Setting up a private limited company in the Netherlands
Doing business in the Netherlands means first choosing the legal form you want to operate through. Your choice will determine various obligations, including your tax liabilities, and also the extent of any legal liability. You can find more information here about setting up a private limited company (or, as it is known in Dutch, a B.V.).
What is a B.V.?
A B.V. is an entity with legal personality. That means, in principle, that the company’s directors are not personally liable for its debts. This contrasts with sole traders, who are personally liable for any debts. You can set up a B.V. on your own or with other people. The shares in a B.V. are held by its shareholders, who are entitled to take decisions about the company and to share in its profits.
Benefits of setting up a B.V.
For many businesses, wanting to limit personal liability is the main reason for setting up a B.V.
Other reasons for choosing to set up a B.V. include:
• possible tax benefits
• more opportunities to raise capital from investors
• conveying a commercial and professional image to clients
Setting up a B.V.
Setting up a B.V is a bit more complicated than starting a business as a sole trader. It requires a civil-law notary to issue a deed containing the company’s Articles of Association. You also have to list the B.V. and its directors in the Trade Register at the Chamber of Commerce. In addition, you have to register all the ultimate beneficial owners of the B.V. (i.e. anyone holding more than 25% of the shares) in the relevant register at the Chamber of Commerce.
You are allowed to carry on your business in the normal way while the company is being established. But the civil-law notary has to state that the B.V. is in the process of being established (‘in oprichting’). Until the B.V. is formally established, you will operate your business activities through a ‘B.V. in oprichting’ (or ‘B.V. i.o.’). Listing in the Trade Register is compulsory in this phase, too. Any contracts entered into during the establishment phase can be taken over by the B.V. after it has been formally established. If you operate through a B.V. in oprichting (company in establishment), you will be personally liable for any debts it incurs.
Setting up a B.V. no longer requires large amounts of starting capital. Shareholders only have to pay in 1 eurocent. But because the legal entity can incur liabilities, it is advisable to pay in more starting capital. This is because if you only pay in a symbolic amount, you can always be held liable retrospectively if the B.V. enters into commitments that you could have known it would never be able to meet.
Costs and taxes
As well as the one-off costs of a civil-law notary and the costs of registering at the Chamber of Commerce, you will have to pay the annual costs of preparing and filing the company’s annual report and financial statements and the costs of the annual tax return. Depending on the company’s activities, you may be liable for turnover tax (VAT).
You may also have to pay:
• Payroll taxes if, for example, you are a director employed by a B.V. or you have employees
• Corporate tax on the company’s profits
• Dividend tax if the B.V. pays dividends to shareholders