A foreign entity can set up business in The Netherlands in two different ways:
- Registration of a branch office;
- Incorporation of a legal entity (subsidiary).
On this page we tell you more about these two ways for setting up a business.
REGISTRATION OF A BRANCH OFFICE
A branch office is, legally, part of the head office. A branch office is formed by taking care of the mandatory registration with the Dutch trade register. A branch office needs to have a Dutch office address but does not need to have a Dutch based director.
Since the branch office is a remote part of the head office, the head office is fully liable for all obligations of the branch office.
Depending on the activities, the branch office will be subject to corporate tax, payroll tax and sales tax. For these taxes the regular tax rules apply, there aren’t any specific rules or rates for branch offices. The corporate tax rate is 20% for the first 200K profit and 25% on the surplus.
The net profit of the branch office can be transferred to the head office without any Dutch tax consequences. There is no withholding tax at source on distributed profits.
It is important to check the treatment of profits from a branch office in the country where the head office is located. In general, the results of the branch office will be considered as foreign business profit in the annuals of the head office, on which the country where the branch is located has the right to levy, and the country where the head office is located will credit for foreign taxes paid or exempt foreign profits. It is important to determine how the home country treats the corporate tax that has been paid in The Netherlands.
INCORPORATION OF LEGAL ENTITY (SUBSIDIARY)
Incorporation of legal entity(subsidiary)
The new legal entity will not be part of the head office. The entity will be seen as independent. A trip to the notary is required to set up a ‘Besloten Vennootschap’ or another entity. It is not possible to set up a new entity without a notary. The new entity needs a Dutch resident director.
The head office is not fully liable for the new entity. The new entity is fully liable for all its agreements.
The new entity will be subject to corporate tax, payroll tax and sales tax. For these taxes the regular Dutch tax rules apply.
The new entity experience tax consequences when the profits will be transferred to the head office. Dividend distributions by the new entity may be subject to withholding tax.
The new entity will be resident of The Netherlands for tax treaties. The profits of the new entity will be not considered as a profit of the head office.