If you incorporate a vehicle with limited liability you pay in a share capital. What is share capital?
What is share capital?
If you incorporate a vehicle with limited liability, let us assume for this article, you incorporate a Dutch BV company, share capital is involved. The notary will ask you how much share capital you wish, it cannot be less than EUR 0,01.
The official statement is that you cannot be held liable for more than the share capital of the BV company. In other words, if you incorporate for EUR 0,01, you need to pay up this amount and if the BV goes bankrupt for no vault of you, then your contribution to this bankruptcy will not exceed the EUR 0,01.
As you have to pay in the BV company bank account this EUR 0,01, you can spend this money on the company, not that we know on what exactly you can spend a wapping EUR 0,01.
Share capital and limited liability
What happens if you do not pay the capital into the business bank account of the BV company. Then the limited liability of the BV has not kicked in yet. That implies you, the shareholder, is fully liable for all actions of the BV company. Believe me, so many people incorporate a BV for the silly one cent and simply forget the actually pay in the one cent, they have issues until the silly cent is paid up.
Should you pay the minimum share capital of EUR 0,01?
I my opinion you should not incorporate a BV company for an amount you cannot spend. At least, I would not know business wise on what you can spend one cent.
Which amount would I recommend? I recommend you make a simple calculation of the costs you will encounter before the first client pays your invoice. You need to pay for the incorporation costs, I expect we, the accountant run your bookkeeping and file your returns. We do charge for that. You might rent an office, you may need an internet connection, office equipment etc.
You might come to the conclusion that EUR 5.000 is what you need, or EUR 10.000. Then we recommend you to ask the notary to incorporate the BV company with a EUR 5.000 or EUR 10.000 capital.
Can you touch the share capital once it is deposited or need it to be untouched on the balance?
You can touch and use the share capital for the company. You pay in the EUR 5.000 mentioned above and you settle the company invoices you are due. If then one day the business bank account started with the share capital deposit and due to all expenses at the end of the day is empty or lower than the deposited amount, then that is not a problem.
Can I put in a much as I like….to avoid Box 3 taxation?
Yes you can, that is the savings BV. We recently incorporated a BV company for a US national who under the Dutch American Friendship Treaty incorporated a BV to use the 30% ruling. As the ruling is now only valid for a max 5 year period and this American had about EUR 20 mln in cash assets, we anticipated the end of the 30% ruling by incorporating the BV with a EUR 20 mln share capital.
Can the tax office argue this amount of share capital? No they cannot. The tax office cannot take the seat of the entrepreneur as the entrepreneur might actually need this investment for his business. And if in the end the amount is not being used, then an incorrect prediction of the future was in place. And you cannot hold someone liable for predicting the future incorrect.
What if the share capital is to be taken out of the company?
In case you put in a much too high amount of share capital in the company and you would like to take this out, you can, via a deed of the notary. If it is truly paid up share capital, this is a tax free transaction. However, if agio or other types of profit related amounts are involved, then most likely the pay out is subject to dividend tax.
Orange Tax Services
We are able to assist you in the incorporation of your BV company. Also the regular tax filings tax are part of running a BV company and the bookkeeping we can process for you. Feel free to contact us.