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Netherlands Company Formation Agents - How they (should) Work!
Are you thinking of starting a business in the Netherlands? One important step is finding a reliable company agent to help with legal and...
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Different type of branch registrations in The Netherlands
There 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.
Permanent Establishments
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.
Non-Permanent Establishments
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.
Representative Office
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.
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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
- termination
- liability
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).
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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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Relevant Taxes for Dutch branches of overseas entities
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When running a Dutch branch of an overseas entity, it is important to consider the relevant taxes that will apply.
One of the primary taxes to consider is corporate tax, which is levied on the profits generated by the branch. The corporate tax rate in the Netherlands is relatively competitive, making it an attractive location for overseas entities to establish branches.
However, it is important to ensure compliance with Dutch tax laws and regulations to avoid potential penalties. In addition to corporate tax, companies with branches in the Netherlands may also be subject to dividend tax.
This tax is applied to the distribution of profits to shareholders, both within the Netherlands and overseas. It is important for overseas entities to familiarize themselves with the rules and rates for dividend tax in the Netherlands to properly plan for and manage any potential tax liabilities.
Furthermore, when it comes to staffing the branch, companies may choose to use payrolling services to manage their workforce. Payrolling staff involves outsourcing the administration and payment of employees, which can have tax implications. It is important to understand the tax implications of payrolling staff in the Netherlands to ensure compliance with Dutch tax laws.
Corporate Requirements for companies registered abroad
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When an overseas company wants to establish a branch in the Netherlands, there are certain corporate requirements that need to be met.
This process is known as Formeel Buitenlandse vennootschappen, which refers to Dutch branches formally registered abroad.
The trade register of the Dutch Chamber of Commerce (Kamer van Koophandel) provides information and guidelines for companies looking to establish a branch in a foreign country. One of the key requirements for setting up a Dutch branch abroad is to register with the trade register of the country where the branch will operate. This registration process may require submitting various legal and financial documents as well as obtaining a local business license or permit.
Additionally, the Dutch company must designate a local representative who will be responsible for managing the branch and serving as a point of contact for local authorities. It is also important for the branch to comply with local tax laws and regulations, which may involve obtaining a tax identification number and filing regular tax returns. Furthermore, the Dutch company must ensure that the branch operates in accordance with local labor laws and employment regulations, including any requirements related to hiring local employees or contractors.
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Registering a European Limited in the Netherlands to avoid Dutch Company Law
Registering a European Limited (LTD) in the Netherlands has become a popular option for many entrepreneurs looking to avoid the stringent company law regulations that exist in the country.
One of the key reasons for this is the ability to avoid minimum capital requirements, which can be a burden for small businesses looking to set up in the Netherlands.
The popularity of the UK LTD in the Netherlands can be traced back to the Inspire Art arrest in 2012, where a Dutch entrepreneur was arrested for running a business without meeting the minimum capital requirements. This incident served as a wake-up call for many Dutch entrepreneurs, who then turned to registering UK LTD's as a way to bypass the strict Dutch regulations.
Many UK LTD's are now registered by Dutch entrepreneurs seeking to take advantage of the more flexible regulations and lower capital requirements offered by the UK company law. By doing so, they are able to operate their businesses more freely and with less financial strain, while still benefiting from the advantages of conducting business in the Netherlands.
Overall, registering a European Limited in the Netherlands has proven to be a strategic move for many entrepreneurs, offering them the ability to sidestep burdensome regulations and operate their businesses more efficiently and effectively.
How do I set up a branch at the Kamer van Koophandel in the Netherlands?
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Setting up a branch at the Kamer van Koophandel (KvK) which is the Dutch Chamber of Commerce in the Netherlands can be a detailed yet rewarding process. Before you can start your business in Holland, you must first register the branch with the KvK.
To successfully accomplish this, you would need to complete two main forms;
Form 9a and Form 13. Form 9a registration is the first step, this involves submitting basic details about the branch such as its name, physical address and the details about the parent company. This is also to inform the KvK about the type of activities that the branch will be engaging in, the financial year end, and the details of any representatives.
Speaking of representatives, Form 13 is the registration document for representatives. This is essentially the process by which you register yourself or another individual as the branch's legal representative in the Netherlands. Whether it's a trustee, a manager, or a director, Form 13 is a necessary step to officially and legally designate that person as the representative of your branch.
Apart from these forms, there are also a few additional requirements you would need to prepare. These include a legalised copy of your passport to verify your identity.
This is a necessary requirement not just for the KvK but anytime you're doing official business in the Netherlands. Also required is proof of address - an official document that verifies your current place of residence. This could be a utility bill, a rental agreement, or any other official document that shows your current address.
Finally, if you're planning to operate your business virtually, you will also need to submit a Virtual Office Agreement. This is a contract that sets out the terms and conditions of your branch's virtual office. This might include services like mail forwarding, live receptionist services, and other amenities that a physical office might provide. However, this must be registered at the KvK too, for traceability and corporate governance considerations.
All these documents must be submitted to the KvK for review, which could take several days or weeks. Once approved, you will be officially registered and ready to operate your branch in the Netherlands.
The KvK offers guidance throughout this process to ensure it's as smooth as possible. Remember, the success of this process highly depends on the accuracy and completeness of your documents and the promptness of your responses to any queries or clarifications from the KvK. It's a process, but a necessary one to establish and run a successful branch in the Netherlands.
How do I set up a representative office in the Netherlands?
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Setting up a representative office in the Netherlands can be an excellent strategic decision for any international business seeking to establish a presence in the European market.
The process involves a series of steps which require diligent planning and understanding of Dutch regulations. A representative office, which is not a separate legal entity but an extension of the foreign parent company, is mainly involved in non-commercial activities such as market research, promotion of the parent company's products or services, and liaison activities.
The first step towards establishing a representative office in the Netherlands is understanding the role and limitations of such an office. It's important to be clear that the rep office cannot engage in profit-generating activities in the Netherlands. Since it isn't a separate legal entity, it doesn't have to pay corporate tax. However, the parent company is fully responsible for the activities and liabilities of the representative office.
Coming to an essential part of the process - registration of your office. Although a representative office doesn't have to be registered with the Dutch Commercial Register, it's good practice to do so. This will make it easier to open a bank account, hire employees, and rent office space. You can register by submitting an application to the Dutch Chamber of Commerce (KVK). Remember to also register for VAT if you plan to carry out activities that are VAT taxable.
Next, you must secure a physical location for your office. This could be in one of the Dutch cities or in a business park depending on your operations and need for visibility. Besides choosing the right locations, it's also important to adhere to all local zoning laws and regulations when setting up your office.
Staffing is another important aspect. Though you can start with a single representative, eventually you may need to hire local employees. It is advisable to fully comprehend Dutch labor laws before initiating the hiring process. If you plan to relocate foreign staff, be aware of the necessary immigration procedures and work permits required.
In addition, you need to open a Dutch bank account for your office. Although it is possible to handle transactions through the parent company's account, having a local account can simplify operations, especially if you intend to hire local staff.
Finally, ensure you comply with all Dutch legal requirements relating to data protection, anti-money laundering, and any other sector-specific regulations. Seek advice from legal and tax professionals to help you navigate through any complexities associated with setting up a representative office in the Netherlands.
In conclusion, while the process to set up a representative office in the Netherlands involves meticulous planning and a comprehensive understanding of Dutch regulations, the potential benefits in terms of business growth, market expansion, and gaining a solid foothold in the European market make the effort truly worthwhile.
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What is the difference between a branch and an entity?
In general, a branch and an entity are recognized as two distinct components in the world of business and finance. An entity commonly refers to an organization that has a separate legal existence, whether it is a business, a government agency, a non-profit organization, or an individual person. This legal recognition confers certain rights and responsibilities to the entity, especially related to financial transactions, accountability, and legal liabilities. For instance, a corporation is considered a legal entity that can own properties, enter contracts, sue and be sued. On the other hand, the entity itself can also be held liable for its actions, be they financial, legal, or operational in nature.
Differently, a branch refers to a part or division of a larger entity, such as a company or a bank that operates in different locations. Functionally, a branch may offer the same services or products as the parent entity, but it operates in a geographically different location. Branches are a common way for large corporations to expand their reach without having to form a separate legal entity. They allow companies to tap into new markets, reach more customers and provide more localized services. Nevertheless, it's important to note that a branch does not have a separate legal identity from its parent company, meaning that the parent company holds the ultimate responsibility for any debts, lawsuits, and obligations of its branches.
From a regulatory perspective, the distinction between a branch and an entity is often crucial since they are governed by different legal rules. For instance, different accounting, tax, and regulatory considerations come into play based on whether an organization operates as a separate entity or a branch. Furthermore, this differentiation also affects management strategies and decisions, as it influences how companies structure their operations, make investments, manage risks, and deploy resources.
In essence, while both terms refer to parts of the business world, they play different roles and abide by a distinct set of rules. An entity is a larger, independent unit with its legal obligations and rights, while a branch is a smaller part of a larger entity, adhering to the entity's legal and operational responsibilities.
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How do I get a KVK number?
Obtaining a KVK number, which stands for Kamer van Koophandel number, is a crucial step for entrepreneurs looking to establish a business in the Netherlands. The KVK number is issued by the Dutch Chamber of Commerce, and is fundamental for the legal functioning of your enterprise within the country's business landscape. Professionals either looking to start a local or a foreign business in the Netherlands should follow a step-by-step process to obtain a KVK number.
The first step entails preparing the needed documents. This typically includes a valid form of identification (passport or national identity card), the tenancy agreement or proof of the business premises, as well as a detailed business plan including the company's financial projections. Subsequently, an appointment must be made with the Dutch Chamber of Commerce either online or via phone.
Once your documents are prepared and your appointment is set, you will need to present your business plan to a KVK representative during your appointment. Here, it's vital to be able to concisely explain your business concept, your target market, as well as your financial forecasts. The representative will assess your business plan and once approved, you'll receive your KVK number.
One point to remember is the need to pay a registration fee. As of 2021, the registration fee for a business is €50.00. This needs to be paid at the desk during the appointment. Furthermore, because the KVK is part of the public business registry in the Netherlands, they're obliged to share your business details with private and public sector organisations. This transparency provides an assurance of your business's legitimacy to other entities and potential clients.
After you receive your KVK number, it's beneficial to understand what it entails. Each KVK number contains a unique 8-digit number. While the first 8 digits indicate your official Chamber of Commerce registration number (unique business identifier), the last 7 digits indicate your VAT number which is crucial for tax purposes. It should be noted that foreign-owned companies are also required to obtain a KVK number for their Netherlands branch in order to conduct local business.
Finally, after receiving your KVK number, you are mandated to include this number in all outgoing mail and invoices from your company. This visibility ensures the legality and credibility of your business operations within the Dutch commercial landscape. In conclusion, while the process of obtaining a KVK number requires planning and preparation, successfully acquiring it is a pivotal stride towards successful entrepreneurship in the Netherlands. It serves as an operational passport of your business, linking you to the Dutch commercial infrastructure, tax system, and the international business community.
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