If you own an existing business overseas, you can decide to literally branch out to the Netherlands.
This means that your overseas legal entity, will be registered at the Dutch Chamber of Commerce, and as such will receive a separate Company Number. For such branch registration, typically a Dutch registered office address is used, which can be provided by House of Companies in any city in the Netherlands.
A company from abroad can also do business in the Netherlands. For example, an English Limited Company (Ltd) may have a retail shop in the Netherlands. Other examples of foreign companies include the Belgium BVBA, German GmbH, French SA and Delaware Corporation or LLC from the USA. Registration in the Trade Register is mandatory.
Because the actual legal entity is not incorporated by Dutch laws, it means that your overseas company law will remain applicable. This also means that you don’t have to prepare any Financial Statements according to Dutch law, and your creditors will also need to consider the possible consequences of dealing with your Dutch branch.
Any entrepreneurs, of any size, can easily register a branch in the Netherlands, and this article, and our Tutorial presentation, will explain you how! But first, we will explain what the branch is, and what the tax and legal consequences are of registering a Dutch branch.
It’s important to understand that a branch does not mean that a separate legal entity is incorporated. Sometimes the branch is confused with the ‘subsidiary’. A subsidiary is a legal entity, of which the shares will be held by your overseas headquarters. Whereas a branch, is simply an extension of your overseas headquarters.
This means a branch can only be established when an existing organisation wants to set foot in the Netherlands, while it’s seen as an independent entity that carries out business in its own name.
A branch does not have to prepare Financial Statements, however it is liable for corporate taxation in the Netherlands.
Depending on it’s activities it can also be registered for VAT, and register as Employer in the Netherlands. The branch basically has no restrictions, compared to setting us a local dutch limited company.
It's rather simple to to set up a branch, which requires no involvement of a notary. The parent company will be registered at the Chamber of Commerce in Netherlands, and will be issued a ‘business license/extract’ and company number for it’s Dutch branch.
However, Dutch authorities (such as banks, tax offices, c and potential customers and suppliers)prefer to work with local legal entities.
The question of ‘local substance’ is becoming more and more relevant, and for non-local companies it will be difficult to open a Dutch bank account or even apply for a resident VAT number, depending on each situation.
Therefore, in case you are aiming to expand your business, and perform trading activities, we would advise to set up a (subsidiary) entity (such as the B.V.) .
There are no minimum capital requirements and the Dutch branch does not require a local director.
The profits of the Dutch Branch will have to be declared, and will be taxed at standard corporate tax rates, in The Netherlands.
Local regulations and requirements apply for the Dutch branch, for example when a permanent agent will be on the payroll of the company, or other employees of a branch must be registered for the social insurance. If not, the representative of the branch may be personally liable for not paying the contributions.
A branch is an efficient tool to establish a presence in the Netherlands
A branch registration should consider the liabilities in case it becomes operational, because in the event of claims from customers or third parties towards the branch, the headquarters can be held liable
A branch registration requires you provide an English (or Dutch or German( and legalised set of of the headquarters statutory documents. If the documents are not available in these languages, you will require official documents.
The branch is not a separate legal entity, but is a legal extension of the headquarters - liabilities borne by the branch will also affect the headquarters.
Different type of branch registrations in The Netherlands
here are different ways of branching out to The Netherlands. You might be opening a warehouse, in which you simply keep a stock of goods. Or you might be planning to open a retail shop, and employ staff.
Depending on the type of activities, such ‘branch’ activities can be considered as an ‘enterprise’ (or might not!). To make it even more complicated, different type of regulations (for example VAT regulations vs. the Trade Register regulations) might apply different definitions.
House of Companies likes to speak of ‘a branch’, in any situation that a company has branched out to another company, in any formal way. It is possible to register an overseas company, directly with the Dutch Tax & Customs Administration, as an Employer and employ staff in the Netherlands, without registering the overseas company at the Dutch Chamber of Commerce.
In case a foreign company has a physical presence in the Netherlands and is able to perform independent business activities,it is considered to be a permanent establishment and it should be registered at the Chamber of Commerce (and will be considered a permanent establishment for VAT purposes). Examples of a permanent establishment include:
A retail shop or other point of sale
A workshop or factory with office space
Fictitious Permanent Establishment
In some cases, the Dutch laws stipulate that an establishment is considered ‘permanent’ by law. For example, when your overseas company relocated a staff member to perform certain activities in The Netherlands, it can register as an Employer, without registering as a branch/permanent establishment in the Netherlands. However as soon as it decides to post out that worker to a third party, the Dutch law stipulate that the overseas company should register it’s company as a permanent establishment in the Netherlands, and charge salary taxes as being a Dutch company.
For foreign companies that start outsourcing/posting of staff in the Netherlands, tax liability arises in the Netherlands from day one. To this end, a company must register with the Tax and Customs Administration and keep a payroll administration.
It is also important for hirers and clients to map out the consequences. They can be held liable for unpaid payroll taxes under the Chain Liability Act (Wka). It is possible to limit this liability by making safeguard deposits into the G account. Liability can even be completely avoided if the foreign company has a NEN 4400-2 certificate.
If a company posts out workers to third parties , then the Act on Allocation of Labor by intermediaries (Waadi) applies and the registration obligation included therein applies. This means that a company that provides temporary workers registers as such with the Chamber of Commerce. This law has consequences for every company operating on Dutch territory.
Not only employment agencies and payroll companies must comply with the registration obligation, but any company posts out workers in a similar manner.
Anyone who works with an unregistered company risks a hefty fine: € 12,000 for fewer than 10 posted workers. If it concerns between 10 and 20 hired employees, the fine amounts to € 24,000 and for more than 30 employees, the fine is € 48,000.
Borrowers can check whether the lending company is registered in the trade register. The so-called Waadi check is possible via the website of the Chamber of Commerce (www.kvk.nl). This requires the Chamber of Commerce number of the company that lends staff. The hiring company can then immediately see whether the lender is registered as a company that makes personnel available.
a non-permanent estashmen would not have to register its ‘location’ at the Chamber of Commerce. This typically applies to warehouses, or basic facilities that allow you to do research, marketing activities, etc., which does not constitute a fully fledged operation.
One form of a non-permanent establishment is the ‘Representative Office’. Representative offices may not perform business activities, and may not enter into contracts with customers, and as such are not able to generate any form of revenue.
What’s the difference between a ‘branch office’ and a legal entity?
In this section, we refer to the branch as a ‘permanent establishment’ of a foreign company in The Netherlands.
Given the size of your group of companies, and the potential of the growth of your business, it might not make sense on the higher amount of expenses that will arise by setting up a legal entity. In the long term, these extra expenses, when a legal entity and branch are compared, are considered marginal.
Instead, it’s important to focus on the ongoing advantages of either the branch or the legal entity, such as the B.V.
Many entrepreneurs believe that branch registration should always be considered PLAN A, assuming you are new to a certain market, and not certain yet of success.
The reason for this is that:
The branch is cheaper to incorporate because no notary is involved (initial fees)
The Company Law of the HQ country of residence is relevant, so they have a better understanding of their overseas responsibilities (which are minimal)
There is no need to file a Dutch Annual Report
There are downsides to the branch:
The head office is liable for claims towards the Dutch branch (this could not be a big issue, is there are hardly activities, or if these (liabilities) already existed in the HQ before anyway
Reputation of the branch is less popular
There are limitations to the structuring, for example, you can't simply include a local partner and provide him equity
Which Company Law is applicable for Dutch branches?
A Dutch branch is not automatically subject by Dutch Company Law.
The Netherlands applies the so-called 'Incorporation Principle', which stipulates that the Company Law of the country of Incorporation remains applicable, when registering a branch in The Netherlands. This principle refer to the following subjects of law:
- incorporation (with legal entities)
- legal personality (with legal persons)
- company structure (structure, powers, obligations)
- authority to represent
When does Dutch law apply for branches?
The Incorporation Principle in the Netherlands is not applicable for all subjects of law. In case of taxation, the environment, labor laws, bankruptcy and criminal law, the Dutch law is applicable.
Formally foreign companies
If your headquarters is based within the EU, then your company can easily register a branch in the Netherlands without any additional formalities. However, in case the headquarters is based outside the EU and has no real relationship with the country of incorporation must comply with the Formally Foreign Companies Act. The company must deposit the following documents with the Chamber of Commerce:
- an extract from the foreign register (annually);
- annual accounts under foreign law (annually);
- annual accounts under Dutch law (annually).
Starting your Dutch branch without visit to the Netherlands
To start a Dutch branch, your company, and your company’s representatives must be properly identified. This is typically done in person, by visiting the Chamber of Commerce.
However this is not absolutely required. You can also submit your request to register the branch remotely to the Dutch Chamber of Commerce. In such case, you must consider that the documents (including the passport copy of the director) will require legalisations (with apostille in most cases)
There is no legal requirement to open a Dutch bank account for a Dutch branch, and no capital deposit is required.
Which documents do you need to start a Dutch branch?
In order to register a branch, or permanent establishment, in the Netherlands, you require the following documents :
Passport copy of the director of the overseas legal entity (legalised with apostille in case the director will not visit)
original proof of address, not older than 30 days, such as an original/English telephone bill
A legalised set of the overseas entity’s Formation deed and recent extract of the company showing the current authorises directors (and address/shareholders).
Process & Timeline
The registration of a branch is straightforward and can be done within 1 day, during a visit of the representatives of the (parent) company to The Netherlands. It’s important to schedule the trip to the Netherlands properly, so that all the correct documents will be taken along, including the correct legalizations. Typically it requires our clients about 1 or 2 weeks to get the documentation in order, unless the parent company is based in a country like the UK, where it’s very easy to obtain the required documents (and no translation is required!).
The Costs to establish a Dutch branch
The cost of a registration of a branch in the Netherlands are 50 EUR, which are charged by the Chamber of Commerce.
For the registration of a new company or organization in the Trade Register, you pay a one-off registration fee of € 50 (payment only possible with debit card).
This is the result of the new Act on Chamber of Commerce. The registration fee is due at the moment of:
the first registration of a company or organization in the Trade Register;
a continuation, takeover, division or merger whereby a new registration in the Trade Register is created with a new Chamber of Commerce number.
This fee covers the administrative costs of the registration.
If you want to buy a Chamber of Commerce extract from your company when you register, it costs € 15 (payment only possible with debit or credit card). Some banks ask for an extract, wholesalers always ask for an extract.
There is no annual government fee applicable to keep your Dutch branch in Good Standing.
Opening bank account for a Dutch branch
When you start a Dutch branch, you might be interested to open a corporate bank account for your branch.
During the last couple of years it has become more challenging to open a corporate bank account, for a company without any physical presence, or a company which is involved in an international structure. This has to do with stricter supervision on banks, who are required to identify the client, but also monitor the transactions of the company (to avoid any misdoings). Performing such due diligence activities by banks, is much harder in case international companies, directors or shareholders are involved. As a result, more international companies find their account opening applications rejected.
Due to these developments, a growing number of entrepreneurs decide to open a bank account outside the Netherlands, for their Dutch branch. For example, at the same bank, which facilitates their overseas headquarters. So a Turkish company, with open a separate Turkish bank account, for it’s branch in the Netherlands. In some cases, they would even contact a Turkish bank in the Netherlands, because they are more familiar with due diligence research on the Turkish market.
Another option for your Dutch branch is to work with an Electronic Money Institution (EMI) that can open an online payment account. Such account can typically be opened remotely, and allows full payment services.
As mentioned there is no legal requirement to have a Dutch bank account, and although our primary goal is to open a bank account in the Netherlands, it should be considered to have a contingency plan (such as a Swiss bank). Even if it’s just a temporary solution, especially when you are in a hurry to perform certain transactions.
The application of the relevant tax numbers for a Dutch branch
The final step of the registration process is to apply for the appropriate tax numbers, once the branch is registered at the Chamber of Commerce.
The branch will require registration form Corporate Income Taxes (CIT), as well as the Value Added Tax (VAT) (if relevant for your situation).
In some cases your company might also need to register as Employer, in case your branch is planning to employ staff. You will find more information about these topics in the category ‘ Obtain Tax ID’s’.
On average it takes about 2-3 weeks to obtain a VAT number, sometimes it just takes 1 week (in combination with the CIT number).
The issuance of the VAT number can also depend on the corporate structure, in practice there is more difficulty for company managed by non-resident director to obtain the VAT Number (because the branch might not be qualified as a Permanent Establishment). The tax authorities might ask questions about the type of activities and how/where they are performed. INCO can assist with the questionnaire and make sure you receive the VAT number in time.
Although you don’t need a local director obtain a VAT number, or even a bank account, it is preferred that the Company can show actual Dutch business activities. For example, the Company can show local staff members, a local warehouse, or even just local suppliers or clients the Company deals with.
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