Corporation or branch?
When you intend to start a new business in the Netherlands you have to decide which legal form is most appropriate for your new Dutch business.
The Dutch B.V. (a private limited liability company) is the most frequently used legal entity by foreign investors, for example to carry out a business, for direct investments in real estate, as (intermediate) holding company, for exploitation of IP, as finance company, etc.
As an alternative for a Dutch legal entity, a foreign corporation may decide to set up a branch or representative office.
What is the most appropriate alternative for your business?
The following schedule compares the main characteristics between a branch and a corporation which may help you to make this decision:
| BV | Branch | |
| Liability | The shareholders of the BV have limited liability. | The foreign company has unlimited liability for the obligations of the branch. |
| Corporate law | Dutch corporate law applies to the BV. | Dutch corporate law does in principle not apply. |
| Minimum capital | There is no minimal capital requirement (the minimum capital used to be € 18,000). | There is no capital requirement for a branch. |
| Business permits | For special lines of business a BV may be required to obtain a permit. | For special lines of business a branch may be required to obtain a permit. |
| Foreign directors | Allowed, but it is advisable that 50% of the directors are Dutch | Allowed |
| Commercial | Within the Dutch and European market a Dutch BV has a good and reliable reputation and business image. | Depends on home country. |
| Registration requirements | A BV needs to be registered with the Dutch Chamber of Commerce and with the Dutch tax authorities. | A branch needs to be registered with the Dutch Chamber of Commerce. The Dutch Chamber of Commerce may also register the company at the tax authorities unless it concerns a representative office. This should be closely monitored. |
| Filing requirements | A BV needs to file annual financial statements with the Dutch Chamber of Commerce as well as periodical tax returns. | A branch does not need to file annual financial statements, but instead limited information about the foreign company should be filed. The periodical tax filings are basically the same as for a BV. |
| Funding | Solvability of BV will be decisive. | Solvability of the foreign company will be decisive. |
| Incorporation procedure | Notarial deed required. | No notarial deed required; only registration with Chamber of Commerce and tax authorities. |
| Incorporation cost | The minimum cost for incorporation is approximately € 1,500 (including tax registration). | Basically only the expenses for registration with the Chamber of Commerce and registration with the tax authorities. |
| Annual maintenance costs | The costs of preparing the financial statements, compliance to corporate law (annual shareholders meeting etc.), and the costs of tax compliance. | Mainly the costs of tax compliance. |
| Corporate tax | A BV is subject to corporate tax for its worldwide profits. | Depending on the nature of the activities of the branch, the branch may not be subject to Dutch corporate tax.If a branch does have a taxable presence in the Netherlands it is only subject to Dutch corporate tax for profit allocable to the business of the branch. Other rules applying to a branch are similar to the rules which apply to a BV. |
| Capital tax | n.a. | n.a. |
| Dividend withholding tax | Dividends paid by a BV are subject to 15% Dutch dividend withholding tax, unless the domestic exemption applies or a tax treaty or European Directive prescribes a lower percentage (in many cases reduction to nil). | Profit distributions by a branch are generally not subject to Dutch dividend withholding tax. |
| Wage tax | A BV has a withholding obligation for wage taxes in relation to its employees. The BV must keep a wage tax administration and should file periodical tax returns. | The wage tax obligations are the same as for a BV. |
| Value added tax | A BV is subject to the Dutch VAT regime and should file periodical VAT returns. | A branch is subject to the Dutch VAT regime similar to a BV unless it concerns a representative office. For a representative office special rules apply for the refund of input VAT. |
| Tax treaties | A BV has in general access to the Dutch tax treaty network. | A branch has no access to the Dutch treaty network, with the exception of certain tax credit facilities. |
We have extensive experience with setting up and maintaining Dutch companies. We provide amongst others the following services:
| Advice on setting up a new Dutch company/ incorporate a new BV / or a branch-representative office |
| Tax registration |
| Set up payroll and import/ VAT administration |
| Claim VAT refund |
| Expatriate services |
| Optimizing an existing company structure |
| Preparation and filing of the annual corporate income tax return and dealing with other tax compliance matters |
| Representation in tax audits |
If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam +31 (0)10 2010466) or Amsterdam +31 (0)20 5709440.