Corporation or Branch?

Last updated : 09-10-2023

08 January 2023 Add expertise tag Add service tag Add country tag

When a foreign corporation intends to start a new business in the Netherlands, it has to choose between a branch of the foreign corporation or a local L.L.C. (B.V).

The Dutch B.V., a private limited liability company, is the most frequently used legal entity in the Netherlands. A foreign corporation may decide to set up a branch as an alternative to a Dutch entity.

Another alternative is a so-called Representative Office, which is the minimum form of the substance of a foreign corporation in the Netherlands. It requires no registration in the Chamber of Commerce and no registration for corporate tax purposes.

The following schedule shows a comparison of the main characteristics of a branch to a corporation:

	BV	Branch
Liability	The shareholders of the B.V. have limited liability.	The foreign company has unlimited liability for the obligations of the branch.
Corporate law	The Dutch corporate law applies.	The Dutch corporate law does not apply.
Minimum capital requirement	No.	No.
Business permits	A B.V. might be required to obtain a permit for specific businesses.	A branch might be required to obtain a permit for specific businesses.
Foreign directors	Allowed	Allowed
Commercial	A Dutch B.V. has a good and reliable reputation and business image in Dutch and European markets.	Depends on the country of origin.
Registration requirements	A BV should be registered with the Dutch Chamber of Commerce and the Dutch tax authorities.	A branch must register with the Dutch Chamber of Commerce and, in most cases, with the Dutch tax authorities. Unless it concerns a "representative office."
Filing requirements	A B.V. must file annual financial statements with the Dutch Chamber of Commerce.	A branch does not need to file annual financial statements, but limited information about the foreign company should be pointed out. The periodical tax filings are the same as for a B.V.
Funding	The solvability of B.V. will be decisive.	The solvability of the foreign company will be decisive.
Incorporation procedure	Notarial deed required.	No notarial deed is required; just a registration with the Chamber of Commerce and tax authorities.
Incorporation cost	The minimum cost for incorporation is approximately € 1,250 (including tax registration.)	The expenses for registration with the Chamber of Commerce and the registration with the tax authorities.
UBO register	The ultimate beneficial owners of a B.V. holding an interest of 25% or more must be included in the Dutch UBO register.	Not in the Dutch UBO register. This will depend on the country of incorporation and residence of the branch and If the reporting of its UBOs for inclusion in a foreign UBO register is obliged.
Annual maintenance costs	The costs for the preparation of financial statements, compliance with corporate law (annual shareholders meeting, etc.), and the costs of tax compliance.	In the Netherlands, mainly the costs of tax compliance apply.
Corporate tax	A B.V. is subject to corporate tax for its worldwide profits.	Depending on the nature and volume of the activities, the branch might not be subject to Dutch corporate tax. If it has a taxable presence in the Netherlands, it is subject to Dutch corporate tax for profits allocable to the business of the branch. Otherwise, the rules are similar to those for a B.V.
Capital tax	n.a.	n.a.
Dividend withholding tax	Dividends paid by a B.V. to its (foreign) shareholders are subject to a 15% Dutch dividend withholding tax unless a domestic exemption applies or a tax treaty or European Regulation prescribes a lower percentage. In many cases, an exemption applies.	Profit distributions by a branch are generally not subject to Dutch dividend withholding tax.
Value added tax	The B.V. has a registration, reporting, and withholding obligation for VAT concerning the import of goods, sale of goods, or providing services.	The VAT obligations of a Branch are the same as those of a B.V.
Wage tax	A B.V. has a withholding obligation for wage taxes and social security premiums concerning its employees. The B.V. must keep a wage tax administration and should file recurrent tax returns.	The wage tax obligations of a Branch are the same as for a B.V.