Key Factors to Consider Before Incorporating a Dutch Company

Ten founders will give you ten reasons why they made the choice to invest in the Netherlands: gateway to Europe, world-class ports, English-speaking business culture and a respected legal system. Fair reasons, all. However, there is one thing that doesn’t get mentioned in the brochure of any company, that becoming a Dutch company is not something easy.

There are several players involved here: a notary, a registry, the taxman and some difficult-to-overturn decisions. Think of incorporation as purchasing a house, not ordering pizza. This guide will help you make the right decisions first, let you know how much it will cost, and help you appreciate the advantages it will deliver on your desk later.

8 Key Factors Before Dutch Company Formation

Here are eight decisions to make before getting into paperwork for a company formation in Netherlands. They make a difference to your taxes, liability and credibility more than any notary’s stamp.

Choose the Right Legal Structure

For growing businesses, the BV is generally the preferred approach to segregation of personal assets from business loans. A sole proprietorship is a simpler process, however, your liability remains personal.

Understand Share Capital

There is no minimum share capital stipulated for a BV, which means the smallest amount could be one euro! If you are going to choose small amounts, then you may encounter the displeasure of those at the bank and your partners.

Appoint Directors Carefully

A minimum of one director is required for every BV, and the director can reside overseas. You need to take directors’ decisions carefully, because they also have a real responsibility and can be held liable for mismanagement.

Secure a Dutch Address

The address provided in the KVK registration form must be based in the Netherlands, an address in another country won’t suffice. It is better to clarify this at the beginning in order to register for tax purposes and open a bank account.

Check Your Company Name

Consult the name database of the KVK prior to choosing a name. A conflict with another business will cause problems and it will be costly to change names in the future.

Plan for the notary

In the Netherlands, a civil-law notary is required to perform the incorporation deed process for a BV. Imagine them as a “gatekeeper” until they sign, things are not official!

Know Your UBO Duties

The Netherlands levies on companies the obligation to register their ultimate beneficial owners, typically those owning over 25% of the shares. Be prepared with identity documents at your notary appointment.

Think Tax and VAT Early

The current corporation tax rate is 19 percent for the first €200,000 of profits and 25.8 percent for the rest, while the VAT rate is 21 percent. Model your numbers before the launch, not on the day of the launch!

How Much Should You Budget for Company Incorporation

These are for reference purposes only, don’t use them for cost comparisons because they will depend on the setup, advisers and notary. Plan ahead for all 5 and you won’t get caught off-guard later.

Notary Fees

Notary fees are also dependent on the complexity and the particular firm that you hire, therefore, ask for a written quote before you hire them. Generally, custom articles of association are more expensive than standard ones.

KVK Registration Fee

There is a one-time payment made for joining the chamber of commerce, the fee is 85.15 euros. It is very small in comparison to the other expenses, but necessary, so plan for it, even if it is a small expense.

Professional Advice

Even though accountants, tax advisors and lawyers cost money, good advice will save you more money than what they cost. There’s potential for a pit in your finances to have a cascading effect for years.

Address and Banking

Rental or virtual addresses for Dutch businesses have continuous charges. The cost of opening a business bank account may vary, and some require time to set up, so always compare options before finalizing.

Paid-in Share Capital

Even without the minimum requirement, you have to invest money that truly belongs in the business. This can be viewed as an investment into making the business function.

What Responsibilities Begin After Incorporation?

Keep Proper Accounting Records

A BV should maintain a record demonstrating its financial situation at any given moment. Unorganized books are not only annoying, but they may also make the directors liable if anything goes wrong.

File Annual Accounts

Annual statements need to be presented at the KVK within one year from the end of the financial year. The shareholders should first approve them, so work backwards on your schedule.

Handle Corporate Income Tax

Your BV is required to submit a corporate income tax return, typically within 5 months of year-end (with possible extensions). Penalties may be incurred for late filing, so make sure to put it in your diary.

Manage VAT and Payroll

Incorporate the correct rate of VAT for any customer and submit returns in a timely manner. You should withhold wage tax and social contributions on wages paid to yourself or to anyone whom you employ.

Conclusion

Founders who plan first and sign second are rewarded by successful incorporation in Holland. When all the cost considerations and the responsibilities are sorted, the Dutch company becomes a no-brainer and not a headache.