In short: direct distribution in the Netherlands
Can a foreign supplier establish its own entity to import and distribute its products in your jurisdiction?
A foreign supplier is free to establish its own entity to import and distribute its products in the Netherlands. In most cases, no approval or authorization from the relevant Dutch authorities will be required, although this depends on the sector and the products the foreign supplier wishes to import and distribute.
For foreign suppliers looking to establish an entity in another jurisdiction, the Netherlands will often be a reliable and financially rewarding choice. This is due to various reasons, among them the strong business climate, the favorable tax climate and the focus on foreign trade, innovation, sustainability and digitalization of the Netherlands. According to Forbes In the ranking of the “best countries for business”, the Netherlands is in the top five of the best countries for business in the world, and in 2020 a record number of foreign companies have chosen to move their headquarters to Netherlands.
Can a foreign supplier be co-owner with a local company of the importer of its products?
A foreign supplier may co-own with a company in the Netherlands the importer of its products. A foreign supplier can also set up a joint venture in the Netherlands with a local company and use this joint venture to import their products.
What types of business entities are best suited for an importer owned by a foreign supplier? How are they formed? What laws govern them?
A limited liability company would be more suitable for an importer owned by a foreign supplier. In a limited liability company, the liability of the shareholders is limited to the capital investment in the event of bankruptcy.
The most common business entities in the Netherlands are limited liability companies: the limited liability company (BV) and the public limited company (NV). Both entities have legal personality, issue shares, offer limited liability to their shareholders and are governed by Book 2 of the Dutch Civil Code.
The main difference between NVs and BVs is that a BV can only issue registered shares, whereas an NV can issue both registered and bearer (freely transferable) shares. Another important difference is the contributed capital: a BV can be set up with contributed capital of just €0.01. The constitution of an SA requires a contribution capital of 45,000 €.
The Dutch BV in particular has proven to be an extremely popular option with foreign companies locating in the Netherlands, due to the (extremely) low minimum capital requirements, as well as the low costs associated with incorporating. a BV and the flexibility granted to companies in establishing the structure of their BV, for example with regard to voting rights.
Russell Advocaten has extensive expertise in setting up BVs for foreign companies.
Does your jurisdiction prohibit foreign companies from operating in the jurisdiction, or limit foreign investment in or ownership of domestic business entities?
Foreign companies will not be prevented from operating in the Netherlands and will be free to invest in or own domestic business entities. The Netherlands is known for its exceptional international business climate and could well be an excellent choice for foreign companies looking to expand into other countries.
Can the foreign supplier hold a stake in the local entity that distributes its products?
A foreign supplier may hold a stake in the Dutch entity which distributes its products.
What are the tax considerations for foreign suppliers and for incorporating an importer owned by a foreign supplier? What taxes are applicable to foreign businesses and individuals operating in your jurisdiction or owning interests in local businesses?
Generally, the tax system of the Netherlands is considered extremely advantageous for foreign companies, which adds to the popularity of the Netherlands among foreign companies. Taxes that may be applicable to foreign companies and individuals operating in the Netherlands or holding an interest in a company in the Netherlands are income tax, dividend tax, corporation tax, value added tax and import tax.
The many advantages associated with the Dutch tax system include:
- an extensive network of nearly 100 bilateral tax treaties to avoid double taxation and provide, in many cases, reduced or no withholding tax on dividends, interest and royalties;
- clarity and certainty in advance about the tax consequences of proposed major investments in the Netherlands;
- a broad participation exemption (100% exemption for eligible dividends and capital gains), which is vital for European head offices;
- an effective tax unity regime, ensuring tax consolidation of Dutch activities within a group of companies; and
- no statutory withholding tax on outgoing interest and royalty payments.
For companies looking to hire employees overseas, the “30% regulation” offers a significant advantage. This decision allows employers to offer up to 30% of the salaries of employees who will temporarily move to the Netherlands for their work tax-free, to compensate employees for costs incurred when moving to the Netherlands. In addition, various tax reductions, allowances and compensations are available for companies that invest in innovation or sustainable energy.
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December 6, 2021.