INCORPORATION OF LEGAL ENTITY (SUBSIDIARY)
A legal entity can only be incorporated trough a notary. Once incorporated, the legal entity will be registered with the trade register. In the incorporation deed, the incorporators list the scope of the business, who will be appointed as the first directors, and who will be the shareholders. Different types of shares can be issued in order to expand or limit the shareholder’s authorizations or entitlements.
The legal entity has a limited liability. Therefore, the shareholders are only liable for debts to the extent of their investment. However, in case of severe mismanagement the directors can be held responsible and become personally liable.
Depending on the activities of the legal entity, it will be subject to corporate tax, payroll tax and sales tax. For all these taxes the regular tax rules apply. The corporate tax rate is 20% for the first 200K profit and 25% for the surplus.
The net profit of the legal entity can be paid out to the shareholders as a dividend. Depending on the tax treaty between the Netherlands and the country where the shareholders are located, the withholding tax rate will be between 0% and 15%. Of course, it is important to check how the country where the shareholders reside taxes the foreign dividend.