The Netherlands is a favourite destination for companies setting up in the European Union (EU) – whether they are an individual partnership, a limited liability partnership or a public limited company, also known as a naamloze venootschap (NV).But by far the most common structure with international investors in the Netherlands is the private limited company, or besloten vennootschap (BV). As with other types of company structure, there are specific steps to consider when setting up a BV in the Netherlands.
Articles of Association
The first step when incorporating a BV is to engage a registered Dutch notary to draw up the articles that determine the company’s business purpose within the Netherlands. These articles will then form the basis of the organisation of the Dutch company. The Dutch Civil Code specifies what can and can't be done as part of a business structure, therefore the notary will draw up the articles in accordance with this.
A translator may also be required to explain what is included in these articles and to ensure that the business adheres to them. Whilst Dutch articles are typically translated into English for business purposes, they will be filed in Dutch with the Netherlands Chamber of Commerce.
There are means by which the articles can be amended, but it is best to inform the civil law notary about the business’ conduct and then align this purpose with the articles at the time of incorporation. Any amendments that are made are also required to be filed with the Chamber of Commerce.
Amongst other things, the articles should also cover the shares and share capital of the company, how the meetings of the company will be conducted and what kind of board set-up the company will have.
In the Netherlands it is possible to set up a two-tiered board, each with a different purview: a working board to manage the day-to-day affairs of the company and a supervisory board to manage the company’s board of directors. When opting for a two-tiered board, this must be included in the articles.
There is no requirement to have a local Dutch director to form a company in the Netherlands. All that is needed is one director (of any nationality) and one shareholder (this can either be an individual or a company).
Although there is no need for a Dutch director, there are certain tax implications to not having one. To be considered a Dutch resident entity for the purposes of taxes, at least 50% of the directorship should be based in the Netherlands.
As well as ensuring half of the directors are Dutch residents, there also has to be a registered office in the country and all of the decisions of the Board of Directors must be taken there.
Substance Requirements and Shareholding
There are a few further substance requirements to fulfil in order to be considered a tax resident Dutch entity.
- At least half of the statutory board and decision-making directors are resident in the Netherlands.
- The directors of the Dutch company possess the knowledge to perform their professional duties.
- Business decisions are made in the Netherlands.
- Bank accounts are kept and managed in the Netherlands.
- Bookkeeping takes place in the Netherlands.
- The registered business address of the company is located in the Netherlands.
- The equity corresponds to the risk of the company.
There is also a participation exemption regulation that a company needs to fulfil to avoid paying withholding tax if they take dividends back to their country.
As for shareholdings, they can be either Dutch resident or non-resident and can be individual or corporate. If there is 100% foreign shareholding, the directorship must be sufficiently resident in the Netherlands to qualify for the above substance regulations.
Due to recent changes in Netherlands law, there is no minimum capital requirement for a BV, so it is not a prerequisite to have a bank account to open a company there at the time of incorporation.
A tax advisor must be engaged before embarking on incorporating a BV in the Netherlands and can answer any enquiries about these participation exemptions and Dutch substance regulations.
Power of Attorney
If a company is completely Dutch-owned, or all directors and shareholders are resident in the Netherlands, incorporation can be accomplished quickly and easily. However, if there is foreign ownership or directorship then a local person will need to be present as a power of attorney holder to sign on their behalf.
This is a commonplace practice that cuts down on formation time and removes the need for directors and shareholders to travel to the Netherlands to form a company.
Ultimate Beneficial Owner (UBO) Register
Another recent change is the addition of the Ultimate Beneficial Owner (UBO) register. Like other EU companies, the Netherlands has passed legislation that all UBOs are to be declared at the time of company formation. Anybody owning 25% or more shares or voting rights in a company will need to be disclosed.
This information is available on the Netherlands registry and will become publicly accessible from mid-2022. All existing companies have also been asked to provide their UBO information.
It is no longer possible to use a nominee or have a representative as the owner of a company. The data is fully disclosed and transparent as per EU directives.
Registering With the Chamber of Commerce
The final step before incorporation is registering with the Chamber of Commerce, also known as the Kamer van Koophandel (KVK). The notary who draws up the articles will send them to the KVK, then a company number is generated after registration.
It is a further requirement for any trading companies to register for VAT. This can be done at the same time as registering with the KVK.
Local employees have to register for Dutch pensions upon hiring, which can also be done once the company is registered with the KVK. A notary will be able to take care of this along with the VAT registration.
The notary holds an important position in the incorporation process as, just like in any other civil law country, he or she is responsible for submitting the documents for initially forming the company.
An experienced service provider can provide further assistance and help you navigate business practices when expanding into the Netherlands.
This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.