As a longstanding member of IAPA and an associated member of the UK200Group we have been faced with many requests of UK companies for information regarding the foundation of a Dutch legal entity (a “BV”) in the Netherlands during the last few months. Which are the (dis) advantages of setting up the foreign legal entity, which formalities need to be adhered to and which timeline is generally applicable. Whether Boris Johnson will succeed in a soft or no-deal Brexit, in general terms, the advantages of an establishment located at the European continent seem to be very interesting from various strategic perspectives, not only for UK companies but also for international companies outside Europe. The Netherlands is also well known as a European Hub towards US, Korean and Japanese companies i.e. Asian countries too.
In this respect The Netherlands territory is very interesting from, amongst others, a tax point of few as the Netherlands has entered into tax treaties with many countries in the world and the Dutch government is aiming at lowering the tax rates for entrepreneurs during the coming years. Also, in The Netherlands the English language is mastered very well, the infrastructure is perfect, the political climate is relatively stable and the country can be considered a logistical center in Europe (Schiphol airport, port of Rotterdam).
As such our firm developed an INTERNATIONAL/BREXIT SERVICE PACK for companies which would like to set up a legal entity in The Netherlands covering all legal, tax and other requirements resulting in an effective and efficient set up process. The foundation itself requires the co-ordination of the activities of the notary, the Chamber of Commerce, the tax authorities and a rental agency of office space. Our firm will co-ordinate the process and has mobilised various advisers who together work as a Team during this process.
As such the following documentation and information needs to be gathered upfront before the process can be started:
- The name of the Dutch legal entity (“B.V.”);
- The objectives of the B.V. in its widest sense;
- The address where the B.V. will keep its office (to be discussed);
- A true copy of the extract from the Chamber of Commerce of the country where the foreign shareholder of the B.V. has its seat, which should state the name and address of the company and the names of the person(s) who is/are authorized to represent the foreign company;
- A copy of a valid passport or identity card of the person(s) who is/are authorized to represent the shareholder, as well as their addresses;
- A copy of a valid passport or identity card of the Dutch director (foreign and/or local director);
- A filled out and signed UBO-declaration of the foreign company that is involved in the incorporation of the B.V.;
- A filled out and signed statement regarding each person who is involved in the incorporation of the B.V. and each of the management board members of the B.V. (a so called PEP form) stating the person is not politically exposed;
- A certificate of good standing, issued by a notary or lawyer, regarding the foreign shareholder of the B.V.;
- Email addresses and phone numbers of all parties involved;
Articles of association
Based on the abovementioned documentation and information the notary will draft the articles of association of the Dutch company which need to be signed in person or a proxy can be used (legalised and apostille). Chamber of Commerce forms need to be completed stating, amongst others, the names of the directors. Subsequently the tax authorities are being informed about the foundation of the company and it is being assessed whether the company qualifies for a corporate income tax, wage tax and/or a VAT tax number.
Substance and operating company
In this respect the tax authorities are more and more verifying for any “substance” and whether the Dutch company can be considered an active operating company. As such to speed up the acceptance process it is very important to arrange some preparation actions such as; prepare a business plan, make sure board decisions are executed in The Netherlands and/or appoint a local Dutch director (not obliged but strongly recommended), sign contracts in The Netherlands, receive/send out invoices, arrange a warehouse, open up a Dutch bank account, receive correspondence in The Netherlands, intensify existing contacts and relationships, move business and/or clients to The Netherlands a.s.o. In this respect employing staff in The Netherlands is also helpful to underline presence in The Netherlands. No strict rules and / or legislation exists with respect to this acceptance procedure and it will be verified on a case by case basis. It is our experience however that a good preparation pays off and shortens the procedure to approximately 4 weeks. In the past limit presence was accepted but the last year The Netherlands have become more critical due to the worldwide political pressure to avoid letterbox companies and to make sure that companies with activities will be located in The Netherlands.
A company just established can in general be considered a “small company” in accordance with Dutch legal requirements. In this respect no audit requirements exist and on an annual basis the company need to compile its annual accounts to be filed at the Chamber of Commerce 10 months subsequent to the book year. Vat tax returns need to be filed on a monthly/quarterly or annual basis, depending on the turnover and sometimes upon request of a taxpayer (in case of periodic refunds). The corporate income tax return can be issued to the tax authorities until 17 months subsequent to the book year if the company is included in our deferral arrangement scheme. The bookkeeping itself can be maintained by the foreign entity using its own accounting systems. Should the Dutch company also need to enter into labour contracts, the payroll should be performed on a monthly basis which can be done by our payroll office.
Should you need more information, please do not hesitate to contact us. Our international team of (tax) advisors are available to assist you 24/7 by involving any specialist you may need. Make sure that you and your clients are well prepared, or at least well informed, towards the risk of a no deal Brexit. We would appreciate it to discuss with you the abovementioned business opportunity for your clients and related advisory costs involved.
Jan van Wijngaarden (Partner)