NFIA, helping your business bloom in EuropeNFIA, a Dutch government agency, can be of tremendous assistance in establishing or expanding you pan-European operation. For an overview of our free and confidential services, click About NFIA. We'll help you discover how investing in setting up your business in the Netherlands pays you dividends all across Europe.
North American Companies in the Netherlands - case studies
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Q&A: Legal Issues, Taxation and Corporate StructureWith its pro-business attitude, the Netherlands strives to make doing business as easy as possible for foreign companies. To find the answers to your questions about legal requirements, taxation and corporate structure - click on a question for a quick link to the answer, or scroll down to read the entire section. Q: I want to conduct business in the Netherlands, do I need to establish a legal entity there? Q: What are the pros and cons of establishing a legal entity? Q: What different legal entities are available in the Netherlands? Q: Do you have to be physically present when incorporating a legal entity? Q: How long does it take to set up a legal entity in the Netherlands? Q: What are the costs involved in setting up a legal entity in the Netherlands? Q: I don't have a legal entity in the Netherlands. Do I still have to pay taxes there? Q: Can I end up paying taxes on the same profits in both the Netherlands and the US? Q: I want to conduct business in the Netherlands, do I need to establish a legal entity there? No. There are no special restrictions on foreign-owned companies starting a business through a branch office in the Netherlands, nor are there restrictions on foreign ownership of land, or on repatriation of capital and profits. Q: What are the pros and cons of establishing a legal entity? The most important legal difference between a branch and a Dutch subsidiary is exposure to liability. Because a subsidiary has a legal identity separate from that of its shareholders, its liability extends only to the amount of its capital contribution. This means that the liability of a subsidiary is generally limited to the assets owned by that subsidiary. On the other hand, a branch is not a separate legal entity, so the foreign company of which it is a part, is fully liable for all the obligations of the branch. A branch is easier and less expensive to establish than a subsidiary. The foreign head office need only file certain documents and data with the Trade Register of the Chamber of Commerce in the district in which the branch will be located. Branches and subsidiaries are taxed on virtually the same basis. The few differences will be discussed later. Q: What different legal entities are available in the Netherlands? Dutch law distinguishes between two types of limited liability companies: the public limited liability company (Naamloze Vennootschap or N.V) and the private limited liability company (Besloten Vennootschap or B.V). The N.V. is more common for companies that are listed on a stock exchange, or engage in banking or insurance, but is not restricted to these businesses. The B.V. is mainly privately owned, and used for smaller businesses or group holdings.
Q: Do you have to be physically present when incorporating a legal entity? No, the incorporators of an N.V. or B.V. may be domiciled anywhere, and can be represented at the incorporation by means of a written power of attorney. Q: How long does it take to set up a legal entity in the Netherlands? The incorporation of a B.V or N.V. requires the services of a civil-law-notary, a Dutch lawyer specializing in drafting and executing deeds of incorporation and articles of association. Prior to incorporation, a Statement of No Objection must be obtained from the Ministry of Justice. It normally takes about two to five business days after submission of the required documents to obtain that Statement. Once the notary has obtained the Statement of No Objection the incorporation can be finalized within a day. Gathering the necessary information regarding beneficial owners, first managing directors, etc. by the incorporators is often the most time-consuming part of the process. Q: What are the costs involved in setting up a legal entity in the Netherlands? Out-of-pocket expenses for the services of the civil-law-notary are in the range of € 2,500 for an N.V. or B.V. with relatively "standardized" articles of association. Dutch law also requires a minimum issued and paid-in capital of € 18,000 for B.V. companies and € 45,000 for N.V. companies. Q: I don't have a legal entity in the Netherlands. Do I still have to pay taxes there? Most probably. Foreign legal entities may be deemed resident for tax purposes in the Netherlands if "day-to-day" management takes place in the Netherlands. Entities deemed resident in the Netherlands are taxed on their worldwide profits. Entities resident outside the Netherlands are only taxed on certain sources of income deemed to be connected to the Netherlands. For practical purposes, these sources of income are: income from business carried on through a permanent establishment in the Netherlands, and income from real estate located here. Q: Can I end up paying taxes on the same profits in both the Netherlands and the US? The Netherlands has concluded a large number of bilateral tax treaties with other jurisdictions to help you avoid double taxation. In fact, the Netherlands has one of the most extensive tax treaty networks in the EU. The treaties generally provide for substantial reductions of withholding tax on dividends, interest and royalties, and the Netherlands does not withhold any tax on interest and royalty payments leaving the Netherlands. Also, the Netherlands has created unilateral provisions to mitigate situations of double taxation in which a tax treaty is absent or does not contain a provision with regard to a certain type of income. Q: How is the corporate income tax system organized in the Netherlands and what are the applicable rates? Recent reforms to the Dutch corporate income tax system have improved the investment climate for foreign companies by offering additional tax relief for companies doing business here. As of January 1, 2007, the corporate income tax rate is 25.5% which is lower than the national average of the EU-25 (25.8%) and far below the average of the EU-15 (29.5%). For smaller firms, even lower rates apply - 20% for the first € 25,000 of taxable profits and 23.5% for profits between € 25,000 and € 60,000. Also reduced for all firms, is the dividend tax rate, down from 25% to 15%. The new corporate tax structure "Working on Profit" that came into effect on January 1, 2007, also includes measures that will fuel innovation. Pending approval by the European Commission, a 10% tax rate will apply for income from innovations ("patent box"). Financing profits within a group will be subject to a separate rate of 5% ("interest box"). For decades, the Netherlands Participation Exemption has not taxed foreign business profits (dividends as well as capital gains) derived from subsidiaries. The Capital Tax - a tax levied on capital contributions to companies - has been abolished as of January 1, 2006. In the Netherlands, taxpayers can find out in advance what fiscal effects a planned transaction will have. Since 2001, this has been accomplished through advance pricing agreements (APA) with, and advance tax rulings (ATR) by, the Dutch tax authorities. APAs and ATRs are treated as agreements binding both the taxpayer and the tax authorities. |
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