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Setting up a branch office in the Netherlands

Having in your home country a limited liability company such as a Ltd, Gmbh or US Inc, then you can register a branch of this company in the Netherlands, if you would like to do business in the Netherlands. How does it work?

At the Dutch Chambers of Commerce the branch is registered. This is an identical registration of the home country registration. When completed, the tax office is informed and your branch becomes a Dutch resident branch subject to Value added Tax, Corporate income tax and wage tax. Basically the branch has from this moment the same rights and obligations as a Dutch BV company, that is the Dutch equivalent of the limited liability company.

Via this branch office you can start the operations in the Netherlands. As the name is the same, the website stays the same and maybe you keep the same phone or email addresses, no extra investment is needed with respect to updating stationary or the website. However, if you would like to appoint a managing director in the Netherlands, you first need to appoint this director in your home country company, as the registration with the Chambers of Commerce is identical.

The most important advantage of the branch office besides the simple set up, so without the notary services, is that the transfer pricing principle between the home country office and the branch do not apply. Transactions between the home office and the branch office are regarded an internal transaction. This is rather different from transactions between the home country limited liability vehicle and the Dutch BV company. Then intercompany transfer pricing issues do exist and need to be documented.

Substance is also not an issue with a branch office, whereas this is an issue with a Dutch BV company. If you incorporate a BV company, then the BV company is situated in the country where the managing director is living. In case you appoint yourself as managing director or the foreign holding company, and you remain living abroad, then this will result into problems with respect to VAT. In order to solve the substance issue you need to obtain the services of a trust company. This company can provide substance, although it can be challenged by the tax office.

The moment you decide the branch is no longer desired, you simply deregister the branch with the Dutch Chambers of Commerce. No liquidation procedure is required, as is with the Dutch BV company deregistration. Should you prefer to continue the business in the Netherlands using the Dutch BV company vehicle, then you still have to deregister the branch registration and have the home country limited liability company contact a Dutch notary to start the procedure of setting up a BV company. This process takes about two months time.

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