How to incorporate a BV in the Netherlands

12 August 2022 Add expertise tag Add service tag Add country tag
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The Dutch B.V. is the most frequently used legal entity in the Netherlands for conducting business activities.

Below we will explain the incorporation procedure of a Dutch BV, and elaborate on the key issues to be considered when setting up a Dutch BV. You will also find an overview of the services which we can provide to you in this respect.

You can find the following information in this publication:

 

Legal form of a Dutch BV

A "BV' is a private company with limited liability; in Dutch: "Besloten Vennootschap met beperkte aansprakelijkheid". In comparison to other jurisdictions, the BV has similar features as the German "GmbH", the American "LLC", or the English "Ltd".

The BV has legal personality and it has an equity divided into shares.

A BV can only have registered shares, but these shares can be freely transferable; since 1 October 2012 transfer restrictions (like the "blocking clause") are no longer obligatory, although still possible and allowed.

The shareholders of a BV are - in general - not personally liable for acts performed in the name or on behalf of the BV, nor can they be obliged to make more funds available than that part of the capital for which they have subscribed.

Statutory directors can be held liable for "acts of bad management" ("onbehoorlijk bestuur"), or the forsaking of certain legal obligations of the BV such as applying certain tests before distributing dividends (statutory directors may also be held liable if the BV distributes reserves (dividend) or paid in capital while the BV cannot comply to its financial obligations in the year following the distribution), the timely filing and publication of the BVs financials statements in the Trade Register, etc.

BVs are allowed to denominate their share capital in another currency than the EURO.

Special classes of shares are possible, including shares without voting rights or profit rights.

Substance requirements for a Dutch BV

There are virtually no legal requirements for a BV to have substance in the Netherlands. The only legal requirement is that the BV has a Dutch registered address.

From a tax perspective it is highly recommendable to comply with the substance requirements that do apply for Dutch tax purposes. These substance requirements include the following requirements: 

  • At least 50% of the statutory directors and directors that are authorized to take decisions (i.e. ‘board members’) have to be resident of the Netherlands;
  • These board members must have the necessary professional knowledge to be able to properly fulfill their tasks;
  • The company should have qualified staff for the proper execution and registration of transactions to be conducted by the company;
  • Major board decisions are to be taken in the Netherlands;
  • The main bank accounts are held in the Netherlands (or are at least managed out of the Netherlands);
  • Accounting is conducted in the Netherlands;
  • The company has an accumulated wage costs of at least € 100,000 per anum;
  • The company has an own office for at least 24 months with such facilities that the activities of the company can actually be conducted from this office.

The potential dual tax residence issue/ "effective management"

From a tax perspective it is recommendable to have a majority of Dutch resident directors. This is generally perceived as the minimum substance requirement for Dutch (Holding) BV's to avoid dual tax residence issues and to qualify for treaty benefits. For operational companies this risk is generally more remote, considering the local presence of the business in the Netherlands.

The primary parameter for determining the tax residence of a BV is the official registration as a tax resident. Once the BV is incorporated, it will by virtue of law be considered a Dutch tax resident by the Dutch tax authorities (incorporation principle).

However, when a foreign tax authority can make a case that the “place of effective management” of the BV is actually situated in their country, they may try to tax the BV as if it were a tax resident of their own country. This is a generally accepted principle of international taxation.

Most tax treaties concluded by the Netherlands provide that in case both treaty countries claim the tax residence of the BV, it will for the application of the tax treaty be deemed a tax resident of the country where it's "effective management" is situated.

The term “effective management” is a technical term, and basically refers to the place from where the key management decisions of a corporation are taken. This is not necessarily the place where the business is ran and managed, and it is not per se the same place as where the day-to-day (routine) management decisions of the corporation are taken.

An important factor for determining where the place of effective management of a corporation is located is the place of residence of the decision making director, and in case of more than one director, the place of residence of the majority of the directors. This is an important parameter although not the most important one: the place of effective management is the place where the actual management is exercised, which does not necessarily have to coincide with place of residence of the director(s).

For every company that operates internationally, senior management can be resident everywhere and travel all over the place. It is then quite inevitable that management decisions have to be taken remotely, by e-mail, telephone, etc. However, in order to avoid dual tax residency issues referred to above, it is import that the center of all the activities with respect to the affairs of the BV is located in the Netherlands.

Other factors relevant factors for determining the effective place of management are:

  • country of incorporation
  • location registered office
  • location personnel
  • location physical office
  • main bank account
  • bookkeeping

As stated above, the BV can have only foreign based directors. Ideally (one of the) director(s) would become a Dutch tax resident. If this is not feasible or desired, the "effective place of management" will still be considered to be situated in the Netherlands provided that the foreign director is in the Netherlands on a regular basis to manage the affairs of the BV, and to attend board meetings, shareholders meetings, etc.

Involvement public notary

The incorporation procedure of a BV requires the involvement of a Dutch public notary.

Under normal circumstances the incorporation can be done remotely, so that personal attendance of the directors or shareholders is not required.

We have special arrangements with public notaries for the incorporation of (standard) BVs, based on fixed prices. We have agreed on a variety of “standard” articles of association which provide all standard provisions suitable for acting as an internationally operating company of a certain nature: the articles will always have to be tailored to the activities of the company.

The articles will be (and must be) drafted in the Dutch language, but we will provide a translation into English.

Minimum capital requirement for a Dutch BV

There is no minimum capital requirement for a Dutch BV.

Pre-incorporation period

As soon as the incorporation procedure of the BV is started up, it is already possible to do business in the name of the BV. The BV should then however first be registered as a "BV in incorporation", also referred to as "BV i.o.", with the Chamber of Commerce. Until the incorporation procedure is completed, the "BV in incorporation" is in fact a branch/partnership of the incorporator(s).

On incorporation, the company must ratify all the transactions which the incorporator(s) entered into on behalf of the BV i.o. during the pre-incorporation period. The directors/incorporator(s) are in essence personally and jointly liable for acts performed during the pre-incorporation period until ratification by the BV.

Because nowadays the BV can in many cases be incorporated "overnigth", the use of a BV i.o. has become a seldom phenomena.  

The incorporation procedure of a Dutch BV

The procedure for the incorporation of a BV (step by step) is as follows: 

Step 1: Fee proposal and confirmation fee quote

On the basis of your specific wishes and requirements we will prepare and provide you with a fixed fee quote for the turnkey incorporation and deliverance of the BV.

Before we can start up the incorporation process we need confirmation that you agree with our fee quote. This can ussually be done by return e-mail, or through the executed of an engagement letter for this purposes.

For KYC clearance, we will need to receive information and documents with regard to party(ies) which we should consider our client. Usually this is the incorporator of the BV, and if this is a corporation, its UBOs and directors. The information and documents required for the incorporation will cover most of our needs in this respect.

Upon receipt of your approval we will ask you to pay a retainer fee as an advance for the work to be done by us and the public notary. After receipt of this retainer fee we will proceed with step 2.

Step 2: Request for required information and documents

We will provide you with a list of information and documents required to start up the incorporation process.

Copy passports and some of the documents requested may have to be legalized (including appostille). The legalization of passports can also be done face-to-face but this then requires a personal visit to our offices or the offices of our public notary. 

Step 3: Provide draft Powers of Attorney and sign off of incorporation documents

After we have processed the required information and documents we will provide you with the draft articles of incorporation of the BV and the forms and documents which will need to be provided by you for completion of the incorporation process such as a Power of Attorney.

Step 4: Completion of the incorporation

Upon receipt of your approval of the draft articles of association and the signed documents/forms referred to above, the BV can technically be incorporated.

Step 5: Registration with the Chamber of Commerce and the Dutch tax office

The final step of the incorporation process is the registration of the BV with the Chamber of Commerce. After registration with the Chamber of Commerce the BV is in most cases automatically registered with the tax authorities. The registration for VAT purposes and the registration as employer will generally require a separate registration procedure to be followed.  

Identification

We will require legalized copies of the passports of the future directors of the BV, the incorporator(s) (if individuals), and UBOs with a qualifying share interest.

If the incorporator(s) and future director(s) are individuals, the legalization can be done face-to-face at our offices or at the office of the public notary.

If the incorporation is to be done remotely, a qualifying third party will need to legalize the documents (typically a foreign notary).   

If the incorporator is a corporation, we will require a Power of Attorney with legal opinion on the existence of this corporation and the person (director) representing the corporation. A draft of such a legal opinion will be provided by us in the course of the incorporation process.  

Opening bank account

No minimum capital requirement applies for a BV anymore, and hence, the BV does from a legal perspective no longer require a (Dutch) bank account. However, it will in practice be very difficult, if not virtually impossible, to operate a BV without a bank account.

The bank account does not necessarily need to be a Dutch bank account, but a foreign bank account may complicate the daily operations of the BV.

During the last couple of years the Dutch banks have become more stringent with regard to the procedure for the opening a Dutch bank account. It is in any case required that the director(s) visit the bank in person, identify themselves and fill out the necessary forms. Furthermore, the banks tend to be quite critical towards foreign owned and managed BVs, the BV's business model, its actual presence/ substance in the Netherlands and the actualy necessity for having a Dutch bank account.

We have close contacts with the major international banks in the Netherlands (like ING, ABN-AMRO, Rabobank, Deutsche Bank) and we can co-ordinate this procedure for you. Alternatively, we can make introductions and give referrals to FinTech Companies who generally have more professional and effective compliance procedures in place.

Time frame for the incorporation of a Dutch BV

The  incorporation procedure for a Dutch BV can normally be completed in a couple of days.

For the entire procedure in an international context, including the gathering of necessary information and documentation, in our experience you should consider a period of one to two weeks. We emphasize that an accelerated procedure is possible.

Registration of the BV in the Trade Register

Upon incorporation the BV will be registered in the Trade Register of the Chamber of Commerce.

The Chamber of Commerce keeps the Trade Register which contains information about all Dutch BVs (and other business entities) incorporated and/or registered in the Netherlands, like statutory name, date of incorporation, registered address, name and authority of directors.

It is noted that the name of 100% shareholders is included in the publicly accessible part of the Trade Register. The identity of ultimate beneficial owners who directly or indirectly own 25% or more of the company will have to be be included in the UBO-register (see also below). This information is not fully accessible by the public (but only certain information).

The information in the Trade Register is freely accessible by the public. In day-to-day business the Trade Register is an important source of information for possible business partners and it is common practice in the Netherlands that the Trade Register is consulted before doing business.

Registration of the Ultimate Beneficial Owners of the BV

On the basis of the fourth EU Anti-money Laundering Directive, the UBO-register is in force as of September 27, 2020. The Dutch UBO register contains information about UBOs holding a direct or indirect interest of 25% or more in a Dutch BV (or other qualifying Dutch entities). Only part of this information is accessible by the public. For more information about the disclosure of UBOs, see 

Registration with tax authorities

The BV needs to be registered with the Dutch tax authorities and also with the social insurance office if any employees are to be hired by the BV or assigned within the group to the BV.

The tax registration of the BV will in essence be done automatically with the first registration of the BV with the Chamber of Commerce. For obtaining the VAT number and for the registration as employer a separate request for registration is required.

We can monitor the registration process for you to ensure proper registration.

Administration and filing requirements of a Dutch BV

In essence every Dutch BV has the ongoing obligation to keep and maintain an administration, to register for tax purposes and to file periodical tax returns.

The administration forms the basis for the preparation of the annual financial statements according to Dutch GAAP. The annual financial statements can also be based of IFRS, but then generally a statutory audit is required.

After the end of the year, the General Meeting of Shareholders should approve the Financial Statements as presented by the board of directors and provide discharge to the board of directors of any liability in this respect.

An abbreviated version of the Financial Statements must be filed with the Dutch Chamber of Commerce for publication in the Trade Register. The Trade Register is accessible by the public.

It depends on the nature of the activities of the BV for which taxes the BV must be registered and which periodical tax returns need to be filed. Most BVs are subject to Dutch corporate income tax and VAT and, if they have employees, Dutch wage tax.

We offer a full compliance package for Dutch BVs, including:

  • administration
  • corporate secretarial
  • payroll and employer's assistance
  • VAT services and compliance
  • corporate income tax compliance

For more information please consult our concrete service offer in this respect.

Cost of incorporation

The cost of incorporation of a BV depends on various parameters such as the volume an nature of the shares, number of incorporators/ directors, required special provisions in the articles, etc.

The cost of incorporating a standard BV in an international context is about € 1,250 to € 1,500 (VAT excluded), which includes English translations of the articles of incorporation.

Our fees for set up advice, co-ordination, etc. will depend on time spent. If no special circumstances occur they usually vary between € 500 and € 1,500 (excl. VAT) per incorporation.

We have trusted relationships with various public notaries. We only work with parties who have experience with the international business practice and have proven to deliver value for money. We can refer you to suitable parties or co-ordinate the incorporation process on your behalf.

What can we do for you ?

We are engaged on a daily basis by non-residents (corporations and individuals) who want to incorporate a Dutch BV.

It usually starts with an inventory of the plans for the BV, confirmation appropriate legal form, potential tax consequences, and the ongoing corporate secretarial, accounting, payroll and (tax) compliance requirements. Once the decision to set up the BV has been taken, we can execute and arrange for the incorporation on your behalf.

To the extent required we can co-ordinate the input of other parties involved (like banks, lawyers, etc.) and make sure that the incorporation process goes smooth and efficient.

Once the BV has been set up we can monitor the tax registration and handle the administration, payroll and ongoing accounting and tax compliance matters.

The services we provide include:

  • Advice on corporate law and tax issues linked to the incorporation
  • Advice on appropriate legal form
  • Coordinate the incorporation procedure
  • Advice on the tax efficiency of the structure
  • Negotiation of an advance tax ruling
  • Deal with registration requirements
  • Employer's assistance and payroll services
  • Accounting and tax compliance
  • Ongoing support on administrative, legal and tax matters

We are gladly prepared to co-ordinate and to assist you with the incorporation process of your BV and handle the associated registration and filing requirements.

If you wish to receive more information, please feel free to contact us via e-mail or call us at our office in Amsterdam at +31 (0)20 5709440 or at our office in Rotterdam at +31 (0)10 2010466 for more information.