Netherlands


Forms of business

There are several ways to operate a business in the Netherlands. A distinction can be made between entities with legal personality (corporate entities) and entities without legal personality (non-corporate entities). Below we discuss the principal forms used by foreign investors and companies expanding their businesses to the Netherlands 

Corporate entities

The BV and NV

Under Netherland law, two types of limited liability companies are recognised:

• BV (‘besloten vennootschap’); and

NV (‘naamloze vennootschap’).

Both the BV – which is a private limited liability company – and the NV – which is a public limited liability company – are entities with legal personality and a capital divided into shares. They can be used for the same business purposes, to be set out in their articles of association. The BV is the more flexible of the two and is most frequently used in international business.

The cooperative

The Netherland cooperative («co-op») was historically used mainly in the agricultural sector and by certain banks and insurance companies. In the last decade, it has been reinvented as a holding company in international structures due to its flexibility from a Netherlands legal and tax perspective. A co-op is a special kind of association. Similar to the NV and BV, it is an entity with legal personality, governed by articles of association.

The participants in a co-op are called members and a minimum of two members is required to set up the co-op. The co-op conducts its activities for its members and is considered an extension of the businesses of its members. Members can be individuals, partnerships or legal entities. Member liability can be unlimited, limited or excluded. In general, the co-op is a very flexible legal entity with no minimum capital requirements and a

less regulated governance structure. Considering these flexibilities, the co-op can be used in international structuring, if the client wants to set up an operational business in the Netherlands.

Non-corporate entities

Partnerships are used by individuals and entities to work together without incorporating a separate legal entity. The legal requirements are limited, a partnership agreement is sufficient. Although a partnership cannot hold legal title, it can acquire rights and assume obligations in its own name. It is therefore a separate business entity from an operating perspective, although it is not legally separate from its owners (the partners) in many respects, including taxation.

The most common partnerships are the VOF(‘general partnership’) and the CV(‘limited partnership’). Partners in the vof have unlimited liability. In the CV, one or more general partners have unlimited liability, but there will also be partners with limited liability. The limited partners are not allowed to perform acts of management and/or represent the partnership, as this would deprive them of their limited liability.

Branch

Another possibility to start up activities in the Netherlands is to create a Netherland branch of a foreign entity. A branch is not a separate legal entity but an establishment in the Netherlands which is part of and governed by a foreign legal entity. The parent business therefore always bears ultimate legal liability for the branch. Depending on the nature and scope of the activities, the branch may qualify as a ‘permanent establishment’ for taxation matters. If so, the results of the branch will be taxable in the Netherlands.

FORMS OF COMPANIES

THE BV

The BVis a privately held company comparable to the «limited liability company» (Ltd) in the United Kingdom or the ‘Gesellschaft mit beschränkter Haftung’ (GmbH) in Germany. The rules for the

BV changed in 2012 and were made even more flexible with the introduction of the «Flex-Bv». The main characteristics of the BVunder the new rules are:

Shares

• Practically no minimum capital is required. The founders will determine the issued capital (at least one share) and required paid-up capital. The issued capital and paid-up capital at incorporation will be laid down in the articles of association.

• Different types of shares are possible to vary the voting rights of shareholders and to vary their dividend rights. It is also possible to issue non-voting shares to shareholders (e.g. banks).

• Shares of a particular class may give no or limited entitlement to profit sharing. Shares with no rights to profit or liquidation proceeds must always have voting rights.

• Depending on the wording in the articles of association, transfer restrictions may be applicable.

• Shares cannot be listed on a stock exchange. 

Governance

• Annual general meeting (GM) for shareholders (in general, also for shareholders without voting rights) and holders of meeting rights.

• Both a one-tier board (executive and non-executives) and a two- tier board (separate supervisory board) are possible.

• A supervisory board (or non-executive directors (NEDs) in the board) is generally optional. Large companies may be subject

to the ‘Large Company regime’. In that case, the supervisory board (or the NEDs) is mandatory and will have special powers to appoint the executive members of the board. For some groups of companies (holding companies, companies with a majority of the employees working outside the Netherlands), the Large Company regime is less restrictive.

• The articles of association may grant shareholders the right to give specific instructions to the management board.

• Disclosures about allocation of board membership to men and women are required. Based on the Netherland Corporate Governance code the principle of «comply or explain»is advisable.

Allocation of profits

• The GM decides on profit distribution, based on the company’s accounts drafted by the management board.

• Dependent on the outcome of a balance and liquidity test, the management board may refuse approval to the distribution of profit, if this contribution might threaten the continuity of the company.

• No other capital and creditor protection rules apply.

• It is possible to make interim dividends.

THE NV

The NVis a public company comparable to the «public limited company» (plc) in the United Kingdom or ‘Aktiengesellschaft’ (AG) in Germany. The shares in an NV may be freely transferable. In general, the NV is more strictly regulated and mainly used to incorporate companies that are very large and/or will be listed on the stock exchange. 

The main characteristics of the NV are:

Shares

• Minimum capital of EUR 45,000.

• Different types of shares are possible (including bearer shares).

• All shareholders have voting rights and profit rights. There is the possibility to create depositary receipts to split up voting rights and profit rights.

• Depending on the wording in the articles of association, transfer restrictions may be applicable. 

Governance

• Annual general meeting (GM) for shareholders (in some cases, depositary receipt holders may also attend the meeting).

• Both a one-tier board (executive and non-executives) and a two-tier board (separate supervisory board) are possible.

• A supervisory board (or non-executive directors (NEDs) in the board) is optional. Large companies may be subject to the “Large Company regime”. In that case, the supervisory board (or the NEDs) is mandatory and will have special powers to appoint the executive members of the board. For some groups of companies (holding companies, companies with a majority of the employees working outside the Netherlands), the Large Company regime is less restrictive.

• The articles of association may grant shareholders limited possibilities to give instructions (only general guidelines) to the management.

• Disclosures about allocation of board membership to men and women are required. Based on the Netherland Corporate Governance code the principle of ‘comply or explain’ is advisable.

Allocation of profits

• The GM decides on profit distribution, based on the company’s accounts drafted by the management board.

• The GM decides on the proposed profit distribution. Dividends are limited by formal capital and creditor protection rules.

Setting up a business

Depending on the form chosen, certain steps must be taken to set up your company in the Netherlands. As it is most common for foreign companies to do business in the Netherlands using a BV (‘besloten vennootschap’), we will elaborate on this legal form.

The BV – rights and rules

• Normally, an establishment permit is not required to start up a new business in the Netherlands. This may be different for some sectors that are considered more complex. An example is the food sector. If you are planning a new plant in the Netherlands, an environmental permit is required in all cases.

• The articles of association must be written in Netherland and contain the name, seat and object of the BV. The name must be unique in such a way that it does not cause confusion with other entities/brands.

• The founders of the BV must sign the articles of association before a civil-law notary in the Netherlands (it is possible to use a power of attorney to avoid unnecessary travel or delays).

• Every business must be registered with the Trade Register of the Netherland Chamber of Commerce. The register holds publicly available information on the business, such as the names of the board members and the articles of association (https://goo.gl/usyJe8).

• Before all requirements are fulfilled, the BV ‘under formation’ is allowed to assume obligations. These obligations are for the risk of the person(s) representing the BV under formation. After the formal establishment of the BV, these obligations need to be ratified by the BV, and the representatives are absolved of this liability.

Taxation in the Netherlands - Corporate income tax rate 2018

Taxable profit more than €200.000 Tax Rate - 20%

Taxable profit but less than €200.000 Tax Rate - 25%

Dividend withholding Tax Rate         15%

Level VAT Rate          

High   21%

Low     0%, 6%

Exempt–

Larus Corporate Services will be pleased to advise you on how to conduct your business in the Netherlands. 

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