundations as Tax Minimization Vehicles
Foundations must pay corporate tax in the Netherlands if they are registered for business purposes. A foundation, as a Special Purpose Enterprise, can, however, be constituted as an intermediate holding and so give investment protection to its settlers. Dutch Special Purpose Enterprises, or foundations, can also receive external funding and avoid having the tax on interest payments withheld. Charitable foundations in the Netherlands may also hold business entities and thus benefit from a lower corporate tax rate. Foundations affiliated with Dutch private limited enterprises may also qualify for corporation and dividend tax deductions.
International investments are encouraged in the Netherlands, and Dutch regulation is very lenient toward foreign firms. Foreign investors are drawn to the Netherlands because of its foreign direct investment policy and tax breaks. Under Dutch law, both domestic and international enterprises are treated equally.
Benefits for Foreign Investors
The laws governing foreign direct investments are fair. Health, safety, and environmental standards apply to both domestic and foreign investors. Immigrants are permitted to live and work in the United States.
The corporate income tax rate is 20% on the first € 200.000,- and 25% on taxable profits over €200.000,-.
In order to avoid double taxation on income and capital, the Netherlands has negotiated treaties with approximately 80 countries. As a result, withholding taxes on dividends, interest, and royalties are decreased. In rare circumstances, taxes on interest and royalties are reduced to zero per cent. Furthermore, no withholding taxes are levied on incoming interest and royalties payments.
Cash dividends, dividends-in-kind, bonus shares, and capital gains are all free from Dutch corporate income tax, according to Dutch tax legislation.
Investors in the Netherlands can likewise benefit from the 30% rule.
Dutch BV Expenses
Costs will be incurred when establishing a BV or Foundation. A notary will be required to draw up the deed and terms and conditions for both builds. If you want to form a foundation, you will need to provide articles and rules in addition to the notary. All of these must be written in Dutch, thus you must hire an expert to do them on your behalf.