The latest global business environment rankings published by the Economist Intelligence Unit (EIU) put the Netherlands in the top ten, making it one of the best places in Europe in which to do business in the period 2005 to 2009.
Why do companies prefer the Netherlands? One of the most important reasons is the highly educated, flexible and motivated workforce. Dutch professionals are among the most multilingual in the world, enabling them to successfully operate in companies in any industry, serving customers across the globe. This is why more than 400 of the 500 largest companies in the world have offices in the Netherlands.
The country’s central geographical position, combined with good access and excellent infrastructure are further reasons why numerous European, American and a growing number of Asian companies have established offices in the Netherlands. Consider for example, the Port of Rotterdam, the world’s largest seaport, and Schiphol Airport, recognized as one of the major aviation hubs in Europe. As a gateway to Western and Eastern Europe, the Netherlands enables companies to serve markets in the current and future Member States of the European Union, the Middle East, and Africa.
So why do business in The Netherlands?
Taxation
The corporate income tax rate for both Dutch resident corporations as well as Dutch permanent establishments is currently 29.6% for taxable profits exceeding €29,689 (approximately £20,000) and is 25.5% for taxable profits up to and including €29,689.
As from 1 January 2007 the general corporate income tax rate is expected to be further reduced to approximately 25%.
These tax reductions are intended to improve the attractiveness of the Netherlands as a business location.
The Netherlands offers customs facilities for export and transit trade in the country. Goods stored in bond are not subject to import duties, VAT or – if applicable – excise duties. Payment is in principle only due if the goods are released for free circulation in the EU.
From a corporate tax perspective, it may be very attractive for a non-resident company to incorporate a Dutch company or to open a Dutch branch for handling storage, monitoring agency and distribution agreements, administration, central purchasing, invoicing, after-sales service, goods repair or research activities.
Pure holding companies have no special tax status under the laws of the Netherlands. Tax benefits are available to all companies that hold shares in Dutch or foreign subsidiaries. Dutch holding companies are therefore quite different from holding companies in a number of other countries, which are excluded from treaty protection.
The Netherlands is particularly attractive to group financing activities. The tax treaties concluded by the Netherlands generally reduce the foreign withholding tax on interest paid to a Dutch company to a substantially lower percentage, or to zero.
A company can engage in business in the Netherlands through a subsidiary or branch. Compared with other EU countries, Dutch corporate law provides a very flexible and liberal corporate framework for the organization of branches and subsidiaries by non-resident companies or individuals. There are no special restrictions on foreign-owned companies starting businesses in the Netherlands, nor are there restrictions on foreign ownership of land or on repatriation of capital and profits.
Infrastructure
Regional headquarters or coordination centres are generally established to supervise the operations of European and/or Middle Eastern subsidiaries. Sales co-ordination, administration, accounting, cash management, central billing, re-invoicing, advertising and public relations, as well as group financing and licensing, are typical activities of a regional headquarters.
The Netherlands offers a central location in Europe, excellent airport facilities, a sophisticated banking system, the availability of adequate office space and many tax advantages both for companies and for expatriates.
Setting up a business in The Netherlands
For foreign investors, there are three principal business entities:
- a private limited liability company or "Besloten Vennootschap" (BV)
- a public limited liability company or "Naamloze Vennootschap" (NV)
- some forms of partnership
Alternatively a branch may be an option. The most common structure is the BV, which requires minimum share capital of € 18,000.
A special way for a foreign company to carry out activities in the Netherlands, or in Europe with the Netherlands as its base, is the formation of a joint venture with a Dutch party. A joint venture can take the form of, for instance, a partnership or a BV.
All new businesses should be registered with the Commercial Register (“Handelsregister”), which is kept at the office of the local or regional Chamber of Commerce. This register is open to public inspection
Before establishing a company, advice should be sought from a Dutch accountant to consider all legal and tax matters.
Through DFK International, we have strong representation in the Netherlands and can make introductions to appropriate specialists. If you are considering establishing a business in the Netherlands, or would like advice in relation to an existing Netherlands operation, please contact
Mark Lamb
Chairman – DFK European Development Committee
020 7509 9279
mlamb@cvdfk.com
