Before deciding where in Europe to establish your business, it is important to research the tax climate. The Netherlands is known to have many fiscal regulations that are attractive for international companies. The Netherlands has one of the lowest corporate tax rates in Western Europe.
Starting in 2019, the Dutch government decided to lower the statutory corporate tax rate (VPB) gradually. Taxes on profits up to €200.000 will even decrease from 19% to 15% in 2021. Profits that exceed €200.000 will be taxed only slightly higher (20,5% in 2021) . The Dutch government has chosen this policy to encourage the local business climate.
If a company makes a profit of €300.000:
The first €200.000 will be subject to a 15% tax rate.
The remaining €100.000 will be subject to a 20.5% tax rate.
The incorporation of a Dutch BV also provides a company with the option to extend its first financial year. This means that a company that is created in 2019 can postpone paying corporate taxes until the end of 2020. In this way, the Dutch BV can benefit even more from the further decreased corporate tax rate over the following year.
Foreign Employees: The 30% Ruling
Another attractive aspect of the Dutch tax climate is the so-called 30% ruling for foreign employees. This ruling allows for foreign employees to receive 30% of their gross salary untaxed. Only the remaining 70% will be taxed according to the rules of Dutch income tax. For instance, if a foreign employee earns €60.000, €18.000 (30%) will qualify as tax-free salary, and only the remaining €42.000 will be taxed. The Dutch tax authority has established this policy to compensate employers for the extra costs of hiring foreign employees, such as moving or travel expenses. More information about this facility can be found on the website of the Dutch tax authority. It is even possible for the director of a BV to benefit personally from the 30% ruling, as long as they are employed by their own BV.
Other attractive elements of the Dutch tax climate include the many bilateral tax treaties to avoid double taxation, an efficient fiscal unity providing tax consolidation for activities within a corporate group, and the absence of a statutory withholding tax on outgoing interest and royalty payments
Substance Requirements for a Dutch BV
Governments worldwide have imposed substance requirements on companies incorporated in their countries. This means that business must actually take place in the country of incorporation. In the Netherlands, a substance requirement is that at least 50% of the directors must reside in the Netherlands and that the bookkeeping must be done in Dutch. Also, the decision-making process by the board must mostly take place in the Netherlands. These requirements all ensure that business is actually carried out in the Netherlands and that companies are not just benefiting from the attractive tax climate. It is therefore necessary to register your Dutch BV at an actual office space or your home address in the Netherlands.
Attractive Climate for Doing Business
Apart from the tax climate, there are many other factors that can influence your choice of where to set up your business. The Netherlands has a healthy economy, a stable political situation, and a great transportation infrastructure. It is no surprise that the Netherlands has ranked highly for many years on the Ease of Doing Business Index. This ranking is based on many parameters, such as receiving credit, protecting investors, and trading across borders. Another important factor is the ease of the procedure for setting up the business.
VAT & KvK (Chamber of Commerce) number
To incorporate a Dutch BV you need a deed of incorporation, which the notary submits at the Chamber of Commerce (Kamer van Koophandel). At Firm24, we take care of the entire incorporation process in 3 steps. First, fill out all the relevant information and preferences about your BV in our online form. Then you will receive a draft of the deed of incorporation. When you accept this draft and sign the necessary documents at one of our partner notaries, your BV will be registered at the KVK. Subsequently, the tax authority will issue a VAT number and you’ll be ready to start doing business in Europe! Of course, our team of legal advisers can help you with the incorporation procedure and advise you where necessary.
Given the attractive fiscal climate, the ease of doing business, and the straightforward incorporation process, it is no surprise that so many international companies have chosen the Netherlands as their European headquarters. You can start the incorporation of your Dutch BV here: https://www.firm24.com/en/incorporate-dutch-bv/ .
If you have any questions regarding the incorporation of a Dutch BV, 30% ruling or anything else, don’t hesitate to contact us at email@example.com.