The Netherlands is a perfect destination for business expansion, owing to its pro-business culture. Hence, foreign companies eagerly set up their subsidiaries or branch offices in the Netherlands to access the European market. The taxation of foreign subsidiaries in the Netherlands is straightforward, making it even more convenient for employers to set up subsidiaries..
If you plan to set up a subsidiary in the Netherlands, this article will help you navigate the process.
What are the Types of Subsidiaries in the Netherlands?
There are different types of subsidiaries in the Netherlands. When you decide to incorporate a subsidiary business in the Netherlands, you must first determine the structure from the following categories:
If you plan to incorporate a foreign subsidiary in the Netherlands, opting for a Sole Proprietorship is the most lucrative choice.
The employer is a single owner having unlimited liability. They are responsible for the company’s debts, capital requirements, and business decisions. Once the company is registered, the owner must also register for VAT.
A Partnership or a Vennootschap Onder Firma (VOF)
In the Netherlands, a partnership (VOF) is a more stable organization. Two or more people own the business. All shareholders are jointly and severally liable for the company's operations, including debts, under this structure.
Each partner must participate in the business with money, commodities, and workforce. Although a partnership contract is not required by Dutch law, drafting one before a public notary is essential since it provides crucial information about the company's partners, including information on each partner's contribution to its capital.
Private Limited Liability Company or Besloten Vennootschap (BV)
Choose a Private Limited Liability Company (PLLC) if you want to be safe.
A BV is a legal entity where shareholders’ liability lies only in proportion to their invested amount. Generally, the BV is liable for all debts instead of individual shareholders. While the director or board of directors runs the daily operations, the shareholders hold the ultimate power over this entity.
A limited company's disadvantage is that it must pay a higher tax rate and that a list of the company's money/capital consumption must be prepared every year.
Public Limited Company or Naamloze Venootschap (NV)
A private corporation and a public limited company are similar. The names of the shareholders need not be registered for this structure in the Netherlands.
Anybody can purchase or sell the company shares. Hence, any individual can own an NV. As a shareholder, the only risk you face is losing the money you invested. The major drawback is that the shares are not registered and can be sold to anybody.
When setting up a subsidiary business in the Netherlands, one can either choose to be a wholly-owned or a partially owned subsidiary.
How to Set Up a Subsidiary in the Netherlands?
Before expanding to the Netherlands, an employer must consider multiple factors.
First, they must finalize the industry they wish to enter and their preferred company structure. Then, they must consider commercial agreements or ties they can strengthen by relocating to the Netherlands. These ties may influence which of the 12 provinces one selects as the headquarters. Although the Netherlands has uniform regulations, there may be minor variations across different provinces.
English is recognized as one of the official languages, but Dutch is the official national language. Depending upon the business location, one may also encounter different regional languages such as Frisian. Accordingly, business owners must determine which dialects they’ll need to learn to conduct business operations in specific regions. This is when they may decide to hire a translator or local staff who can speak these languages.
Business owners must also factor in the Dutch subsidiary laws that may affect their staff. Unlike European Union (EU) members, non-EU or EEA citizens require a residence permit (MVV) or a work permit to travel within the Netherlands and other EU member states (TWV). Some professions in the Netherlands are regulated and demand special certification. Employees hired in these roles must obtain these qualifications before they start work.
Once these considerations are settled, business owners must fulfill the following criteria to establish a subsidiary business in the Netherlands:
- ~Verify the business name
- ~Notarize the Articles of Association
- ~Register the company and name with the Dutch Chamber of Commerce
- ~Register with the Tax Department and Trade Register
- ~Open a business bank account
- ~Set up an employee insurance scheme
- ~Perform a risk assessment and evaluation
Benefits of Setting Up a Netherlands Subsidiary
Setting up a subsidiary company in the Netherlands has its unique benefits. The biggest advantage of setting up a subsidiary in the Netherlands is that it’s the foundation for hiring staff, establishing the company payroll, and conducting official business.
A Dutch subsidiary can opt for a private limited liability company (BV) or a public company (NV). It is independent of its parent company, meaning it exercises complete control over business decision-making and management.
Subsidiaries in the Netherlands are liable to a corporate tax imposed on a two-tier system based on their annual income - the rates are 20% and 25%. However, Dutch subsidiaries also enjoy tax exemptions and deductions as any other local company.
A company is not legally recognized in the Netherlands unless it has an established subsidiary. Therefore, you should invest in incorporating a wholly-owned subsidiary in the Netherlands to reap the maximum benefits and avoid legal complications.
Documents to Prepare When Opening a Subsidiary in the Netherlands
Individuals wanting to incorporate a foreign subsidiary in the Netherlands must produce the following documents:
- ~All necessary information about the parent company, including the contact details and the address of the parent company in a foreign country.
- ~A confirmation by the Trade Registrar that a parent company exists in a foreign land since it is proof of the parent company's existence.
- ~A duly notarized copy of the Articles of Association of the subsidiary. A Dutch Public Notary must notarize all of the documents.
- ~A declaration that assigns a local representative to the subsidiary.
- ~A no-objection declaration, signed by the Dutch Ministry of Justice.
What Business Forms can Netherlands Subsidiaries Take?
Any overseas parent business must own 100% of its shares to get into the incorporation of a wholly-owned subsidiary in the Netherlands. A company is considered a subsidiary if the parent company owns 50% or more of the business. These subsidiaries are distinct legal entities governed by UK law.
The subsidiary in the Netherlands can take a legal form out of the available four options -
- ~Sole proprietorship
However, when establishing a subsidiary in the Netherlands, companies usually select between the two most common forms - private limited liability companies (BV) and public limited liability companies (NV). Private subsidiaries in the Netherlands are frequently limited by guarantee or by shares.
Typically, employers must consider various factors while deciding on the subsidiary form, including taxation, registration process, etc.
To establish a subsidiary in the Netherlands, you can visit the official website and check for relevant business forms, such as registration forms.
Netherlands Subsidiary Laws
A private limited liability company, often known as a Besloten Vennootschap or BV, is the most prevalent subsidiary in the Netherlands. You can also form a Naamloze Vennootschap, or NV, a public limited liability business.
Irrespective of the form you choose, you must comply with Netherlands’ subsidiary laws during the incorporation of the subsidiary.
The laws governing subsidiaries in the Netherlands differ depending on the type of company you form. For example, a BV requires a minimum share capital of 1 EUR. At least one share must have voting rights, while another must have profit rights, or a single share can have both. Bearer shares and share certificates are likewise unavailable to BVs. On the other hand, NVs must have a minimum share capital of 45,000 EUR.
Post Incorporation Compliance
After registration, a foreign subsidiary's compliance in the Netherlands demands that employers -
- ~Provide the registered office address
- ~Obtain the CIN
- ~Set up the company's contact information
- ~Give the shareholders a share certificate (for NV Company)
- ~Select an auditor
- ~Create a transactional bank account
Taxes on Subsidiaries in the Netherlands
A subsidiary is considered a resident firm if registered in the Netherlands. Thus, the taxation of foreign subsidiaries in the Netherlands follows the same rules as the resident companies. The same percentage of corporate tax of 25% is levied on the subsidiary as any other local company in the Netherlands.
One must register with the tax authorities for tax filing purposes. They must also register with the Administration for Social Security to be able to hire local employees.
All the resident companies are charged on their global profits. The EU Parent-Subsidiary Directive applies to all the subsidiaries of foreign firms incorporated in the Netherlands since it is an EU member. This regulation, combined with the double tax treaties that the Netherlands has signed with other countries, provides significant tax benefits and relief.
Real property tax, social security payment, and transfer tax are among the other company taxes in the Netherlands. Dutch subsidiaries must follow their parent company's exact accounting and reporting procedures. Penalties and fines apply if you fail to comply with the current filing requirements.
Tax Incentives for Businesses Setting Up a Subsidiary in the Netherlands
According to Dutch rules, the subsidiary is liable to a reasonable tax rate of at least 10%. In addition, Dutch law exempts revenue from permanent foreign establishments of Dutch businesses from taxation and allows for tax-efficient repatriation of earnings.
The 30 percent rule allows enterprises to offer 30% of employee salary tax-free to compensate for the additional expenditures that international employees bear when migrating to the Netherlands. However, it applies only to highly skilled expat employees under specific conditions.
Other Important Considerations
Setting up a subsidiary in the Netherlands will take a significant amount of time and money. Specific steps in the procedure can be expensive. Apart from the business capital, you must bear other expenses like round trip flights from your parent firm’s location to the Netherlands. In addition, if your team does not include expertise in Dutch subsidiary laws, you may need to acquire legal counsel or other staff to handle compliance issues.
How Multiplier's Employer of Record Can Help You Hire & Expand in the Netherlands?
Planning for a business expansion takes time and money, whether you do it in your home country or a foreign country. However, complying with its labor laws and industry standards may get challenging when expanding to a foreign nation.
Why not enlist the services of a third-party service provider like Multiplier to ease this bump in your company's growth?
Multiplier handles all of the procedures that accompany when entering a new market, so you don't have to. We help you onboard local and global talent while maintaining total compliance with the rules and labor laws in the Netherlands. Most importantly, you don’t need to set up a subsidiary if you partner with us. We will ensure that your employment contracts, payroll processing, etc., are fully compliant with local regulations.
Frequently Asked Questions
Are subsidiaries different from regular companies?
Yes, they are different from standard companies as another huge company is the owner of the subsidiary as it has a majority stake in the company.
Do subsidiary companies in the Netherlands pay corporate taxes?
Yes, all the taxation rules are the same for subsidiary companies as the resident companies in the Netherlands.
What is the corporate tax rate in the Netherlands?
The corporate tax rate in the Netherlands in the year 2022 is 25.8%.