Get off to a sound fiscal start when doing business in the Netherlands

The Netherlands is known worldwide for its favourable corporate climate. Our country, with its strong economy, well-developed infrastructure, and favourable tax schemes, is an attractive hub for both Dutch and foreign entrepreneurs. Are you interested in doing business in the Netherlands? If so, you need to be aware of a number of tax aspects. Tax specialist Ricardo te Kaat explains five of those aspects.

By Ricardo te Kaat, Senior Tax Specialist

I’ve been working in the professional tax field for a while now. Early on in my career, I discovered that I found international tax particularly fascinating. Nothing is more rewarding than guiding a business from outside the Netherlands through the opportunities and pitfalls of Dutch tax laws and regulations. This is no easy feat because it’s a highly complex field. When you’re looking to enter the Dutch market from a foreign country, it’s particularly critical to be fully aware of the details. For instance, you can:

• Find out which tax obligations you must meet
• Optimise tax benefits
• Prevent double taxation
• Discover which corporate structure works best for your business
• Evaluate labour law and social security obligations

By collecting the right knowledge in advance, you’ll reduce costs and ensure that your operational management in the Netherlands runs more smoothly and efficiently. I’ve drawn up a list of five points you should certainly focus on when doing business in the Netherlands.

1. Choosing the proper corporate structure 

One of the first steps is choosing a legal form for your business. The legal form impacts:

• Your legal liability
• Your tax rates

You can start as a permanent establishment (a fixed location, such as an office or factory) of a foreign company, or as a Dutch private limited company (bv). If you want to run your own business privately in the Netherlands, you may want to consider setting up an éénmanszaak (sole proprietorship) or a vennootschap onder firma (vof, or general partnership) in the Netherlands.

Each of these legal forms impacts:

• How you pay your taxes
• What your administrative obligations are
• How revenue is taxed

Taking over an existing company

Sometimes, it’s also possible to take over an existing Dutch company, which could be an attractive option if the business already conducts activities you want to do in the Netherlands. Another advantage to consider is that the company might already have the permits you need to conduct business. Taking over such a company could give you a significant head start when doing business in the Netherlands.

Integration into a foreign corporate structure

Determining how to best incorporate your Dutch legal form into your existing foreign corporate structure is also key. Would it be better to make your Dutch company a subsidiary of your foreign company, or to establish it directly as a private company? Is a holding structure more desirable, or should you divide your business activities among multiple subsidiary companies? As you certainly understand, the answer depends on numerous factors. That’s why I always tailor my advice to suit each client on a case-by-case basis.

2. Be aware of the attractive tax benefits for private limited companies

Another attractive option for your business could be to establish a private limited company (bv) in the Netherlands. Why would you do that?

• A private limited company has limited liability.
• The revenues from a private limited company are taxed at a 19% corporate tax rate up to €200,000; the revenue tax above this value amounts to 25.8% > this tax is often lower than the corresponding foreign corporate tax rate.

Innovation box for innovative private limited companies

If your company is involved in innovative activities, chances are you’ll be eligible for the ‘innovation box’. This special scheme decreases the corporate tax on revenues earned from innovations. The tax rate is 9% instead of 15% in this case.

3. Know what to do with sales tax

If transactions occur between foreign businesses and your Dutch private limited company, you need to have a good overview of the consequences of these transactions for managing your sales tax. Does foreign or Dutch tax apply? Or do you not have to apply sales tax at all? Or perhaps transfer the tax? Are you eligible for exemptions?

Transactions of goods between international companies, inventory transfers, and so-called ABC transactions between producers, distributors, and end consumers are all transactions that require a certain level of knowledge and specialisation regarding sales tax. Because, if you miss something or assume that the Dutch system works the same way as the foreign system, the financial consequences can be considerable.

4. Keep the international aspect in mind

There are several other important points to note with international transactions:

Determine the right price

If you have a parent company with (international) subsidiaries and you exchange goods, services or intellectual property, it’s vital to be aware of transfer pricing. This concerns determining honest, internal pricing that is in line with prevailing market conditions.

Avoid double taxation

Have a good look at tax treaties: which country is allowed to tax which part of your revenue? Before you know it, you may undeservedly be paying the same tax in both countries. You also need to thoroughly assess which country can tax employee income. This is not always either one or the other. For work carried out in multiple countries (which may even be the case when an employee works remotely from home in another country!), both countries often tax part of the employee’s income.

Be aware of social security and insurance contributions

You must also be mindful of in which country you or an employee requires social security and insurance. In which country are you required to pay contributions? In which country are you eligible for benefits in case of disability or unemployment? What is the amount of benefits you would receive?

Remember also to consider pension accrual schemes. Where does the employee accrue their pension? How much is that pension? Do you need to take out additional insurance?

I often see significant differences between countries’ social insurance systems, even within the EU!

5. Know that foreign and Dutch law works differently

When doing business in the Netherlands, Dutch law usually applies. Therefore, it is not wise to work with a foreign contract and then have that translated into Dutch and use it in the Netherlands. Foreign law is never the same as Dutch law. You may find that an agreement or contract that you believed was correct and valid in the Netherlands is worthless and could even work against you.

Don’t hesitate, seek expert advice

Are you having doubts about whether you would like to do business in the Netherlands as a foreign company? Don’t worry! Our country offers excellent opportunities for building strong businesses, as long as you realise that there are substantial differences. Tax and legal regulations may look similar, but they are never the same. Be prepared and make sure that you’re correctly informed.

Do you have specific questions about doing business, taxes, or legal structures in the Netherlands? Don’t hesitate to reach out to me. Call me or email me, and I’ll be happy to help. Do you have any questions about business takeovers or company valuations? I’ll be happy to put you in touch with one of my colleagues at Stolwijk vanWijk.

Ricardo te Kaat

Senior Tax Specialist
T +31 (0)6 1127 4485
E ricardotekaat@stolwijkkelderman.nl