How to incorporate a BV in the Netherlands

Below is the incorporation procedure of a Dutch B.V. and elaborates on the key issues to be considered when setting up a Dutch B.V. There is also an overview of our services regarding the setup of a B.V. and the annual maintenance of the B.V. once incorporated.

In this publication, we highlight the following topics:

The legal form of a Dutch B.V.

A "B.V." is a private company with limited liability (L.L.C). The Dutch term is "Besloten Vennootschap met beperkte aansprakelijkheid". In comparison to other jurisdictions, the B.V. has features similar to the German "GmbH," the American "L.L.C," or the English "Ltd."

The B.V. has a legal personality and an equity divided into shares.

A B.V. can only have registered shares, which are freely transferable. Transfer restrictions (such as the "blocking clause") are not obligatory, although possible and allowed.

Generally, the shareholders of a B.V. are not personally liable for acts performed in the name of or on behalf of the B.V., nor can they be obliged to make more funds available than the capital for which they have subscribed.

Statutory directors can be held liable for "acts of bad management"("onbehoorlijk bestuur") or forsaking of agreed-upon legal obligations of the B.V., such as applying fixed tests before distributing dividends. (Statutory) Directors may also be held liable if the B.V. distributes reserves (dividend) or paid-in cap when the B.V. cannot comply with its financial obligations in the year following the distribution, the timely filing and publication of the B.V. financial statements in the Trade Register, etc.

B.V.s are approved to denominate their share capital in another currency other than the EURO.

The use of particular shares, such as shares without voting or profit rights, is allowed.

Substance requirements for a Dutch B.V.

There are virtually no legal requirements for a B.V. to have actuality in the Netherlands. The only legal requirement is a Dutch-registered address.

From a tax perspective, it is highly recommended to comply with the substance requirements for Dutch tax purposes, such as:

• At least 50% of the statutory directors and directors are authorized to make decisions (i.e., Board members) must reside in the Netherlands,
• These board members should have the necessary professional knowledge to fulfill their tasks properly,
• The company should have qualified staff for the precise execution and registration of transactions,
• Important board decisions must be taken in the Netherlands,
• The primary bank accounts of the company are held in the Netherlands (or are at least managed out of the Netherlands);
• The accounting is conducted in the Netherlands;
• The company has accumulated wage costs of at least € 100,000 per annum;
• The company has an office with facilities where its activities can be conducted for at least 24 months

The potential dual tax residence issue/effective management

From a tax perspective, it is suggested to have a majority of Dutch resident directors. This is generally perceived as the minimum substance requirement for Dutch (Holding) B.V. to avoid dual tax residence issues and to qualify for treaty benefits. For operational companies, this risk is generally unlikely due to the location of the business, the Netherlands.

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

However, when a foreign tax authority can prove that the B.V.'s “place of effective management” is situated in their country, they may try to tax the B.V. as a tax resident in their own country. This is a generally accepted principle of international taxation.

Most tax treaties concluded by the Netherlands provide that when both treaty countries claim the tax residence of the B.V., it will, for the application of the tax treaty, be deemed a tax resident of the country where its "effective management" is situated.

The term “effective management” is a technical term and refers to the place from where the decisive management decisions of a corporation are taken. This is not necessarily from where the business is run and managed, nor is it necessarily the same place as where the day-to-day (routine) management decisions are taken.

A significant factor for determining the place of effective management of a corporation is the place of residence of the decision-making director. In the case of multiple directors, that will be the place of residence for the majority of the directors. However, this is not the most critical factor. The place of effective management is where management is exercised, which does not necessarily have to coincide with the residence of the director(s).

Senior management of every international operating company can reside and travel everywhere. Management decisions are inevitably taken remotely, by e-mail, telephone, etc. However, to avoid dual tax residency issues referred to above, the center of all the activities concerning the affairs of the B.V. must be located in the Netherlands.

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

• The country of incorporation
• The location of the registered office
• The location of personnel
• The location of the physical office
• The location of the primary bank account
• The location of the bookkeeping

As stated above, it is allowed for the B.V. to 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 "can still be located in the Netherlands, provided that the foreign director is in the Netherlands regularly to manage the affairs of the B.V. and to attend board meetings, shareholders meetings, etc.

Involvement of a public notary

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

Under normal circumstances, the incorporation can be done remotely, and the personal attendance of the directors or shareholders would not be required.

We have special arrangements with public notaries concerning incorporating (standard) B.V.s based on fixed prices. We agreed on "standard” articles of association that provide all standard provisions suitable for acting as an internationally operating company of a specific nature. The articles will always have to be tailored to the (activities of the) company.

The articles will be (and must be) drafted in Dutch, but translation into English will be provided.

There is no minimum capital requirement for a Dutch B.V. as long as there is at least one share with a par value.

The pre-incorporation periods

As soon as the incorporation procedure of the B.V. is started, it is possible to do business in the name of the B.V. The B.V. should first be registered as a "B.V. in incorporation" also referred to as "B.V. i.o." with the Chamber of Commerce. Until the incorporation procedure is completed, the "B.V. in incorporation" is considered an extension (branch/partnership) of the incorporator(s).

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

Nowadays, the B.V. can, in many cases, be incorporated overnight, and a "B.V. i.o." has become a rare phenomenon. 

The incorporation procedure of a Dutch B.V.

 The incorporation of a B.V. (step by step) is as follows:

 Step 1: Fee proposal and confirmation fee quote

Based on your specific wishes and requirements, we will prepare and provide you with a fixed fee quote for the turnkey incorporation and delivery of the B.V.

Before starting the incorporation, we need confirmation that you agree with our fee quote. This can usually be done by return e-mail or through an engagement letter.

For KYC clearance, we need information and documents about the party/parties we should consider our client. Usually, this is the incorporator of the B.V., 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 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 information and a list of documents required to start the incorporation process.

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

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

After we have processed the required information and documents, we will provide you with the draft articles of incorporation of the B.V. and the forms and documents (that 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

The B.V. can be incorporated upon your approval of the draft Articles of Association and the signed documents/forms referred to above. 

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 B.V. with the Chamber of Commerce. After registration with the Chamber of Commerce, the B.V. is (in most cases) automatically registered with the tax authorities. The registration for VAT purposes and as an employer will generally require a separate procedure. We usually monitor this process and handle it on our client's behalf.  

Identification

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

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

If the incorporation is done remotely, a qualifying third party should legalize the documents (typically a foreign notary).  

If the incorporator is a corporation, we will require a Power of Attorney with a legal opinion on the existence of this corporation and the person (director) representing the corporation. We will draft such a legal opinion during the incorporation process. 

Opening a bank account

Since no longer a minimum capital requirement applies for a B.V., the B.V. does, from a legal perspective, no longer require a (Dutch) bank account at incorporation. Not even afterward, however, in practice would it be challenging, if not nearly impossible, to operate a B.V. without a bank account.

The bank account does not necessarily need to be a Dutch bank account; however, a foreign bank account may complicate the daily operations of the B.V.

During the last couple of years, Dutch banks have become more stringent about the procedure for opening a Dutch bank account. In any case, it is 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 B.V.s, the B.V. business model, its actual presence/ substance in the Netherlands, and the necessity for a Dutch bank account.

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

The timeframe for the incorporation of a Dutch B.V.

The incorporation procedure for a Dutch B.V. can usually be completed in a couple of days.

For the entire procedure in an international context, including gathering 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 B.V. in the Trade Register

The B.V. is registered with the Chamber of Commerce Trade Register upon incorporation. 

The Chamber of Commerce keeps the Trade Register, which contains information about all Dutch B.V.s (and other business entities) incorporated and registered in the Netherlands, like the 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 Trade Register is a source of information for possible business partners, and it is common practice in the Netherlands to consult the Trade Register before doing business.

Registration of the Ultimate Beneficial Owners of the B.V.

The identity of ultimate beneficial owners who, directly or indirectly, own 25% or more of the company will have to be included in the so-called "UBO-register". The information in the Trade Register was freely accessible to the public until November 22, 2022.

Based on 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 B.V. (or other qualifying Dutch entities). Only part of this information was accessible to the public.

As of November 22, 2022, data from the UBO Register are no longer accessible to the public, and obtaining an extract from the UBO Register is no longer possible. This is based on a ruling by the Court of Justice of the European Union, which considered the public accessibility of the UBO Register an infringement of European privacy laws.  

Registration with tax authorities

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

The tax registration of the B.V. will be done automatically with the first registration of the B.V. with the Chamber of Commerce. A separate request for registration is required to obtain a VAT number and register as an employer.

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

Administration and filing requirements of a Dutch B.V.

Every Dutch B.V. must keep and maintain administration, register for tax purposes, and file periodic 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 on IFRS, but generally, a statutory audit becomes obligatory.

After the end of the year, the General Meeting of Shareholders should approve the Financial Statements as presented by the Board of Directors and discharge any liability to the Board of Directors 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 to the public.

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

We offer a complete compliance package for Dutch B.V.s, including

• Administration,
• Corporate secretarial,
• Payroll and employer 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 B.V. depends on various parameters, such as the volume and nature of the shares, the number of incorporators/ directors required, special provisions in the articles, etc.

In an international context, the cost of incorporating a standard B.V. is about € 1,150. = € 1,500. = (VAT excluded), which includes English translations of the articles of incorporation.

Our fees for setting up advice, coordination, etc., will depend on the time spent. If no particular 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 international business practice and have proven to deliver value for money. We can refer you to suitable parties or coordinate the incorporation process on your behalf.

What can we do for you?

 Daily, we are engaged by non-residents (corporations and individuals) who want to incorporate a Dutch B.V.

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

To the extent required, we can coordinate the input of other parties involved (like banks, lawyers, etc.) and make sure that the incorporation process goes smoothly and efficiently.

Once the B.V. 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 typically include:

• Advice on corporate law and tax issues linked to the incorporation
• Advice on the 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 assistance and payroll services
• Accounting and tax compliance
• Ongoing support on administrative, legal, and tax matters

We are gladly prepared to coordinate and assist you with the incorporation process of your B.V. and handle the associated registration and filing requirements.

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