For clients looking to set up or expand in the Netherlands, Sovereign has a formal agreement with Amsterdam-based RPS Group, a team of professional and experienced lawyers specialising in providing business development solutions to investors from all over the world.
RPS services include full company registration solutions, bookkeeping and accounting for investors interested in starting businesses in the Netherlands. In addition, it offers services covering business immigration, corporate structuring, compliance, mergers and acquisitions, contract negotiation and dispute resolution, strategic consulting, and legal and tax advice.
RPS Partner and Director Business Development Michael Rothuizen sets out why foreign entrepreneurs should be looking to expand their businesses into the Netherlands and the EU.
The five key considerations for selecting the best place to expand or relocate a business internationally are: location, infrastructure, financial incentives, local workforce and quality of life. The Netherlands scores highly in each of these areas, providing an outstanding strategic location for successful innovation, enterprise and growth, both for start-ups and firms looking to scale up for European and global markets.
By choosing the Netherlands, you gain access to key markets and partners in Europe as part of an international business environment that offers superb infrastructure, world-class multilingual talent, business-friendly regulatory authorities, and a collaborative mindset.
The Netherlands ranks second on the IMD World Digital Competitiveness Ranking 2023, which measures the capacity and readiness of 64 economies worldwide to adopt and explore digital technologies as a key driver for economic transformation.
Strategic Location
Consistently ranking in the top of the World Bank Logistics Performance Index, the Netherlands is a leading logistics hotspot in Europe. Home to the world’s most efficient seaports and the highest quality of air transport in the EU, the Netherlands’ logistics infrastructure provides unparalleled access to Europe.
The Netherlands serves as the gateway to Europe with its world-class logistics hubs facilitating trade and transport for global markets. The Port of Rotterdam is Europe’s largest seaport, while Schiphol Airport is the world’s second best-connected airport and the fourth largest cargo airport in Europe. When combined with the high-speed rail, road and waterway networks, these open up the whole of Europe for multimodal transport and distribution.
Offering advanced distribution capabilities and a robust supply chain, the Netherlands allows businesses to reach customers in Europe and beyond. Major European economies, including Germany, the UK and France, are all within a day’s reach of the Netherlands. There are 170 million consumers within a 500km radius of the Netherlands, and 244 million consumers within a 1,000km radius.
The Netherlands is Europe’s second largest import destination and second largest exporter. International companies are attracted to the Netherlands’ advantageous customs and VAT systems, which are designed to ensure efficiency. As a result, more than 1,000 American and Asian companies have centralised their European distribution activities in the Netherlands.
Innovation Ecosystem
The Netherlands is an innovation leader in Europe, ranking fourth on the EU Commission’s 2022 European Innovation Scoreboard. It offers a powerful digital infrastructure, 14 universities and generous research and development (R&D) incentives for companies pushing boundaries in the Netherlands.
The WBSO R&D tax credit scheme is designed to stimulate innovation by enabling companies to lower the wage costs for R&D and other R&D costs and expenditures, such as prototypes or research equipment, while the Innovation Box results in a 9% tax rate for income related to patents and associated development.
The Innovation Credit aids companies in the development phases of new products or services. SEED capital is available via loans or venture capital funds, and the Dutch Venture Initiative II is a €200 million fund supported by the Dutch Ministry of Economic Affairs, all of which contributes to supporting new thinking and innovation across the Netherlands.
The Netherlands is also one of Europe’s largest start-up ecosystems with a pronounced emphasis on entrepreneurship and innovation. As the country that gave the world the CD, DVD Wi-Fi and Bluetooth, the Dutch are renowned internationally for advanced tech and innovation. As the European R&D location of various major multinationals, the Netherlands has the second highest number of patent applications per million inhabitants in Europe, according to the European Patent Office (EPO).
The Netherlands offers a unique advantage in finding answers to complex challenges: science and innovation parks are engines of R&D, knowledge-sharing and business growth. These campuses serve as hubs for companies to tap into the Netherlands’ rich research ecosystem, state-of-the-art facilities and talent pool to tackle key global challenges.
To foster ideal conditions for innovation, the Dutch traditionally take a ‘triple helix’ approach, where government, business and academia join forces to find solutions for the future. Public-private partnerships (PPP) are the Dutch way of driving success in R&D, ensuring the country can make a difference on the European playing field and in global markets.
Corporate structures in the Netherlands
There are many potential business structures, with and without legal personality, in the Netherlands. The most suitable option will depend on your circumstances, the type of business activity and the maturity of the business.
With legal structures without corporate (legal) personality, you are personally liable for the business’s debts. These include:
- Sole proprietor or sole trader – ‘Eenmanszaak’
- General or commercial partnership – ‘Vennootschap onder firma’ (VOF)
- Professional or public partnership – ‘Maatschap’
- Limited partnership – ‘Commanditaire vennootschap’ (CV)
If your company has a legal personality, you will not be personally liable for the company’s debts. These include:
- Private limited company – ‘Besloten vennootschap’ (BV)
- Public limited company – ‘Naamloze vennootschap’ (NV)
- Cooperative – ‘Coöperatie’
- Association – ‘Vereniging’
- Foundation – ‘Stichting’
A branch office is not a separate legal entity itself. It is fully dependent on the head office, and generally comprises only one section of the business, such as marketing. A branch office in the Netherlands must be registered with the Dutch Business Register (Handelsregister).
There is no requirement for the branch office to file financial statements, but there is a requirement to submit financial statements from the parent company. The Tax Administration considers branch offices that engage only in supporting activities as ‘non-permanent establishments’.
If you open a fully operational company in the Netherlands, it does not matter to KVK or the Tax Administration that the company is affiliated with a foreign company.
if you are only looking for a Dutch presence, with no or limited self-management, a warehouse or a branch office may be sufficient to make distribution of your products and services easier and establish a presence for your company on the Dutch market.
A subsidiary is a legal entity in its own right and carries with it all the liabilities and duties of an independent company in the Netherlands. It is an expansion of your existing business that will enable you to establish your presence in the Netherlands and expand or diversify your activities in the European market.
Remote Incorporation
A significant advantage for setting up a business in the Netherlands is the facility for remote incorporation, which means you can start a business in the Netherlands without being physically located in the country.
This flexibility makes the Netherlands an attractive option for international businesses looking to expand their operations in Europe. It is necessary to have sufficient sustainable economic activities and a business address in the Netherlands.
Remote incorporation is facilitated by the Netherlands’ efficient and transparent regulatory framework and business-friendly policies, which include clear and straightforward procedures for company registration, tax filings and compliance requirements.
Beneficial Tax Environment
To stimulate foreign investment, the Netherlands offers a highly favourable tax environment for businesses, which is a significant draw for international companies.
- Corporate income tax in the Netherlands is levied at the following rates (2024):
- 19% for taxable amounts up to €200,000
- 25.8% for taxable amounts exceeding €200,000.
- ‘Innovation Box’ – Companies can further benefit from a special optional tax rate for profits derived from self-developed intangible assets under the ‘Innovation box’ regime. Development costs of intangible assets and losses on the exploitation of intangible assets can be deducted against the regular tax rate to provide an effective tax rate of 9%. To qualify, companies are required an R&D declaration under the R&D tax credit (WBSO) regime. Larger companies also require, for example, a patent, an exclusive licence, a software programme, a plant breeders’ right or a pharmaceutical certification to qualify. The R&D tax credit (WBSO) reduces the wage tax burden of qualifying companies by offering a R&D wage tax deduction of 32% of the first €350,000 of R&D wage and other costs and expenses, and 16% of all further R&D costs and expenses. For start-ups, the tax deduction for the first €350,000 spent on R&D is 40%. There is no maximum allowance per calendar year.
- Participation Exemption – A key feature of the Dutch tax regime, which explains the high number of European headquarters in the Netherlands, is the ‘participation exemption’, which prevents benefits being taxed twice within the same group of companies by exempting the parent company from paying corporate income tax on benefits from a qualifying shareholding.The participation exemption applies to shareholdings of 5% or more, provided that the shareholding is not held as a non-qualifying portfolio investment. Benefits include cash dividends, dividends in kind, bonus shares, hidden profit distributions and capital gains realised upon disposal of the shareholding.
- Fiscal Unity – A group of Dutch companies or permanent establishments of foreign companies located within the Netherlands can apply to be treated as a ‘fiscal unity’, which allows tax consolidation of the Dutch activities within a group and the filing of just one consolidated tax return. The main advantages of this regime are:
- The offset of losses of one company against profits of another company within the fiscal unity.
- Tax-free transfer of assets.
- Elimination of most intercompany transactions.
- Tax Rulings – The Dutch Tax Administration has a dedicated International Tax Certainty Team that handles requests for Advance Tax Rulings (ATRs) or Advance Pricing Agreements (APAs), which provide domestic and international companies the opportunity to obtain certainty in advance about their future tax position.
- An ATR is an agreement on the tax characterization of transactions in international corporate structures and provides taxpayers with certainty in advance on the tax implications of a planned transaction or combination of transactions in an international context.
- An APA offers a taxpayer certainty in advance on transfer pricing transactions between affiliated organisations and companies, or between units of the same organisation or company.
- Tax Treaties – The Netherlands has one of the most extensive double tax treaty networks in the world, comprising bilateral double tax agreements (DTAs) with over 90 countries. These double tax treaties generally provide for a reduction, or even an exemption from, withholding tax levied on inbound dividend, interest and royalty payments. The Netherlands itself does not levy any withholding tax on outbound interest and royalty payments.
Holding Companies
The Dutch tax system has many features that make the Netherlands a favourable jurisdiction for establishing an international holding company. These include:
- The participation exemption, under which dividends and capital gains on the sale of shares in foreign subsidiaries are fully exempt from Dutch corporate income tax.
- Absence of withholding taxes on outbound interest and royalty payments.
- The potential to obtain Advance Tax Rulings (ATRs) and Advance Pricing Agreements (APAs) from the Dutch tax authority.
- The extensive double tax treaty network.
To benefit under these features, it is essential to understand and comply with local tax regulations, particularly in the context of economic substance requirements.
Substance Requirements
While the Netherlands permits non-resident directors, substance requirements refer to the need for a business to have a physical presence and demonstrate genuine economic activity in the Netherlands. This is increasingly important for establishing business activity and compliance, especially in the context of international tax regulations.
The adoption of the OECD Base Erosion and Profit Shifting (DEPS) standards in October 2015 and the introduction of anti-abuse provisions in tax treaties limits the use of tax treaties by companies lacking appropriate substance.
To establish a minimum level of substance in the Netherlands, the tax authority has developed the following requirements for Dutch intra-group financing and licensing companies:
- At least 50% of all authorised directors must be tax residents of the Netherlands.
- Resident directors must have the relevant professional knowledge and skills to execute their obligations as directors.
- The company has qualified personnel to execute and administer its transactions.
- The principal directorial decisions are taken in the Netherlands.
- The company’s principal bank account is maintained in the Netherlands
- The company’s books and accounts are kept in the Netherlands.
- The company is a tax resident of the Netherlands and is not deemed a resident of any other country.
- The company has a minimum of €100,000 salary expenditure in relation to the licensing and/or financing activities.
- The company has a lease of at least 24 months on appropriate office space.
The company must declare in its tax return that these substance requirements are fulfilled. Lack of substance may cause spontaneous exchange of information with foreign tax authorities and the disallowance of tax treaty benefits.
Having a physical presence in the Netherlands can provide several advantages, including access to local markets, better customer engagement, and enhanced credibility. It also assists businesses to benefit from the country’s favourable tax treaties and avoid potential issues related to tax avoidance.
Collaboration Opportunities
The Netherlands’ business environment, both domestically and internationally. The Netherlands’ innovation-friendly business climate is characterised by strong collaboration opportunities for companies, including attractive incentives.
The Dutch government is investing in innovation within the key sectors in the Netherlands through its National Growth Fund. These sectors include agri-food, life sciences and health, high-tech systems, chemicals, clean energy, IT, fintech, creative industries and maritime and water technology.
By establishing or expanding your business in the Netherlands, you can connect and collaborate within existing industry ecosystems. Companies can also benefit from the public-private partnerships between the private sector, research universities and government.
High Quality of Life
The high quality of life in the Netherlands plays an important role in attracting internationals and companies looking for a new home. It is a good place to live and work, which is reflected in several world rankings.
The Netherlands is ranked as the world’s sixth happiest nation according to the United Nations Happiness Report, while the OECD gives the Netherlands above average scores in numerous sectors including employment, health, housing and subjective well-being.
Dutch employers and employees share the idea that a healthy work-life balance makes employees more motivated and productive. And it shows: part-time labour is popular in the Netherlands and the efficiency of Dutch workers is extremely high compared to other European nations according to the OECD.
A healthy public education system and quality international schools help create a secure environment for families and their children, while Dutch universities and centres of higher education consistently rank among the world’s best.
The Netherlands ranked second in the 2018 EHCI ranking for best healthcare system, with equitable access to high quality services. It is also generally a safe place and Dutch cities and villages are equipped with a network of cycle lanes that are so safe and comfortable that even the youngest and the oldest riders regularly use bikes as the easiest mode of transport.
The Netherlands’ multicultural and inclusive society also enhances its appeal. Studies show that the Dutch are among the most proficient in English, some of the most skilled workers, among the most flexible – among the most important factors in relocating a business. This international outlook explains why the Netherlands is the ideal choice for entrepreneurs and corporations alike.
