If you’re looking to start or expand your company into the European Union (EU), the Netherlands is one of the best countries to do it. The country has a highly developed infrastructure that aids in the distribution of goods and services. Aside from its EU neighbors, the Netherlands is also in close proximity to the Middle East and Africa. Due to its proximity to these locations, it allows access to international trade on an unprecedented scale. Additionally, the country boasts advantageous tax rates, which favors foreign investors.
Types of Business Entities in the Netherlands
Before you register your company in the Netherlands, note that the country’s business structure can perform with or without a corporate (legal) personality. The main difference is that without a legal personality, the owner(s) will be fully liable for any debts incurred by the company.
The business entities without corporate personality include sole proprietorship and partnerships (general or commercial, public, or professional, and limited). Meanwhile, private and public limited companies operate under a corporate personality.
Sole Proprietorship or Sole Trader (Eenmanszaak)
A sole proprietorship is a business entity where there is only one owner. It is the easiest type of business to set up. All you need to do is register your business with the Netherlands Chamber of Commerce (Kamer van Koophandel or KVK). You will pay a one-time fee of EURO 50. The KVK will list your company in the Dutch Commercial Register (Handelsregister). Then, your information will be passed to the Dutch Tax and Customs Administration (Belastingdienst).
Sole proprietorships have tax benefits if they reach certain criteria. If a business owner reaches 1225 hours of work performed over a year, they are eligible for several tax benefits such as tax reliefs and allowances. If your company earns less than EURO 20,000 a year, you can apply for a small business scheme (kleineondernemersregeling or KOR). Under KOR, you won’t have to pay value-added tax (VAT).
General or Commercial Partnership (Vennootschap Onder Firma or VOF)
A general partnership is formed by at least two people who contribute an equal share of capital. The division of income will be decided based on a contractual agreement. The setup process is essentially the same as a sole proprietorship, with the addition of having a lawyer or notary draw up the partnership agreement.
General partnerships are obligated to pay VAT. Partners are taxed individually based on their share of the profits. Each partner can also be entitled to tax benefits such as:
- entrepreneur allowance (ondernemersaftrek);
- investment allowance (investeringsaftrek); and
- tax-deferred retirement reserve (fiscale oudedagsvoorziening).
Like a sole proprietorship, unlimited liability applies to a general partnership.
Public or Professional Partnership (Maatschap)
A professional partnership is essentially identical to a general partnership in terms of requirements, advantages, and disadvantages. The main difference is that a professional partnership is created between professionals looking to conduct professional business under a single identity. An example of a professional partnership would be a law firm.
Limited Partnership (Commanditaire Vennootschap or CV)
What distinguishes a limited partnership from other types of partnerships is that in a limited partnership partners will have different roles assigned to them. In a limited partnership, there are two different types of partners: a managing partner and a limited partner. The managing partner will be in charge of day-to-day business, while the limited partner will be a financial investor without direct control of the business.
Only the managing partner will be held fully liable if the business fails to meet obligations. On the other hand, the limited partner will only be at risk of losing their investment.
Private Limited Company (Besloten Vennootschap or BV)
The ownership of a Private Limited Company is divided into shares that are held by shareholders. The management of the business entity is held entirely by its board of directors.
The main benefit of a private limited company is that liability lies with the company itself rather than any of the shareholders. It means that if you are the owner of a private limited company, you will not be held solely liable for the debts of the company.
As the owner of the company, you will have to file an income tax return based on your share of the profits from the company. Shareholders that hold at least 5% of the company shares are required to file an income tax return.
If the company earns less than EURO 20,000 a year, it can file for KOR and be exempt from VAT.
Public Limited Company (Naamloze Vennootschap or NV)
An NV is similar to a private limited company, with the main difference being the scale of the company. An NV is much larger than a BV. In an NV, its shareholders hold ultimate power over business decisions, with the capability of dismissing its board of directors.
Corporate income tax must be paid by the company. NVs are also obligated to pay VAT. Directors of the company are obligated to pay income tax based on their shares and the earnings of the company. Directors must have a minimum yearly salary of EURO 46,000.
Incorporation Process in the Netherlands
- Draw up the deeds of incorporation before an official notary registered in the Netherlands.
- Make an initial deposit of at least EURO 0.01 to serve as the company’s capital.
- Have a civil-law notary register your company with the KVK.
- Registration at the Dutch Tax and Customs Administration by a civil-law notary on behalf of the company.
Staying Compliant in the Netherlands
Helping more than 600 companies all around the globe, INS Global is well equipped to assist your business with all of its HR administrative needs. Whether you are looking to incorporate your enterprise in the Netherlands, hire staff without setting up an entity, or find a partner to manage your payroll, we can help you. Get started with us today and let our consultants introduce you to our flexible product range. Make your global expansion easy with INS Global.