04-05-2020

How to establish a private limited company (BV) in the Netherlands?

Tax Advice

Many businesses are looking for opportunities. A large number of entrepreneurs would like to have access to the Netherlands. In addition to a thorough market research and assessment of the tax and legal situation, they are also required to determine what the correct legal position is for their companies. There are a number of legal entities to choose from in the Netherlands. In this memo we would like to explain the Dutch private limited company (PLC) to you, or as in Dutch the “besloten vennootschap”, or abbreviated in BV.

Why a BV?

The establishment of a BV has many advantages for foreign entrepreneurs. Dutch entrepreneurs prefer to do business with the “trusted” Dutch BV than with an “unknown” legal entity. As a result, Dutch companies and suppliers are more accessible and thus easier to approach. Also, the recruitment of Dutch personnel is often a major challenge for foreign entrepreneurs . This is a lot easier in the case of a BV. Another advantage is the spread of risk liability. A BV has separate assets which Dutch creditors can lay claim to. Finally, a BV is also advantageous when it comes to taxation on profits.

On the other hand, a BV also has some disadvantages. A BV requires additional administration, additional set-up costs and annual costs for the preparation of the annual financial statements and tax returns. Whether a BV is advantageous for foreign entrepreneurs can be determined on a case-by-case basis. If the foreign entrepreneur's is involved in small-scale activities in the Netherlands, it is debatable whether establishing a BV is absolutely essential.

Establishing a BV

Since the 1^st October 2012 it has become easier to establish a BV in the Netherlands. This is when the new law, the Flex BV, was implemented. The law applies to both new and existing BVs. A Dutch BV can be established by a natural person or a legal entity. When establishing a BV, the following should also be taken into account:

Research

The market research must be conducted and examined with regard to the activities planned in the Netherlands. A permit is required for certain activities in the Netherlands. The scale of activities is also a crucial consideration. A BV’s costs will predominantly include the set-up costs and costs of preparing the annual financial statements and tax returns. Also, one should consider whether there are government grants in the Netherlands for the activities planned. In order for grants to be issued, further requirements relating to the legal form and the entrepreneur's location should be met.

Tax consultant

Every company is involved in tax and legal issues. What is required to establish a BV? What types of taxation are there in the Netherlands? What particular types of taxation are applicable for the company? How will the company be registered with the Dutch tax authorities? Which legal form is the most favourable from a tax point of view? The assessment of the tax and legal situation will determine the legal form and future of the company. A tax consultant is your best sparring partner in such a procedure. He has an excellent understanding of the laws and is able to carry out a clear analysis of the tax and legal risks. Working together with a tax consultant also provides the foreign entrepreneur with many benefits when it comes to practical matters, such as providing the notary with the information required for the establishment of the BV or registration with a chamber of commerce.

Notary

The establishment of a BV has to go through a notary. First of all, the notary will check the personal details of the founders on the basis of the proof of identity presented. Next, the notary will prepare the BV's articles of association. These articles will be drawn up in Dutch, and upon request, in English or German.

Articles of association (statutes) of a BV

The articles of association comprise the statutes of the BV, in which the rules are recorded. The following has to be stipulated in the statutes:

the name of the BV;
the purpose of the BV: It is advisable that the company’s activities are described here as extensively as possible. This means that the entrepreneur will not require the notary to amend the statutes whenever the activities are extended.
the registered office (address): the BV’s registered office in the statutes must be situated in the Netherlands;

the share capital: The minimum share capital of € 18,000 no longer applies. At least € 0.01 has to be paid into the company. The capital can be paid in cash or in kind. The company is given the choice;
a provision for the Management Board and/or Supervisory Board members who become suddenly unavailable (e.g. due to illness or suspension).

Drawing up articles of association

Deviation from these statutory requirements is not permitted. However, implementation of the Flex BV law means that the entrepreneur now has more freedom with regard to further content and statutes. When drawing up the articles of association, the following points should be taken into account:

blocking provision in the event of transfer of shares: In the event of the transfer of shares, these have to be offered to the other shareholders initially, or the other shareholders have to agree to the transfer. It is a prerequisite that shares in a BV can only be sold or transferred through a notary;
Authorisation of Management Board members to represent: There are two options to choose from for the authorisation of Management Board members to represent. The first is that every member of the Management Board is authorised to represent the BV without restrictions. The other option is authorisation to represent jointly with other members of the Management Board;

Rights and approval of shareholders. It is advisable that an overview of the rights of shareholders is recorded in the articles of association. In addition, an overview of legal acts which require the approval of the shareholders can also be inserted.
Share types. The entry into force of the Flex BV law also enabled the sale of shares:
- without voting rights, or with more or less voting rights;
- without profit entitlement, or with more or less profit entitlement;
- with special powers, such as the appointment of Management Board members.

Obligations of the BV

The Flex BV law also introduced new obligations. Shareholders can no longer decide independently whether to pay out dividends. For this purpose the approval of the Management Board is required. Before approval is granted by the Management Board, they are required to examine the payout. The Management Board must examine whether the BV is able to meet its obligations for a further year after the payout. If it is subsequently ascertained that the Management Board has wrongly approved the payout and could have had knowledge of this, members of the Management Board can also be held personally liable for this. They will subsequently be required to compensate the loss of the BV, up to a maximum amount of the previous dividend payout. Shareholders can also be required to reimburse the amount received, should they have been aware that the dividend payout was irresponsible. The same applies for the repayment of capital by the BV to its shareholders.

Registration in the commercial register

After the establishment of the BV, the notary will take responsibility for the registration in the commercial register in the Netherlands.

The amount of time invested in (market) research differs from company to company. The notary activities and registration usually take one to two weeks.

Tax rates

In the Netherlands you are required to pay corporate tax on the profit of the BV. There are two rates for Dutch corporation tax. For the first € 200,000.00, a rate of 16,5% is charged. For all amounts above this, a corporate tax rate of 25% applies. Corporate income tax in the Netherlands will decrease to 15% and 21,7% in 2021.

If you wish to establish a BV, we will be happy to help you. Should you have any questions concerning this or other issues, please contact our Tax Advisors.

Would you like more information? Please feel free to contact us.

Stef Arkink

Tax Advisor

Send an email +31 (0)5 41 21 74 06

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