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Company Formation
Entity Management 
Residency for Entrepreneurs

Comparing Dutch Subsidiaries and Branch Offices in the Netherlands

Dutch BV or Dutch branch company?

The Branch office or Branch company is becoming a more popular alternative for the local Dutch BV. In this article we discuss why!? Unlike a Dutch BV, a Dutch branch company does not have a separate legal entity from its parent company. This means that the branch company can extend the legal entity of its parent company and use its corporate veil (and thus Company Law) in the Netherlands. This can be a more attractive option for foreign companies looking to establish a presence in the Netherlands, as it allows them to benefit from their existing corporate structure and legal protections. Additionally, setting up a Dutch branch office can be a simpler and faster process compared to establishing a separate Dutch BV. This can result in cost savings and a quicker entry into the Dutch market. Overall, the Dutch branch company provides an efficient and convenient option for foreign companies looking to expand their operations into the Netherlands. 

Difference between a Dutch BV and a Dutch branch company

When expanding their business internationally to the Netherlands, companies often consider setting up a Dutch BV or a Dutch branch company. The main difference between these two entities lies in their legal status and operational independence. A Dutch BV, or Besloten Vennootschap, is a separate legal entity, similar to a limited liability company, with its own share capital and management. The BV is subject to Dutch corporate law and has limited liability, meaning the personal assets of shareholders are protected from any liabilities of the company. On the other hand, a Dutch branch company is not a separate legal entity but rather an extension of its foreign parent company. T

his means that the parent company retains full control over the branch and is ultimately responsible for its debts and liabilities. The branch operates under the same legal and tax framework as the parent company but is subject to some local Dutch registration and reporting requirements. Additionally, the branch company does not have its own share capital and does not have limited liability. In terms of taxation, a Dutch BV is subject to corporate income tax, while a Dutch branch company is also taxed on its profits but may be subject to different withholding tax rules. Ultimately, the decision to establish a Dutch BV or a Dutch branch company depends on factors such as the level of operational and legal independence desired, tax considerations, and the level of liability protection needed. Both options have their advantages and disadvantages, and companies should carefully consider their specific needs and circumstances before making a decision. 

The difference for (bootstrapped) startups as opposed to (funded) multinationals

Say you are really inspired by an Instagram meme, to take your business to the next level. You just started out, you are making some profits, but Grant Cardone, or Gary Vayner has convinced you to go 10x, very soon.

To make it worth your while, and have a positive ROI, you need to make sure your investment is as low as possible.

In comparison to the situation of a well funded multinational, that has developed a longterm business strategy to enter the Dutch market. mainly deals with the first category. Whether you are an Importer/Exportor, or an Ecommerce entity in need of a local VAT or Company number, or a Outcourcing Agent, it might just take 1 project, or 1 client, or 1 platform, to consider to establish a presence in the Netherlands.

And if that is the case, then the registration of your Dutch business should be as easy as possible, as well as the exit strategy. The Branch fits perfect with this strategy! Easy to register, even easier to de-register, while guarantees the opening of a bank account, and provides all the playbooks to get your tax numbers, and file your tax returns without involving any local accountant or lawyer! Even relocating your staff, and obtaining a residency permit for non-EU nationals becomes easy with a branch registration!

A Subsidiary Company in the Netherlands 

The establishment of a subsidiary in the Netherlands can be a strategic move that presents numerous opportunities for your company. The Netherlands boasts a strong and stable economy, making it an ideal location for expanding our business operations. By setting up a subsidiary in this country, you can benefit from its favorable business environment, well-developed infrastructure, and highly skilled workforce. Additionally, the Netherlands is known for its favorable tax climate and access to international markets, which will further support our growth and success. This expansion will also allow you to establish a stronger presence in the European market and provide better support to your clients and partners in the region. Furthermore, having a subsidiary in the Netherlands will enable you to tap into the country's innovative and technology-driven industries, fostering collaboration, and knowledge exchange. Overall, the decision to establish a subsidiary in the Netherlands can align with your long-term growth strategy and will contribute to your ongoing success in the global marketplace. 

Starting a subsidiairy in the Netherlands implies that you select a local entity form, such as the Dutch BV, and this BV will be incorporated, with your current (Head) office as its Founder. Setting up a subsdiairy in the Netherlands ofcourse has both advantages, as disadvantages. 

The (dis)advantages of a Dutch branch company, compared to the Dutch BV 

When considering whether to establish a Dutch branch company or a Dutch BV, it is important to weigh the advantages and disadvantages of each option. A Dutch branch company, while having the advantage of being a part of the parent company and not requiring additional capital to be established, also comes with its own set of drawbacks.

One major disadvantage is that the parent company is fully liable for all the debts and losses incurred by the branch, which can expose the overall business to significant risk. Additionally, a branch company is not considered a separate legal entity, making it more difficult to enter into contracts and engage in legal proceedings. On the other hand, a Dutch BV has the advantage of limited liability, meaning that the shareholders are only liable for the amount of their investment in the company. This reduces the risk and exposure of the parent company and its shareholders.

Furthermore, a Dutch BV is a separate legal entity, which allows for easier contracting and legal proceedings. However, establishing a BV requires a minimum share capital and additional administrative responsibilities, such as filing annual financial statements and holding shareholder meetings. In conclusion, while a Dutch branch company may be easier to set up and maintain, it also carries higher risks and limitations compared to a Dutch BV. The decision ultimately depends on the specific needs and circumstances of the parent company and its business goals.On the other hand, a branch company also presents certain advantages over a Dutch BV.

As a branch is considered a part of the parent company, it allows for a more integrated and coordinated management structure, leading to potential cost savings and streamlined operations. Additionally, a branch company may benefit from the established reputation and resources of the parent company, making it easier to establish a presence in the Dutch market. However, these advantages must be carefully weighed against the potential risks and limitations of a branch company, including the lack of separate legal entity status and the higher liability for the parent company. Overall, the decision between a Dutch branch company and a Dutch BV should be made after a thorough evaluation of the respective (dis)advantages and a consideration of the specific needs and goals of the business. 

Legal and Tax Similarities between a Dutch branch and the incorporation of a subsidiary in the Netherlands

When considering the establishment of a business presence in the Netherlands, it is important to understand the legal and tax similarities between setting up a Dutch branch and incorporating a subsidiary in the country.

From a legal perspective, both options involve the establishment of a separate legal entity within the Netherlands. A Dutch branch operates as an extension of its foreign parent company and is not considered a separate legal entity, whereas a subsidiary is a distinct entity with its own legal status. In terms of taxation, both the branch and the subsidiary are subject to Dutch corporate income tax on their profits.

However, a Dutch branch may also be subject to taxation in the country where its parent company is located, depending on the tax laws and treaties in place. On the other hand, a subsidiary is treated as a standalone entity for tax purposes and is only subject to Dutch corporate income tax. It is important to note that both the branch and the subsidiary are required to comply with Dutch tax regulations, including the submission of annual tax returns and the payment of value-added tax (VAT) if applicable.

Additionally, both options may benefit from certain tax incentives and deductions offered by the Dutch government, such as the participation exemption for qualifying foreign subsidiaries. When assessing the legal and tax implications of establishing a business presence in the Netherlands, it is advisable to consult with legal and tax advisors who specialize in international business operations. They can provide valuable guidance on the most suitable option based on the specific needs and circumstances of the company, as well as assist with the necessary legal and tax compliance requirements. Overall, understanding the legal and tax similarities between a Dutch branch and the incorporation of a subsidiary in the Netherlands is essential for making informed decisions and ensuring compliance with local regulations. 

How to choose between registering a Dutch branch office or incorporating a Dutch BV company

The first step is to identify your type of company. Are you just starting out, and bootstrapped, looking for every dollar to make a positive return? Or are you a well established multinational that has sufficient funding to aim for the longterm?

Once you identified your company profile, it should be easy to answer this question; Most of the global entrepreneurs, digital nomads, and startups should definitely opt for the Dutch Branch. Looking for longterm solutions in staff, finance, or other complex matters, such as buying local real estate in the Netherlands, then it might be suggested to register a Dutch BV.

Contact Dennis Vermeulen for a free consult, or download our Guide to the Netherlands.