Entity and Structure for Businesses in the Netherlands

Most foreigners that open a company in the Netherlands, open a BV company. This is a private limited company. If one or all of the shareholders of the company are located outside of the Netherlands you should most likely open a BV.

In some situations a branch office is a suitable option. A branch is a sort of extension of an existing foreign company. However, if you are planning on long-term business activity, we do not recommend this.

Another alternative is a sole proprietorship (in Dutch: Eenmanszaak) or a partnership (in Dutch: VOF). This is only interesting if you have a very small business that will stay small, you are yourself physically based in the Netherlands and your business has a very low risk profile.

If you are looking for a long-term business presence in the Netherlands it is almost always recommended to set up a BV company. Although the branch office is a technically possible, in practice it has a few disadvantages.

First and foremost, Dutch consumers and suppliers do not like working with a branch of a foreign company, but rather deal with a Dutch company. Clients will be more sceptical in working with a branch office than with a permanently established entity.

Furthermore, liability for risk/debt lies with the founding mother company.

Finally, it possibly leads to double taxation problems.

Therefore it is usual more sensible to set up a structure properly straight-away, instead of having to change the structure again once the business is actually taking off.

Finally, the establishment and maintenance costs of a branch versus a BV are not substantial.

In most cases it is beneficial to incorporate a BV holding structure. This means that you will incorporate two BV companies: one holding and one operating company. You will personally hold the shares in the holding BV. The holding BV will hold (part of) the shares in the operating BV. This will decrease your personal risk and will have certain tax advantages:

The holding company offers two important tax benefits. Under the Dutch tax rule participation exemption any profits on the sale of shares or dividend payments are received tax free in the holding. Because the profit is received tax-tree in the holding, you may use their full amount for further investments. This is a big cash advantage.

If you ever want to start up new activities, your holding company will serve as the base from where you conduct all of your activities. This allows you to use tax facilities such as the tax unity for the purposes of both corporate tax or vat. You may invest the profits of one BV tax-free in the other BV or offset any losses from the one with profits from the other, meanwhile lowering your tax bill.

Another benefit is the decrease of risk. Your company's vital assets such as IP, cars, business real estate, extra cash) are put in the holding company whereas the actual activity is undertaken in the operating BV. If the operating company gets into trouble or even goes bankrupt, your most important assets are safe in the holding BV.

A final financial advantage once you have accumulated assets in the holding is that you can provide a loan/mortgage to yourself from the holding so you can skip a visit to the bank. The interest on this mortgage loan will be paid to your BV, which is owned by you so you will receive the interest. This interest is in turn profit in the holding and then taxed at the much lower corporate income tax rate. The interest that you have personally paid to your own holding is again deductible from your taxable personal income.

Read a full overview in our BV structure guide

Clients wonder often if they can incorporate an operating BV first with a natural person as the shareholder. As soon as this BV is formed, they would like to set up the holding BV structure afterwards.

In our opinion, it is better to go ahead with the holding BV right away if you are seriously considering or are sure that you want to add a holding anyway. Adding a holding later is certainly possible, but would mean that the shares will need to be transferred from your personally into the Holding. A share transfer is done by notary deed and will involve extra notary fees.

Additionally, you will need to set up the Holding which is cheaper when incorporated simultaneously with the operating BV. This does not include the money spent to legalise documents abroad.
In conclusion, adding a Holding after registration of the operating BV is possible but we would not necessarily advise it.