Netherlands

Starting Up in the Netherlands

Amsterdam: a busines hub

In preparing to conduct business activities in the Netherlands, a company is presented with several choices of how to go about it, as well as a slew of legal requirements to be complied with. From a legal and tax point of view, the first priority is deciding on which legal form to use “to house” the proposed Dutch-based activities.

Legal business form

Compared to other EU countries, the Netherlands has a flexible and liberal legal framework for the organization of enterprises by non-resident companies or individuals. There are no special restrictions on foreign-owned companies that wish to start a business in the Netherlands. Business operations can be set up as having either legal personality or not. If a legal entity has legal personality, the entrepreneur cannot be held liable for more than the sum he contributed to the company’s capital. A private limited liability company – “Besloten Vennootschap” (BV) – and a public limited liability company – “Naamloze Vennootschap” (NV) – are examples of limited liability companies with legal personality.

Most foreign investors in the Netherlands conduct their business activities there in the form of a private company with limited liability (BV). The BV is commonly used for all types of business ventures. However, a public limited liability company (NV) is the usual form of business enterprise adopted when capital is to be acquired through public offerings. When incorporating a BV or an NV, the foreign investor must submit a notarial deed of incorporation, which must contain the articles of association. The incorporators of a BV must provide a minimum of €18,000 of the share capital, whereas for the incorporators of an NV the amount is €45,000. To complete the incorporation procedure, the founders have to register the new company in the trade register at the Chamber of Commerce of the district in which its main business will be located.

Sole traders, partnerships and limited partnerships are examples of legal forms without legal personality, wherein the guiding principle is that the entrepreneur remains personally liable for the company’s debts. A partnership format can be used when two or more partners wish to do business jointly and under a joint name without having to meet all the legal requirements that a BV or NV would entail. If the foreign investor prefers not to set up a legal entity in the Netherlands, a branch might be a better option. A branch is easier and less expensive to establish than a subsidiary. However, a branch is not a separate legal entity, so the branch’s foreign parent is fully liable for all of its obligations.

Permit requirements

Usually, an establishment permit is not required to register a new business in the trade register of the Chamber of Commerce. However, permits are required for more complex businesses that place extra demands on the entrepreneur. Examples are enterprises in the construction, automotive and food sectors. Dutch environmental law calls for an environmental permit for all new (industrial) plants in the Netherlands. In order to obtain this permit, an application has to be filed with the competent authority, which is usually local or provincial governments. A regular building permit is required for the construction of new businesses or industrial premises. A building permit application has to be filed with the local government, which must decide on the application within 12 weeks of its receipt. However, should a company require both a building and an environmental permit, the former will not be issued before the application for the latter has been approved.

In principle, every employer planning to employ a citizen of a country from outside the European Economic Area (EEA) must apply for a permit for this purpose. Application for such a work permit is made at the Centers of Work and Income – “Centrum voor Werk en Inkomen” (CWI) – in the municipality where the company is or will be located, and this must be done before the applicant moves to the Netherlands.

Trade name

In the preliminary stages of forming a company, the founders must check that its proposed name is not identical to or too closely resembles that of an existing company. This is normally done by the public notary through the Chamber of Commerce, which maintains a Register of Trade Names. A general search will be carried out to determine if there is already a business with that name in that region. Beyond the region, the Chamber of Commerce may conduct a nationwide business name search on request. For a BV or NV, the name must begin or end with the initials BV or NV, or the equivalent words spelled out.

Internet domain name registration

The Foundation Internet Domain Registration the Netherlands (SIDN) is responsible for the registration of domain names ending in .nl. Apart from the technical requirements, SIDN’s only criterion is whether the name is unique and does not concern itself with content. Nor is a potential domain name holder prevented from registering multiple names. In fact, there is no limitation on the number. There is no requirement for the applicant to be based in the Netherlands for an “.nl” domain name. However, if the applicant is based outside the Netherlands, an address in the Netherlands does have to be given, to which formal correspondence can be sent.

The Dutch Tax Department

The entrepreneur should notify the Dutch Tax Department as soon as it is known when the company plans to start business. The relevant form, “Opgaaf Gegevens Startende Onderneming” (statement of information for starting up a new business), is available from the Dutch Tax Department, which uses it as a basis to decide for which taxes the entrepreneur will be liable.

Personnel matters

As of the beginning of July 2006, employers have the obligation to report new employees to the Dutch tax authorities no later than the day before the work commences by means of a “first-day registration” form. With this “first day registration” the government wants to reduce black-market work and illegal labor. First day registration forms can be submitted in three ways: by means of the Dutch tax authorities’ internet site, using declaration or administration software, or by a tax consultant.

Costs of incorporation

The chief expenses incurred in forming a company are:

• The public notary’s fee charged for drawing up and executing the articles of incorporation. Additional fees are charged when difficult problems necessitate much correspondence, translation or discussion. If other professional advisors have been engaged, provision for their fees should not be overlooked. The notary cost of setting up a BV depends on the notary and varies between €1,000 and €1,500.
• Ministry of Justice fee charged for issuing the Declaration of No Objection is approximately €90.
• Chamber of Commerce fee charged for filing the company’s documents in the trade register. This fee is based on the legal form of the company and the location. Registration with the trade register will cost around €180.

Preparations in Home Country

For incorporating a subsidiary, the following data and documents need to be submitted:

• Name of the company.
• Statutory seat.
• Incorporators (incl. addresses, dates and places of birth, nationalities, annual report for corporate incorporator).
• Members of the board of management (same information as above).
• Members of the supervisory board (same information as above) (if applicable).
• Authorized, issued and paid-in capital (min. €18,000)
• Power of attorney authorizing the manager. Dutch articles of association (together with Dutch civil notary).

For registering a branch:

• Name and address of the foreign legal entity or partnership, its legal form, details about the registration in its home country (such as name register and registering body, city and country of registration, registration number).
• A proof of registration, not older than one month, issued by the foreign registering body.
• In the case of a foreign legal entity, a copy of the articles of incorporation and articles of association (if these last are a separate act). These documents must be original or certified copies. All these documents should be in Dutch, English, French or German or have been translated into any of these languages.
• The identities and addresses of its directors and the identity of the branch manager, empowered to legally bind the company. The office address of the branch in the Netherlands, which is to be considered its legal domicile. The trade name and a description of the business.

For expatriate employees:

• Certificate from foreign employer explicitly stating expatriation and effective date.
• E101/102 forms (only for EU countries).

 

This article first appeared on the invest in the Netherlands website.

 

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