Setting up a BV in hightech Eindhoven

company in eindhoven

Eindhoven: ‘the smartest city of Europe’. This modern city in the south of the Netherlands is the home of  the latest high-tech inventions and breakthrough technologies. Do you want to start a company in Eindhoven?

BV company in Eindhoven

Renowned companies like ASML, ASMI and Philips have their operatons in Eindhoven. Other companies in the tech and medical sector are present as well. These companies attract highly-skilled expats from all over the world. In the tech and meditech industries, Eindhoven is the place to find talent.

In this blog, we will look at how to set up a Dutch private limited liability company (subsequently: BV) in this innovative region. It is this easy to open your company in Eindhoven. We have our local specialists to guide to.

The BV and possible benefits

A BV is a Dutch legal form of private character. The BV is private because its shares cannot be freely traded and are registered. The bv has legal personality. The consequence of this is that the legal person itself, and not the shareholders, is in principle responsible for the obligations that it enters into.

If you intend to start up an innovative company in the Netherlands and hire foreign high-tech masterminds, you and your employees could possibly benefit from certain benefits. For example, you may be able to make use of the innovation box or the 30% ruling.

If your company achieves profit through innovative activities, a tax discount can be applied. As a result, a lot less corporation tax has to be paid on these profits.

When hiring foreign employees, these may incur additional costs (extraterritorial costs). As an employer, you may in some cases grant these employees a tax-free allowance for these extra costs. It is also possible to compensate for the additional costs. Therefore, we can help request or transfer the 30% ruling. This means you pay up to 30% of a salary tax free. You can read more about this scheme in this blog.

Requirements for setting up a BV

  • Notarial deed of incorporation

A BV must be set up at the office of a notary, who will draw up a deed of incorporation. The articles of association of the BV are laid down in this notarial deed, which is required by law. Among other things, it is mandatory to include the name, location and purpose of the BV in the articles of association.

  • Starting and share capital

The mandatory minimum starting capital when setting up a BV is € 0.01, which means that setting up a BV is easily accessible. The starting capital is not required to consist of money; it may also consist of assets. The capital of the BV must be divided into shares. It is possible for all shares to be held by a (legal) person.

  • Registering with the Chamber of Commerce

Another requirement when setting up a BV is registering the BV in the Dutch trade register of the Chamber of Commerce. CompanyNL will take care of registration with the Chamber of Commerce when setting up your Dutch BV.

If you have any questions about doing business Eindhoven, or about the innovation box, the 30% ruling or setting up a private limited company, do not hesitate to contact us.

Turbo liquidation – a little less turbo?

Turbo-liquidation is the quickest and simplest dissolution procedure in the Dutch legal system. This form of dissolution offers the possibility of dissolving a legal person within one week and de-registering it from the Trade Register. Because it is not necessary to go through long-term formal procedures, turbo liquidation offers many advantages for the legal person to be dissolved. However, the simplicity of turbo liquidation does not only entail positive consequences. There is a chance that creditors will miss out on their claims due to the abrupt dissolution of a legal person, and then not get the chance to examine whether there was any possibility for the legal person of settling their claim. Sander Dekker, Minister for Legal Protection, has addressed this problem and announced a bill.

As indicated above, the Dutch legal system has several options for dissolving a legal person, namely; 1) by means of a shareholders’ resolution to dissolve; 2) because the articles of association of the legal person contain a resolutive condition or; 3) a dissolution by the court.

Turbo liquidation proceeds via the first option for dissolution. The dissolution process can be started via the General Meeting of Shareholders of the legal person with it passing a dissolution resolution. After this resolution has been made, only a notification of dissolution has to be made at the Chamber of Commerce (KvK) and with that dissolution is, so to speak, complete. A very simple and quick form of dissolution.

The condition for applying turbo liquidation is that it is an ’empty’ or inactive legal person. This means that there must be no income and/or expense in the legal person at the time of turbo liquidation. This condition is not always complied with and this entails the aforementioned risk for creditors. To limit the risks for creditors, the Minister for Legal Protection announced a bill on 7 October 2019. From now on, dissolution must be published and a final balance must be drawn up and filed with the Chamber of Commerce. The new arrangement must enable creditors to assess whether there are indeed no more assets left in the company.

The bill will be submitted in 2020, but it is not known when and whether this law will be implemented. This means that turbo liquidation may lose some of its simplicity, but despite the fact that the dissolution procedure is being extended, turbo liquidation will certainly remain the fastest and easiest way of dissolution.

If you want more information about the dissolution of legal persons, feel free to contact us.

BV in Curaçao

If you have a company and have to pay a lot of corporation tax in the Netherlands, it might be a good idea to consider the options for establishing your business in Curaçao. Whereas in the Netherlands the low rate is currently 19%, the fixed rate in Curaçao is only 2%. This is because there are so-called E-zones in Curaçao that enable the establishment of companies for tax purposes. In these E-zones, the corporation tax rate is guaranteed 2% until 1 January 2026.
To establish in these E-zones and to be eligible for the favourable rate, a few conditions apply.

The application

The shareholders of a company established in Curaçao can submit a request to apply the E-zone regime. For this, the company must be registered with the Curaçao Chamber of Commerce. The request is submitted to the Ministry for Economic Development and must meet certain conditions. In this way, it is important to attach a customs declaration and a concise business plan to the request.

The conditions

Trading Companies

It must be a company that acts in an international context. Products do not have to be traded via the port in Curaçao; this can be done directly from the producer to the buyer.

Company with share capital

The company must be a company with capital divided into shares, that has been established by a notarial deed. Dutch examples of this are the BV and the NV. This may also be a joint venture or a branch of such a company that is established in the E-zone.

Trade with international clients

The company’s activities must focus primarily on trading with customers who are not based in Curaçao. Delivering to customers on Curaçao is only permitted if the authorities give specific permission for this.

Actual management in Curaçao

The actual management or direction of the company must be in Curaçao. It is not necessary for the direction that this is a natural person, it is also possible to engage a legal person (such as a trust office) as the direction.

No service

The provision of services has been excluded from establishment in the E-zones, unless the service falls under a legal exception. Think especially of maintenance or repair work within the E-zone.

Economic growth

The activities that your company carries out must contribute to the economic growth of the Netherlands Antilles. This means that it is important that you make a profit or that you make a substantial contribution to employment.

Benefits

In addition to the very favourable rate for corporation tax, there are a few other advantages associated with establishing a business on Curaçao. For example, the distance to buyers in the US and South America is a lot smaller and a large part of the population speaks Dutch, English and Spanish. The level of education is also relatively good and the wage costs are relatively low. Finally, there are still some tax benefits for companies that are located in the E-zone: the import of goods is exempt from import duties and sales tax and delivery to customers outside of Curaçao is exempt from Dutch Antillean sales tax.

Please note that it is important to obtain good tax advice, because the Dutch tax authorities are watching critically. We can advise on this.

 

Societas Europaea, the European company

Since 2004, it has been possible to set up a Societas Europaea (SE). An SE is a European company that aims to make cross-border operations within the EU easier. Such a company can be established in several ways: through the creation of an SE, the merger of several existing companies, or by converting an existing company into an SE. In this blog, we will discuss the various advantages and disadvantages of setting up an SE, as opposed to a Dutch BV or NV.

Advantages (PE):
One of the biggest advantages of an SE is that its functioning and creation is governed by centrally-regulated European law. Why is this beneficial? Well, because it involves fewer transaction costs. Please note that this Regulation also refers to national law in the country where the SE has its registered office. Some cases are, therefore, still covered by national law.
Another major advantage of an SE is that it can be relatively easy to conduct a cross-border seat transfer. There is clear legislation for an SE wishing to transfer its registered office; in many national legal systems, in contrast, this is either inefficiently, or not at all, regulated. For example, if you want to transfer a Dutch company to Germany, you will first have to liquidate the Dutch company and then move the liabilities and assets. This involves a lot of time and costs. With an SE, all of this is not necessary, therefore saving you a whole lot of time and money.

Finally, an SE has the advantage of a strong global image. Some well-known, large companies, such as Airbus, Porsche and Allianz, are after all, SEs. Many people outside the Netherlands will not be overly familiar with a BV or an NV, but, in the case of an SE, however, there will be much greater public perception.

Drawbacks (PE):
Despite the fact that an SE is mainly governed by European law, it also has to satisfy the national law of the Member State where the registered office has been located. This can, therefore, cause confusion, because you are dealing with two legal systems at the same time.
In addition, the minimum starting capital required, at EUR 120,000, is relatively high. This can be disadvantageous for parties who do not have a large sum of money to start with.
Finally, another critical point can be where a company is required to set up an employee negotiating group; this can occur if a form of employee participation was in existence prior to the creation of the SE (in the case of a merger or conversion).

Conclusion (PE):
When you perform many cross-border activities, and want to have a stronger image abroad, it may be wise to set up an SE. In addition, it can also be beneficial to have the possibility of transferring the registered office of the company, for tax purposes, for example. On the other hand, there are clear disadvantages in the fact that it is not always clear which law – national or European – is applicable, and the requirement to have substantial starting capital.

Why set up a Dutch B.V. over a Permanent Establishment?

Dutch B.V. over a Permanent Establishment

Typically multinationals operate in the Netherlands via a B.V. (subsidiary) or a branch or a permanent establishment (P.E). There could be various factors which ultimately becomes the decisive factor for choosing between the two legal forms. The following article summarizes the key differences in terms of tax consequence between setting up a B.V or a PE in the Netherlands.

Tax consequences of Permanent Establishment (PE):

A permanent establishment is typically a branch, which is essentially an extension of the parent company abroad. According to OECD’s requirements, a permanent establishment is defined as a fixed place of business which is used to fully or partly carry out the business operations of a company. This includes, for example, the location of the management, a branch office or the execution of construction or assembly work as far as the latter is conducted for longer than 12 months. Hence it is not a separate dutch legal entity but operates as a foreign company.

However, there is a possibility of double taxation which may arise in the case of a permanent establishment. Although a PE is considered inseparable from Parent company it is still subject to the separate obligations regarding registration and taxation in the jurisdiction where it is located.  If there is a double taxation treaty in place, the taxation of the profits of the permanent establishment falls within the competence of the jurisdiction where the permanent establishment is set up. The Authorised OECD approach (AOA) has to be undertaken for the determination of profits of a PE, under the arm’s length principle. But there is ambiguity in the application of AOA approach which leads to issues in tax determination of the PE.

Tax consequences of B.V. in the Netherlands:

In the Netherlands, a B.V. tends to be a preferred form of business in many fields. Usually, the key advantage of a Dutch subsidiary is the shareholder’s limited liability, to the extent of their capital contribution. Also, there are no start-up capital requirements.

For tax purposes, a B.V. is usually considered a separate, legally independent company. This helps in achieving a strict separation of the levels of taxation (company, shareholders). During this process, the amount of the taxation of the B.V. is made in accordance with the corporate tax rate in the country of the B.V. This helps in avoiding any ambiguities in determination of the tax, unlike in case of PE.

Distributed profits from the B.V. are usually subject to withholding tax. However, a double tax treaty limits the withholding tax to 15 percent for natural persons and 0, 5  or 10 percent for legal entities as shareholders of the B.V. Even without any Double tax treaty in place the parent-subsidiary directive (within the EU) provides for a reduction in withholding tax amount to 0 percent. That is subject to meeting certain conditions (including minimum participation to the amount of 10 percent, minimum holding period of 12 months).

Conclusion

In general, before starting any business operations, a careful planning process must take place. Only after careful planning and consideration of the tax merit, one must choose the preferable form of business model. Hence, after performing the careful planning and consideration of the tax merits between a B.V. and a PE it can be concluded that there are numerous tax benefits of setting up a B.V. It ultimately qualifies the B.V. as the optimal form of business entity, as against a PE.

If you need more information to set up a Dutch BV, please feel free to contact us

 

Internship SEO and Content Specialist

Today, the internet is the key media form to promote your international business.  If you want to promote your brand, attract customers and compete with your competitors, merely hosting a website will not suffice.  In order to even be found by search engines, you need to be a specialist who monitors your presence in online marketing, enhances your content and creates brand awareness on social media. Hence, SEO, SEA and Content enforcement has become a booming business and specialists are in demand.

Are you interested in online marketing, content creation, and social media?  Would you like to be a part of a small, fun and motivated team?  Is your written and spoken English good?  If so, apply for this vacancy for the Internship SEO- and Content Specialist!

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Opening a bank account in the Netherlands

With its attractive economic climate, the Netherlands has become one of the most attractive EU-members to settle international business entities. These international companies may also benefit from the Dutch range in banks, as the Netherlands is home to some of the world’s most renowned banks. These are complemented by Dutch banks, such as ABN-AMRO, ING Bank and Rabobank.

Expats or companies residing in the Netherlands, need a bank account in the Netherlands to pay/receive salaries, rent etc. Yet, as a foreign entrepreneur, it can be quite challenging to open a bank account in the Netherlands, since there are some hurdles along the way. 

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Tax Plan 2019

On Tuesday, September 18, 2018, better known as Prinsjesdag, Minister of Finance Hoekstra presented the Tax Plan for 2019.  The Ministry for Finance has based these fiscal plans on 5 concrete goals:  reducing the burden on workers, creating an attractive climate for setting up business, making the Netherlands greener, implementing satisfactory enforceability and the tackling of tax avoidance or evasion.  You can read all about what these proposed changes could mean for you and/or your company here.

Income tax

Double-bracket system box 1

The current Dutch income tax system in box 1 is based around 3 brackets.  The cabinet wants to simplify this by making the transition to a double-bracket system, with a lower rate of 36.95% and a higher rate of 49.5% per cent.  However, the Dutch Tax Authorities are retaining the previous triple-bracket system for those entitled to the basic state AOW pension.

This transition will be made on a step-by-step basis and will be accompanied by a gradual change in tax rates.  Specifically, the lower rate will increase from 36.65% in 2019 to 37.05% in 2020.  The higher rate, on the contrary, set at 38.10% in 2019, will subsequently drop to 37.8% in 2020 and to 37.05% in 2021.  The threshold will stay at € 20,384 throughout this period.  This means that you will pay tax at the lower rate on income up to and including this amount.  If your income exceeds this threshold, you will be taxed at the higher rate on the remainder of your income.  This higher rate applies to income up to and including € 68,507.  For taxable income over this threshold, a combined rate of 51.75% will apply in 2019.

Rate increase box 2

As of 2020, the tax rate in box 2 will gradually increase.  In 2019, as in 2018, the Tax Authorities intend to levy 25% tax on profits from shares.  That rate will see subsequent increases of 26.25% in 2020 and 26.9%  in 2021.  In order to lessen the pain, the government is planning less tax on profits for entrepreneurs who own more than 5% of the shares in a company.

Economizing on loss carry forward box 2

In addition, the 2019 Tax Plan contains the proposal to shorten the loss carry forward period in box 2 from 9 to 6 years.

General tax credits

The cabinet is also proposing an increase in general tax credits. Consequently, in 2019, the maximum amount of tax credits available to those on incomes up to € 50,000 per year will go up by € 140.  In 2020, this will rise by a further € 103.  Yet another increase, in 2021, will see the total increase come to € 350.  The cabinet is hoping that this will improve buying power.

A measure on rates pertaining to tax base-reducing items

Furthermore, Minister Hoekstra has also made it known that the cabinet wants to phase-out a number of tax base-reducing items.  This is not a new proposal, but it is now being fast-tracked.  As a result, as of January 1, 2020, there will be a lower maximum rate for deductible costs related to personal residences, and entrepreneur’s and personalised deductions.  As for profit exemption for SME’s, the measure will, however, only apply when the total amount of joint profit, less the entrepreneur’s deduction, is positive.  This is also the case for the Posting exemption when the combined result from activities is positive.  By 2023, the lower rate for these items will drop to 36.95%.

Decrease in notional ownership value

For private residences valued between € 75,000 and € 1,060,000, the notional ownership  value percentage will decrease by .15% between now and 2023.  Similarly, the notional ownership value percentage for private residences with a value under € 75,000 will decrease on a step-by-step basis, albeit at a lower percentage.  Finally, there is a decrease of .24% for residences that come under the deployment scheme and that have a value up to € 1,060,000.

Adjustment to interest tax

In the 2019 Tax Plan, the cabinet is proposing no tax on interest for tax returns filed on time.

 

Payroll tax

Transitional measure 30% ruling

As previously reported, the duration of the 30% ruling will henceforth reduce from 8 to 5 years.  This change is not accompanied by a transitional measure.  This five year period is thus not just applicable to new appointments from 2019, but also to existing transitional 30% ruling.

Increase in volunteers’ scheme

When organisations wish to appoint volunteers, they do not have to deduct any tax or premiums on indemnification for that voluntary work.  That is, nonetheless, only so if this indemnification remains under the set threshold.  From 2019 on, this threshold will be increased to € 170 per month and € 1,700 per calendar year.

Increase in labour deduction

From 2019, Dutch tax payers with a yearly income between € 20,000 and € 60,000 will be entitled to an increase in the labour deduction.

Tax credits for foreign tax payers

The government views the inhabitants of the European Union, European Economic Area, BES islands and Switzerland as non-qualifying foreign tax payers.  By EU law, these are entitled to a tax share of the labour and income-dependant combination deductions.  This also applies to those foreign tax payers who run a company permanently established in the Netherlands.  Although the Dutch Tax Authorities have already applied this entitlement, it will officially become law on January 1, 2019.

 

Corporate income tax

The rate for the first corporate income tax bracket applies to profits up to and including € 20,000.  That rate will be 20% in 2019 and decrease to 16% by 2021.  Profits in the second bracket will be gradually taxed less as well.  By 2021, the corporate income tax rate for the second tax bracket will drop to 22.5%.  That is 1.25% more than the cabinet stated last year.

Dividend tax

Abolition of Dividend tax

It is no secret that the Rutte cabinet wants to abolish dividend withholding tax.  Whether it happens or not has always been the question.  Minister Hoekstra finally had his say on Prinsjesdag 2018:  dividend withholding tax is indeed being abolished, but not before 2020.    In this way, the Netherlands hopes to remain/become an attractive location for international companies to set up.

Introduction of withholding tax

The abolition of dividend withholding tax will go hand in hand with the introduction of specific withholding taxes.  By levying withholding tax on dividends going to jurisdictions with low taxation rates, the governments wants to stop cash flows to tax havens.  Additionally, withholding tax will also apply to constructions set up with tax avoidance in mind.

 

Sales tax

The Dutch VAT system, which contains 3 separate rates, will, from now on, have its lowest rate at 9% instead of 6%.  This lower rate is  applicable to shopping, as well as to certain services.  Besides a small increase at the checkout, this will mainly have administrative consequences for entrepreneurs.

Extension of Dutch VAT-sports exemption

The VAT-sports exemption that the Netherlands has applied up to now will also be granted in the future to non-profit sports associations holding sports-related events for non-members.

Inheritance tax

The cabinet is also proposing to revise interest tax on inheritance tax interest.  Interest tax would thus not be applicable to (current) inheritance tax assessments.  That will, however, only be the case when the request to make a provisional and/or actual return is filed on time.

Environmental tax

The Dutch government wants to take a more severe approach to environmental pollution by, amongst other things, levying a heavier tax on natural gas.  More ecologically-aware tax payers, in contrast, will be rewarded.  The cabinet is planning to impose less tax on electricity.  Furthermore, landlords who renovate a residence for rental with a view to energy-saving will also benefit from a reduction in tax.  Additionally, those going to work by bicycle benefit in the 2019 Tax Plan.  The government has simplified the fiscal scheme through which it will be possible in the future to make use of company bicycles.

 

Do you still have questions about the 2018 Tax Plan or taxation in general?  Then do not hesitate to contact us.