Setting up your Business
Issues to consider
The Netherlands, with a historically strong economic financial climateimportant gateway to Europe. world leading Rotterdam harbour ainfrastructure to our neighbourEuropean continent and the UK However there are a number of issues which you must consider when you are looking to set up your business in The Netherlandscommon questions we come across and gives you practical information about the issues you need to consider. What type of Business Structure should we use? There are advantages and disadvantages to all of them, and there is no one correcanswer, it’s all dependent on your specific boverview of the main structures is below: Permanent Establishment (a branch of your overseas business)
� Not a separate legal entity but an extension of the overseas parent company � No limited liability or ring� If have a permanent establishment in
liable to Dutch Corporate Income T� Obligations for filing parent company accounts
PE, do have filing obligation in head of group’s home Limited Company:
� Provides limited liability and ring� Gives a perception of a local business, with longevity � Corporation tax to be paid on company profits � Accounts require auditing if
and/or Gross Assets > criteria).
� Obligations for filing annual reports depending on size of the companymeet 2 of 43 criteria as mentioned before only a balance sheet with limited disclosure has to be filed).
Limited Liability Partnership:
� Members (partners) have limited liability � Profits are allocated to members who then pay Income Tax on these profits
personally
Setting up your Business in The Netherlands
, with a historically strong economic financial climate, Situated in the western part of the European continent with its
world leading Rotterdam harbour and important airport facilities near Amsterdamneighbour countries Germany and Belgium as well as to the rest of the
European continent and the UK is strong to use for international business.
ever there are a number of issues which you must consider when you are looking to The Netherlands. This document takes you through some of the
common questions we come across and gives you practical information about the issues
What type of Business Structure should we use?
There are advantages and disadvantages to all of them, and there is no one correcnt on your specific business circumstances and needs. A
overview of the main structures is below:
Establishment (a branch of your overseas business)
Not a separate legal entity but an extension of the overseas parent company iability or ring-fencing of the Dutch operations
ave a permanent establishment in The Netherlands then profits from this PE are liable to Dutch Corporate Income Tax Obligations for filing parent company accounts if the foreign company, with PE, do have filing obligation in head of group’s home country
Provides limited liability and ring-fencing to Dutch operations Gives a perception of a local business, with longevity Corporation tax to be paid on company profits Accounts require auditing if its (or in its group as a whole) Revenues > and/or Gross Assets > € 4,4m and/or number of staff exceeds 50
Obligations for filing annual reports depending on size of the companymeet 2 of 43 criteria as mentioned before only a balance sheet with limited disclosure has to be filed).
Limited Liability Partnership:
Members (partners) have limited liability Profits are allocated to members who then pay Income Tax on these profits
is traditionally an Situated in the western part of the European continent with its
near Amsterdam the countries Germany and Belgium as well as to the rest of the
.
ever there are a number of issues which you must consider when you are looking to . This document takes you through some of the
common questions we come across and gives you practical information about the issues
There are advantages and disadvantages to all of them, and there is no one correct usiness circumstances and needs. A brief
Not a separate legal entity but an extension of the overseas parent company
fits from this PE are
if the foreign company, with a Dutch
Revenues > € 8,8 m p/a and/or number of staff exceeds 50 (meeting 2 of 3
Obligations for filing annual reports depending on size of the company (if it does not meet 2 of 43 criteria as mentioned before only a balance sheet with limited
Profits are allocated to members who then pay Income Tax on these profits
Setting up your Business
Issues to consider
� The tax residence of the member, and where the profits in the LLP originated willdetermine in what jurisdiction and how these profits are taxed
How much Corporation Tax will the business pay? Current Corporate Income Tax rates in The Netherlands Tax rate (%) Small co rate 20% Full rate 25% (NB: rates are for the tax year to 31/12/2013
Corporate income tax is charged to legal entities of which the capital is partially of fully divided into shares. Examples are the Dutch B.V.company) but also Dutch permanent establishments (brancbased in the Netherlands. Companies based in the Netherlands are taxed on the basis of residents, however due to the extensive network of tax treaties usually the taxation is limited to the companies’ local revenues. Corporate income tax is charged on the taxable profits less the deductible losses.The companies’ profits must be determined on the basis of sound commercial practice and on the basis of a consistent operational pattern. Forand a carry forward period of nine years apply In principle all business expenses are deductible. However there are a number of restrictions. For example:
a. Special depreciation rules apply for buildings, goodwill and than buildings.
b. Limitations on deduction of interest apply in some situations e.g. acquisition of companies, funding dividend distributions with loans.
Special tax facilities may apply for income from subsidiaries as well as R&D income/expenses. Furthermore the Netherlands interest. What if we use the Netherlands The Dutch B.V. is still one of the most popular entiinternational structures. The main reason for using the Netherlands as location for a central holding company is the favorable tax infrastructure. Due to the facility of the participation exemption disposal of group companies will in general not trigger taxation in the Netherlandsof profits to a Dutch entity are taxedThe same applies for dividend distributions by the Dutch entity.
Setting up your Business in The Netherlands
The tax residence of the member, and where the profits in the LLP originated willdetermine in what jurisdiction and how these profits are taxed
How much Corporation Tax will the business pay?
urrent Corporate Income Tax rates in The Netherlands are: Taxable profit (€) 0 – 200.000 over 200.000
31/12/2013)
Corporate income tax is charged to legal entities of which the capital is partially of fully divided into shares. Examples are the Dutch B.V. (private company)
but also Dutch permanent establishments (branches) of companies that are not
Companies based in the Netherlands are taxed on the basis of unlimited tax liability as residents, however due to the extensive network of tax treaties usually the taxation is
companies’ local revenues. Corporate income tax is charged on the taxable profits less the deductible losses. The companies’ profits must be determined on the basis of sound commercial practice and on the basis of a consistent operational pattern. For losses a carry-back period of one year
ard period of nine years apply.
In principle all business expenses are deductible. However there are a number of
Special depreciation rules apply for buildings, goodwill and tangible assets other
Limitations on deduction of interest apply in some situations e.g. acquisition of companies, funding dividend distributions with loans.
may apply for income from subsidiaries as well as R&D . Furthermore the Netherlands levy no withholding taxes on royalties and
the Netherlands to set up our holding company?
l one of the most popular entities to be used as a holding company in international structures. The main reason for using the Netherlands as location for a central
favorable tax regime and the excellent legal and financial
e participation exemption disposal of group companies will in general not trigger taxation in the Netherlands. Due to the wide range of tax treaties the distributions
are taxed at a reduced rate or no dividend withholding tax at all. The same applies for dividend distributions by the Dutch entity.
The tax residence of the member, and where the profits in the LLP originated will
Corporate income tax is charged to legal entities of which the capital is partially of fully and N.V. (public
es) of companies that are not
unlimited tax liability as residents, however due to the extensive network of tax treaties usually the taxation is
companies’ local revenues. Corporate income tax is charged on the taxable
The companies’ profits must be determined on the basis of sound commercial practice and back period of one year
In principle all business expenses are deductible. However there are a number of
tangible assets other
Limitations on deduction of interest apply in some situations e.g. acquisition of
may apply for income from subsidiaries as well as R&D no withholding taxes on royalties and
es to be used as a holding company in international structures. The main reason for using the Netherlands as location for a central
regime and the excellent legal and financial
e participation exemption disposal of group companies will in general Due to the wide range of tax treaties the distributions
at a reduced rate or no dividend withholding tax at all.
Setting up your Business
Issues to consider
Holding companies in the Netherlands have friendly substance requirements. What if we make cross- border transactions between group companies? The Netherlands follows internationally recognised cross-border trading and financial transactions between affiliated entities have to be conducted on an arm’s length basis. The price and terms should be the same as if the transactions had been between completely independent parties. Typical transactions between affiliated entities that are covered by TP regulations are:
� Sale and purchase of goods � Provision of management services � Property rental charges � Transfer of (in)tangible assets � Sharing of knowledge, expertise, business contacts � Provision of financial support
on loans A business may need to prepare a Transfer Pricing Report proving the arm’s length basis of transactions. The report will include a functional and risk analysis, analysis of the adopted pricing model and benchmarking of the arm’s length basis. used TP advanced pricing agreements can be concluded with the Dutch tax authorities.Companies may fall under the scrutiny of the international tax jurisdictions where it transacts. There may also be other tax regulations whichundertaken at a commercial value. What Employment Taxes and Social Security will need to be paid? If an individual is resident in person will also be taxable in the employer and works in the Netherlands. Also when a person works more than 183 days in the Netherlands in a year the related income may be liable to Dutch income tax and social security. We would advise any new entrant to the Netherlands to take professional advice to determine whether thethe Netherlands Curre nt Personal Income Tax rates in the Netherlands Band of income (€) 0 – 19,645 19,645 – 33,363 33,363 – 55,991 Over 55,991 (NB: rates are for the tax year to 31/12/2013
Setting up your Business in The Netherlands
Holding companies in the Netherlands have friendly substance requirements.
border transactions between group companies?
follows internationally recognised Transfer Pricing (TP) rules where border trading and financial transactions between affiliated entities have to be
arm’s length basis. The price and terms should be the same as if the transactions had been between completely independent parties.
Typical transactions between affiliated entities that are covered by TP regulations are: Sale and purchase of goods
ision of management services Property rental charges
tangible assets e.g. trademarks, patents Sharing of knowledge, expertise, business contacts etc. Provision of financial support e.g. inter-group loans and charging a “market” interest
need to prepare a Transfer Pricing Report proving the arm’s length basis of transactions. The report will include a functional and risk analysis, analysis of the adopted pricing model and benchmarking of the arm’s length basis. For tax consequences on the used TP advanced pricing agreements can be concluded with the Dutch tax authorities.
may fall under the scrutiny of the international tax jurisdictions where it transacts. There may also be other tax regulations which ensure transactions are undertaken at a commercial value.
What Employment Taxes and Social Security will need to be paid?
If an individual is resident in the Netherlands then they are subject to Dutchperson will also be taxable in the Netherlands when this person is employed by a Dutch employer and works in the Netherlands. Also when a person works more than 183 days in the Netherlands in a year the related income may be liable to Dutch income tax and social
d advise any new entrant to the Netherlands or person who spends time working in to take professional advice to determine whether they are tax resident
nt Personal Income Tax rates in the Netherlands are:
Tax rate (%) 5.85% 10.85% 42,00% 52,00%
31/12/2013)
Holding companies in the Netherlands have friendly substance requirements.
border transactions between group companies?
(TP) rules where border trading and financial transactions between affiliated entities have to be
arm’s length basis. The price and terms should be the same as if the
Typical transactions between affiliated entities that are covered by TP regulations are:
group loans and charging a “market” interest
need to prepare a Transfer Pricing Report proving the arm’s length basis of transactions. The report will include a functional and risk analysis, analysis of the adopted
For tax consequences on the used TP advanced pricing agreements can be concluded with the Dutch tax authorities.
may fall under the scrutiny of the international tax jurisdictions where it ensure transactions are
Dutch tax laws. A Netherlands when this person is employed by a Dutch
employer and works in the Netherlands. Also when a person works more than 183 days in the Netherlands in a year the related income may be liable to Dutch income tax and social
or person who spends time working in are tax resident in
Setting up your Business
Issues to consider
Employers and employees also have to pay Current Social Security rates are:
Band of income (Employee Up to 33,363
Over 33,363 Employer Up to 50,853
Over 50,853 on excess
NB: (rates are for the tax year to 31/12/2013
It is the employers’ legal responsibility to pay over employee’s tax and social security deductions to the Dutch tax authorities. The Netherlands have a Reciprocal Agreement with the USA, EU countries and many others whereby when an overseas national of those countries is seconded to theNetherlands for a defined period of time and continues to pay social security in their home country, then the employer and employee are exempt from paying What is Value Added Tax (VAT) and should the busine ss be registered? VAT is a “goods and services tax” on supplies made, the standard rate of which is (some specific products are charged with 6%)form a branch in the Netherlands or a request for a refund of Dutch VAT is made must be registered for VAT. There are three types of supply
� Taxable – must charge VAT on supplies, can reclaim input VAT� Exempt – cannot charge VAT nor reclaim input VAT� Outside the scope – not in the
The supply of most types of goods and services in taxable supplies. However when these supplies are made to companies which areof the Netherlands advice needs to be sought as to what rate of VAT, if any, to use. If a Dutch entity sells goods or provides services to its non EU parent then there is no VAT chargeable on this overseas supply, however on the basis that the supply would be VAT’able if made in the other country Can we provide Share option plans to our staff? Many companies see Share Option plans as being an important way of attracting, motivating and retaining key staff. purposes a form of salary. The
Setting up your Business in The Netherlands
Employers and employees also have to pay Dutch social security charges:
rates are:
Band of income ( €) Rate (%) 31,50% (included in payroll) 00,00% 18,68% (this may differ depending on
collective agreements)on excess 00,00%
31/12/2013)
It is the employers’ legal responsibility to pay over employee’s tax and social security tax authorities. This is usually done through the payroll process.
a Reciprocal Agreement with the USA, EU countries and many others whereby when an overseas national of those countries is seconded to the
for a defined period of time and continues to pay social security in their home r and employee are exempt from paying Dutch social security
What is Value Added Tax (VAT) and should the busine ss be registered?
VAT is a “goods and services tax” on supplies made, the standard rate of which is (some specific products are charged with 6%). If a business makes taxable supplies form a branch in the Netherlands or a request for a refund of Dutch VAT is made
There are three types of supply charge VAT on supplies, can reclaim input VAT
cannot charge VAT nor reclaim input VAT not in the Netherlands VAT system, mainly import/export
The supply of most types of goods and services in Netherlands would be classed as xable supplies. However when these supplies are made to companies which are
advice needs to be sought as to what rate of VAT, if any, to use.
entity sells goods or provides services to its non EU parent then there is no VAT chargeable on this overseas supply, however on the basis that the supply would be
other country then the entity will be able to reclaim all its input
Can we provide Share option plans to our staff?
Many companies see Share Option plans as being an important way of attracting, motivating and retaining key staff. In the Netherlands Share option plans are for tax purposes a form of salary. The realized gain on option plans will be taxed as a salary
:
31,50% (included in payroll)
18,68% (this may differ depending on collective agreements)
It is the employers’ legal responsibility to pay over employee’s tax and social security This is usually done through the payroll process.
a Reciprocal Agreement with the USA, EU countries and many others whereby when an overseas national of those countries is seconded to the
for a defined period of time and continues to pay social security in their home social security.
What is Value Added Tax (VAT) and should the busine ss be registered?
VAT is a “goods and services tax” on supplies made, the standard rate of which is 21% . If a business makes taxable supplies that
form a branch in the Netherlands or a request for a refund of Dutch VAT is made then it
, mainly import/export
would be classed as xable supplies. However when these supplies are made to companies which are outside
advice needs to be sought as to what rate of VAT, if any, to use.
entity sells goods or provides services to its non EU parent then there is no VAT chargeable on this overseas supply, however on the basis that the supply would be
then the entity will be able to reclaim all its input VAT.
Many companies see Share Option plans as being an important way of attracting, In the Netherlands Share option plans are for tax
realized gain on option plans will be taxed as a salary
Setting up your Business
Issues to consider
component. This is a very technically complex area and careful planning needs to be undertaken as soon as share option plans are being conside How else can we compensate our employees? The Netherlands have a very comprehensive range of compensation and benefit options available for companies to offer their employees. disability cover are now commonplace benefits provided by many workforce. Flexible benefit packages are also gaining in popularity, giving employees options on how they wish to “spend” their benefits allowance. To discuss your requirements p449266 or email us directly. Kreston International Kreston International Limited is a global network of independent accounting firms. Offering reliable and convenient access to efficient and seamless advisory and assurance services through member firms located around the globe, Kreston:
� Is ranked the 13th largest accounting network in the world� Covers 104 countries � Has 700 offices � Has a resource of 21,000 professional and support staff.
Our members are accustomed to working together to deliver cohesive international solutions to ensure clients receive threspective countries. Beyond assurance, quality and experience, clients will enjoy the unique synergy that stems from the trusted relationships that Kreston members have created globally and which support tservice. This information is provided for guidance only and is not a substitute for professional advice. Neither Kreston International Limited nor its member firms accept any liability for any loss arising as a result of actions takenin this document. The information in this document was prepared as at 30 November 2013.
Setting up your Business in The Netherlands
is a very technically complex area and careful planning needs to be undertaken as soon as share option plans are being considered for implementation in the Netherlands.
we compensate our employees?
a very comprehensive range of compensation and benefit options available for companies to offer their employees. Pensions, commuting allowances,disability cover are now commonplace benefits provided by many Dutch businesses to their
Flexible benefit packages are also gaining in popularity, giving employees options on how pend” their benefits allowance.
discuss your requirements p lease contact the International Off ice on +44 (0)
Kreston International Limited is a global network of independent accounting firms. Offering reliable and convenient access to efficient and seamless advisory and assurance services through member firms located around the globe, Kreston:
h largest accounting network in the world
as a resource of 21,000 professional and support staff.
Our members are accustomed to working together to deliver cohesive international solutions to ensure clients receive the highest quality of expertise available in their respective countries. Beyond assurance, quality and experience, clients will enjoy the unique synergy that stems from the trusted relationships that Kreston members have created globally and which support the consistent delivery of exceptional international
This information is provided for guidance only and is not a substitute for professional advice. Neither Kreston International Limited nor its member firms accept any liability for
ng as a result of actions taken or not taken based on the information contained
The information in this document was prepared as at 30 November 2013.
is a very technically complex area and careful planning needs to be undertaken as the Netherlands.
a very comprehensive range of compensation and benefit options commuting allowances, life and
businesses to their
Flexible benefit packages are also gaining in popularity, giving employees options on how
ice on +44 (0) 1245
Kreston International Limited is a global network of independent accounting firms. Offering reliable and convenient access to efficient and seamless advisory and assurance services
Our members are accustomed to working together to deliver cohesive international e highest quality of expertise available in their
respective countries. Beyond assurance, quality and experience, clients will enjoy the unique synergy that stems from the trusted relationships that Kreston members have
he consistent delivery of exceptional international
This information is provided for guidance only and is not a substitute for professional advice. Neither Kreston International Limited nor its member firms accept any liability for
based on the information contained
