Many foreign companies expanding into the EU consider establishing a Dutch BV (private limited company) for their European operations. Below are a few important considerations that could save significant time and costs.
Common Scenario
A typical foreign company (often from Asia, UK, or US) wants to:
- Sell products across the EU market
- Handle VAT compliance efficiently
- Use Netherlands as their European base (as a logistics hub and/or EU HQ)
- Minimize physical presence requirements
- Leverage third-party logistics providers
The Challenge with Dutch BV Setup
Setting up a Dutch BV as a non-resident faces several hurdles:
High Costs: (Nominee) director services are expensive, often running several thousand euros annually.
Complexity: Non-resident companies face stricter requirements and longer setup times.
Ongoing Obligations: Full corporate compliance, accounting, and tax filing requirements.
The Alternative: VAT Representation
Dutch tax law offers VAT representation as a streamlined alternative that provides many of the same benefits:
Advantages:
- No need for Dutch company incorporation
- Access to import VAT deferral (crucial for cash flow)
- Ability to issue invoices with Dutch VAT
- Significantly lower setup and ongoing costs
- Faster implementation
Besides not having to incorporate an entire entity and deal with all the administrative tasks there, the other main advantage is access to so-called Article 23 Import VAT Deferral. Foreign companies importing goods into the Netherlands normally must pay import VAT immediately to customs – creating massive cash flow pressure. However, with either a Dutch VAT number (via BV) or fiscal representation, you can access Article 23 postponed accounting.
This mechanism allows you to:
- Defer import VAT until your quarterly return
- Declare it as both payable and deductible in the same filing
- Result: Zero net VAT payment on imports (assuming you’re VAT-registered and entitled to deduct)
For high-volume importers, this can mean keeping hundreds of thousands of euros in working capital instead of paying customs upfront.
Typical Costs:
- Setup: ~€2,000 (one-time)
- Quarterly VAT returns: ~€500
- EU sales reporting: ~€350
- OSS returns: ~€350
How to choose between setting up a BV or appointing a VAT representative?
Choose VAT Representation if:
- Primary goal is EU market access and VAT efficiency
- No need for local banking or contracts under Dutch law
- Cost efficiency is important
- Quick market entry is preferred
Consider Dutch BV if:
- Need local legal entity for contracts/banking
- Plan significant local operations eventually
- Require Dutch corporate structure for business reasons
For pure e-commerce and wholesale operations, VAT representation often provides 80% of the benefits at 30% of the cost compared to full BV incorporation. The key is aligning your legal structure with your actual business needs rather than defaulting to full incorporation.
Our qualified Dutch tax advisors can help evaluate your specific situation, as tax rules and optimal structures vary significantly based on your business model and home country.
