Can you help me with my BV company is a frequently asked question recently. While this is asked, I raise a red flag. Why?
Can you help me with my BV company
This is a strange question to ask for me, the tax advisor. A BV company is not a company you easily set up like the sole proprietor company. A BV company is not set up by visiting the Chambers of Commerce, answering some questions and you walk out with the company. Not at all.
A BV company is set up via a notary. The notary will ask for the BV name, how much share capital, who will be director, which type of shares, short or long first financial year etc. Questions most people, especially international in the Netherlands, need assistance with.
Accountant and or tax advisor
The person to assist with the setup of a BV company is an accountant, bookkeeper or tax advisor. The logical step is that this accountant then also assist with the books, filing of Value Added Tax return, annual report etc.
Can you help me with my BV company?
That is a strange question. A not strange question is: I would like to change from my accountant. Or, my accountant is too expensive. Or, my accountant cannot communicate very well in English.
The latter remark we also encounter. Often it is not the case of the accountant not communicating in English very well, it is the client not willing to understand the consequences.
In case of change of accountant, we always inquire about the reasons, because if we provide an identical service, there is no reason to switch to us.
Why raising the red flag?
The moment for some reason no accountant is involved. And if you make some inquiries and the BV company is address as something started in the past and neglected, our red flag is up against the ceiling.
Probably no annual reports have been published in time, which make the directors personally liable. Uncomfortable, but doable. More problematic is not filing the corporate income tax returns in time. The penalty for filing too late is EUR 5.514. The tax office is so kind to give you a 50% discount for the first time, but still a huge amount.
What should you do?
The problem of not filing only gets bigger if you continue not to file anything. So the only and rather brave thing to do is face your issues and have the outstanding reporting done.
Tax is Exciting
We think tax is exciting. A EUR 5.514 penalty for too late filing of a corporate income tax return is absolutely not exciting. The longer you wait the more you need to pay in penalties. Do not wait anymore and have your corporate bookkeeping done to get it up to date.
The process towards the filing of the corporate income tax return in the Netherlands you might wonder about. We explain the steps to be taken.
The process towards filing of the corporate income tax return
If you are the shareholder and or director of a BV company, you are the person in charge of the procedure. It all starts with the bookkeeping. The BV company needs to run a bookkeeping like a bubble.
The bubble cannot let escape money to the shareholder, without it being labelled. It is labelled either salary or dividend. When neither is the case, the money flowing to the shareholder in cash or costs is a loan the shareholder needs to pay back.
We are often confronted with new clients who keep an excel bookkeeping for the BV company. Excell is not ideal for a one man company, but really not possible for a BV company. You cannot keep track of the outstanding debts and receivables in excel.
The result of the bookkeeping is in the annual report. The annual report is a requirement set by the Dutch law. Some find the annual report obsolete, expensive or irrelevant. It is super relevant.
Above I mention the shareholder and director in one line. Actually it is the director of the BV company responsible and in charge of the tax filings and the bookkeeping. However, the moment the annual report is finished, it is the meeting of the shareholders to approve or dismiss the annual report.
This formality is of great influence of the director. In the shareholders meeting the director is given discharge for his or her actions during that year. This legal phrase implies the director is set free from liability with respect to the day to day activities of that concerning year.
The moment the shareholders meeting has agreed upon the annual report, the annual report can be published with the Chamber of Commerce. Again this publication is an obligation set by Dutch law. The annual report is to be published within max 12 months from the end of the financial bookyear.
The penalty for not sending in publication of the annual report with the Chambers of Commerce can be EUR 900 fine. That said, we have not seen many of these fines over the years. The true penalty is in the board of the BV being held responsible in person the moment the BV company goes bankrupt.
Corporate income tax return
The moment the annual report is approved, the corporate income tax return can be filed. This is the moment the heart of a tax advisor starts to pump more vividly. In the corporate income tax return the commercial fiscal differences aspects of the annual report come to light. Or balancing out the fiscal unity of several BV companies is finalized in this tax return. All very exciting.
Tax is exciting
We think tax is exciting. Assisting you with running your BV company from an accounting and tax filing perspective is getting us excited. A simple BV company is already exciting.
That said, some in our office really get excited when the BV company is far from simple and challenging. Within the rules that is. One of them is Hans. Hans is a very experienced international tax advisor that is eager to sort out your international fiscal unity. The questions you might have about how to set up best your structure. Hans is also experienced enough to inform you up front already what is possible and what is certainly not possible.
A company is a source of income, not loss. If the company is a source of loss the phrase company should be replaced by hobby.
A company is a source of income
It does happen that a new client arrives at our office. This client is proud to state they have a company. A healing company, part time piano teacher, yoga enterprise, homework assistant, doggy doggy walky walky and more creative types of companies.
With the aforementioned examples of companies the previous income tax returns contain cost deductions that exceed what is possible. Part of the home rent costs, electricity, new stairs, house extension. Strangely enough, the tax office never inquired about that.
The explanation for the tax office not to respond was also at hand. The income of the company was far exceeded by all the costs of the company. Actually, if all the costs would have been deleted that are not accepted, the company still had a loss. This was the case for a couple of years already.
Response tax office to company that is in fact a hobby
Upon our findings the new client always responds that this is how they have done it for many years. No issues with the tax office. That is true, but that is not the same as a correct income tax return. The fact that the tax office did not respond had to do with no other source of income.
The moment you have employment income next to this hobby, then the hobby creates a loss. This loss is set off against the positive employment income resulting in a tax refund. Then the Dutch tax office is going to respond quickly.
Most clients with a hobby have no other source of income, it is the partner who funds it basically.
What is the difference between a hobby and a company?
An activity is a company when it participates in the economic traffic. In other words, there are sales and purchases. Commitments. The activity is a company when the aim is to make an income, a profit. And finally, from an objective standpoint a profit is likely to be made.
The moment these three criteria are met, you have a company. And ofcourse nobody expect you to be profitable instantly. That said, if from an objective standpoint no profit is to be expected. Then the activity is labelled as hobby. An hobby is often an activity with costs and pleasure, where the income is often less important than the pleasure.
What to do when you are told your company is a hobby
The moment the conclusion is drawn that your activity is a hobby. The first step is to terminate the registration of the company with the KVK (Chamber of Commerce). That will also stop the request to file an entrepreneurs income tax return.
Explain to the tax office that the VAT numbers should be cancelled.
Hobby – court case
A nail polish BV company has not made a profit since 2013. Due to a transfer of shares the tax payer claimed a loss in his income tax return. This loss was denied by the Dutch tax office.
The case went to court and in court it was determined that the BV company did take part in the economic traffic. A profit was the goal of the company. But the objective eye quickly came to the conclusion a profit was never going to be possible. Hence the court ruled indeed that the BV company loss was not to be deducted in the income tax return.
The tax payer did proof the turnover was increasing, but the turnover could not keep up with the costs. Also the argument that companies such as Rituals, McDonalds and Amazon were loss making in the startup years did not stand. This argument did not stand as it was not made clear how the situation of those companies reflected on this case.
A BV company can ofcourse not be allocated as a hobby company. That said, the execution of the tax return is done as if it were a hobby. No tax base, no tax deduction.
Tax is exciting
We think tax is exciting. Challenging is to explain to a new client that their activity is in fact not a company, but a hobby. This is never digested well and takes some time for the client to accept. Plus, the client finds it very strange no longer to report the company tax wise. Despite we are excited about tax, a hobby is a hobby.
What does owning a BV company imply is a question you should ask yourself, or us, before you are involved. It is more than the fancy director title.
What does owning a BV company imply
I would like to go through the steps of setting up a BV company up to and including the annual obligations.
Set up of BV company – the notary
A BV company is an official public company with limited liability. Such a company can only be incorporated by a notary, a Dutch notary.
The notary will ask you about the name of the company. Important to do some research. Even if your name is Albert Heijn and you sell groceries, you cannot register a company with such a name. There was an Albert Heijn, not family of the large supermarket store, who tried and lost. Or if you think you are clever and you call your store Loods 6 based on the success of Loods 5, you will be asked to change the name. Mind the name.
What will the company be doing? What is the service you provide or the goods you sell. How much share capital will you issue. Will you have an extended first financial bookyear. Who are the directors, are they fully authorized? These questions and more are to be addressed with the notary.
The BV has been incorporated, the notary updates the Chamber of Commerce. The Chamber of Commerce updates the Dutch tax office. The Dutch tax office will issue a corporate income tax number and often also a value added tax number (VAT). Sometimes you provide a service that is not subject to VAT, then no VAT number is issued. For instance when you set up a holding company that is a pure holding company.
The wage tax number can be applied on request.
Obligations of the BV company
We have a number of obligations the BV company needs to meet. That makes the BV stand out from the much more simple one man company.
Filing the VAT return and wage tax return is not different from the one man company. Also the bookkeeping merits are the same with the one man company. The limited liability aspect of the BV makes that the content of the annual report is different. You will see share capital and general reserve on the balance of the BV. This is not shown on the one man company balance.
That said, if the share capital of the BV company has not actually been paid by the shareholder, you also do not see this amount on the balance with the BV. Neither has the limited liability started then. Limited liability only applies when the share capital was actually paid.
The bookkeeping will result in an annual report and the shareholders meeting needs to approve this annual report. In the same shareholder minutes the board can be granted discharge for the concerning period. That implies the persons of the board cannot be held liable themselves for that period, should anything occur later. However, if the annual report is reported too late with the Chambers of Commerce, the persons of the board are always held personally liable in case of bankruptcy or things like that.
The deadline of publication of the annual report is within one year after the calendar year has finished.
Corporate income tax return
The BV company is to file a corporate income tax return within 5 months after the book year has finished. The Dutch tax office has yielded experience in this field, hence the fine for filing too late is set at EUR 5.514. The first time 50% discount is granted, as if it is a bargain, but still a lot of money for nothing.
Dividend paid out
The moment the BV has made a profit and the director was paid at least the required minimum salary, the profit is taxed with corporate income tax. The net result (after tax) is allocated to the general reserve in the shareholders meeting.
Very important to realize is that when a dividend paid out in the one year creates later in time insolvency issues, there is problem. That implies, the company has not enough funds to pay for the costs or tax. Too much dividend was apparently paid out. That is an economic crime with consequences. Mind the accounts!
Income tax return
In the income tax return you report the salary you earned with the BV company. If you loaned money to the BV company, the interest is taxed as income in Box 1. Dividend you received from the BV are taxed in Box 2. Via the dividend withholding tax return 15% tax was withheld, in the income tax return you pay the remainder up to 26,9% (2022). Loaned money taken from the BV are reported in Box 3.
Now your obligations have been met.
Tax is exciting
We think tax is exciting. We are excited to assist you with the setup and or running of your BV company. However, we will ask the question if a sole proprietorship would be sufficient as well. We have to ask, as the administrative costs and formalities with the sole proprietorship are much less.
The moment we learn the BV is commercially, logically or strategically the best, we are happy to serve. Our fees you find on the website, we will be glad to email them to you as well.
The company investment tax credit is a teaser for companies to make investments. Investments are good for our economy, hence the tax credit
Company investment tax credit
An investment equals a cost made by the company exceeding the amount of EUR 450 excluding VAT. The cost is related to material, like computer, desk, chair and what have you. Other costs, like those of subcontractors, rent etc. is not regarded an investment.
Software is out of the ordinary. Most companies pay for a software license or subscription. That does not make them owner of the software, only user. That is not an investment.
How does the company investment tax credit work?
The company makes the investment and keeps track of that. If you invest less than EUR 2.400 you have no deduction. Investing more than EUR 2400 but less than EUR 59.939 (2022) you get 28% over the total investment value as deduction.
When you invest over EUR 59.939 but less than EUR 110.998 your deduction is EUR 16.784 instead. That implies you invest EUR 59.940 you get EUR 16.784 deduction or if you invest EUR 110.900 you get EUR 16.784 deduction.
Between EUR 110.999 and EUR 332.994 the EUR 16.784 gradually reduces. Above EUR 332.994 no investment credit is paid.
The company invests in EUR 3.000 excluding VAT. That is more than EUR 2.400 which implies over the full EUR 3.000 28% investment credit is allocated in the corporate/personal income tax return.
However, the investment itself is subject to regular accounting rules. That implies the EUR 3.000 is to be depreciated over a 5 year period.
The company car, with the exception of the full electric or liquid hydrogen car. This type of car has more tax facilities, such as the MIA and the random depreciation possibility. Mind the conditions that need to be met.
No investment credit for housing, ground costs, animals, ships, representative made costs, shares/bonds, receivables, goodwill or federal permits.
No investment credit for investments that will be rented for more than 70%, or personal goods transferred to the company. Nor investments made with family.
Company terminats/stops.What happens then?
The company invested in a EUR 3000 laptop in November and in February you decide to close the company. What happens with the investment?
In the year purchasing the laptop, the laptop is processed as normal. However, in February the company is closed and that implies the laptop is to be sold to yourself against the economic value. Moreover, the investment tax credit will be made undone partly via the income or corporate income tax return. The value of this laptop is to be determined within reason. Reasonable is probably not EUR 100 for the laptop. The tax office does make inquiries especially about these aspects during an audit.
Tax is exciting
We think tax is exciting. Assisting you with optimizing your income tax return is our standard. This implies the investments of your company are taken into account. Please connect to us if you like assistance with your 2021 entrepreneurs income tax return or your 2021 corporate income tax return.
The dentist costs are not company costs. Obviously you would imagine, but not for this tax advisor who claimed dentists costs as a company costs. Was he right?
Dentist costs are not company costs
Company costs are costs made to run a company. Office rent, stationary, a desk, computer are costs aspects not under debate by the Dutch tax office. Other aspects such as a ships/boats, guns, animals and fines are excluded as costs for a company.
Then we have the freedom of the entrepreneur to allocate as costs what the entrepreneur thinks is necessary to run the company. For instance, if the entrepreneur prefers to drive a Rolls Royce in his 5 kilometer commute every day, the Dutch tax office cannot deny these costs based on the fact a bicycle is cheaper.
However, this is up to a certain line. The line is gray, but a dentist pushed the limits in the past. This dentist purchased an airplane to visit his clients within the Dutch borders. That was for the Dutch tax office a line being crossed and these excessive airplane costs were not accepted.
I have to look good
Our clients often provide receipts of a suit, shoes, hairdresser. All these costs are not business costs. We are countered by the client that these costs were specifically made to look good for the client. They would not wear the suit at home, or would have visited the hair salon weekly if it was not for the clients.
For these costs there is article 3.14 in the income tax act that states costs made to support a certain flair in life as a result of which more business is done, are not accepted as such.
Dentist costs are not company costs – court case
The tax advisor claimed in the 2016 income tax return EUR 2.308 dental costs as company costs. The Dutch tax office denied the costs and the tax advisor went to court. In court the tax advisor could not substantiate what the dental costs could weigh more as business costs then personal costs. As the personal use of the teeth was out used by far over for business purposes, the deduction was denied.
These costs can be denied based on article 3.14 of the income tax act.
Tax is exciting
We think tax is exciting. A business relation that takes care of his or her teeth is also very much appreciated by us during a conversation. A conversation with your tax advisor does not make the tooth brush tax deductible.
Shareholder and salary income is a continuous discussion. There are rules in the Netherlands. The preferred situation is low salary high dividend, but that is forbidden. The regular employees also play part in this discussion, how is that possible?
Shareholder and salary income
If you are the shareholder of the company in which you are the director, you can do as you like. You think. Tax wise that is not the case. Many before you have indeed done as they liked. This resulted in rules that have been set in place.
Low income high dividend
The most desired salary is a low salary and then high dividend. Is that indeed a desire?
Let us assume the salary is EUR 70.000, so anything earned on top is taxed at 49,5% income tax. To avoid that, no EUR 50.000 bonus is paid to this director. As a result the company made for the purpose of this example EUR 50.000 profit. That profit is taxed with 16% corporate income tax being EUR 8.000. Hence there is EUR 42.000 after tax profit available for dividend. The dividend withholding tax is 26,5%. That implies EUR 11.130 dividend tax is to be paid, so net received by the director is EUR 30.870. That is more than EUR 50.000 gross salary taxed at 49,5% income tax.
What is the problem?
The problem is that most directors did not take EUR 70.000 as salary, but they waived their salary. Zero. If you have zero salary, you are poor. If you are poor, you receive a rental tax credit, health carde tax credit and day care tax credit. But this employee is not poor, he will probably receive EUR 70.000 dividend.
To avoid the zero salary the minimum salary for a director that also owns at least 5% in shares in the company is set at EUR 47.000. However, the salary cannot be less than 75% of a similar position. And the salary cannot be less than the highest paid employee who has no shares in the company.
Court case shareholder and salary income
A director paid himself the following salaries: EUR 177.705 (2013), EUR 180.962 (2014), EUR 199.098 (2015), EUR 217.427 (2016), EUR 217.427 (2017) and EUR 215.239 (2018). The tax office disagreed with that salary, as the highest paid employee earned constantly EUR 215.239 during these years.
The director argued in court that a similar person earned the salary that was paid to him over the years. The proof he provided was that of a person not in a similar position. Nor was sufficient proof provided, only for the year 2016.
The court dismissed the proof, and agreed with the tax office that over the 2013-2018 period the correct salary is EUR 215.239 and all years were updated to that amount.
What is a correct salary?
We are often asked what is the best salary tax wise to obtain. This is not a simple question, as the director holding a 30% ruling benefits from taking the maximum salary possible. That is tax wise better. Some fix themselves on the minimum of EUR 47.000. That is a risk if the result of the company is very positive. The court ruled in 2011 that 75% of the profit is a correct salary for the shareholder, not less than EUR 47.000 (2021).
That was the tax part. Then the EUR 47.000 salaried director comes to us a couple of years later that he want to purchase a house, but the bank does not want to loan him enough. The bank states his salary is not good enough. Setting a salary is more than tax alone, more is involved.
Tax is exciting
We think tax is exciting. We are excited for you to start a BV company. The salary is a flexible part of the administration. At the start the company probably does not earn enough to pay salary. If successful much more salary can be paid. This update needs to be made. If not, the tax office could compare the corporate result against director salary earned in their system. If not in line with expectations, corrections probably follow. Corrections are often not exciting.
Liquidation of a BV company has recently been a hot topic. Covid19 made some internationals aware that they are needed elsewhere, hence terminate their Dutch business. How does it work?
Liquidation BV company
A BV company is a formal vehicle, hence the liquidation procedure is formal as well. There are two methods of liquidation, the turbo liquidation or regular liquidation.
Regular liquidation procedure
The meeting of shareholders has decided that the company will be liquidated. A person in charge of this liquidation is appointed. The keeper of the books is appointed, as the tax office can still do an audit after the vehicle is liquidated.
In the event the company has a positive result or there are assets still in the company, the BV announces its liquidation with the Chamber of Commerce. At the same time a publication is made to inform possible debt collectors that the company is going to be closed. If nobody made a claim for an unpaid debt or outstanding invoice in a two months period the liquidation can finalized. When claims are being made, these need to be addressed before the liquidation can continue.
Turbo liquidation procedure
The turbo liquidation procedure starts with the same shareholders meeting. Often the situation is that there is one shareholder and the only debt or receivable is with this shareholder. Then the liquidation procedure with the Chambers of Commerce can be finalized instantly, no publication required.
Liquidation – no loose ends
A loose end is the tax office and you do not want a liquidation with loose ends. The year following the year the BV company has been liquidated, the corporate income tax return needs to be filed. And, although no a requirement, it is good to publish the final annual report with the chambers of commerce.
The director of the company is personally liable for the corporate income tax obligation. This means that a liquidation does not imply you have no more obligations. A tax return is still to be filed.
Value Added Tax
We also suggest to keep an eye on the Value Added Tax obligation, as that obligation does not instantly stop. It is true when you have no more BV company, there is no more VAT to be filed. But the tax office has a different opinion. If you do not file the VAT return issued, you still get a fine for not filing in time. Even when you are asked to file a VAT return after the BV was terminated.
Tax is exciting
We think tax is exciting. A liquidation, of a BV company, we think is exciting as well. We offer for EUR 100 excluding VAT such a liquidation. In addition to the liquidation a corporate income tax return, annual report and some bookkeeping needs to be done. That is not included in the fee, obviously. Feel free to contact us for a clean liquidation.
Holding structure BV company, what is this about? This is about the future of your business you need to determine now already.
Holding structure BV company
A holding structure is one BV company that holds the shares of another BV company. A BV company is the equivalent of the limited liability company, the Ltd company. Such a holding structure sounds complex, doesn’t it? We agree. The question is, do you need one?
Advantage of a holding structure BV company
The advantage of a holding structure is especially in the following scenario. The holding BV holds shares of a working BV. These share can be sold for a substantial profit. This profit is received by the holding company, tax free! Yes, you read correctly, tax free.
You have a holding BV that holds the shares, all of them or at least more than 5%, in the work BV. The work BV is doing well and someone else, or your partners what to purchase the shares you have in this BV. You paid yourself EUR 10.000 for the shares and you are now offered EUR 50.000 for these shares.
You accept the offer and receive EUR 50.000 in the bank account of the holding BV. Indeed tax free. Is it truly tax free? Not really. Most human beings want to celebrate the deal with gift to themselves for which they need money. The holding BV either pays a dividend from this money, with max 26,5% dividend tax. Or the Holding BV pays a salary bonus, with max 49,5% wage tax. To touch the money, tax is to be paid.
Not having a holding structure makes the EUR 50.000 profit directly taxable. Taxed is EUR 50.000 minus EUR 10.000 capital is EUR 40.000 times 26,5% dividend withholding tax (2021). Then again, you can spend as you like the after tax amount.
When do you set up a holding structure?
A holding structure you set up before the value of the purchased shares have increased. In the above example it is not possible to set up the holding 1 day or month before the sale. That is too late. You need to have set up the structure before the investment starts to increase in value. Hence my remark in the opening paragraph, you need to determine now already your future.
When is the profit actually tax free?
The EUR 50.000 in the above example is truly tax free when you reinvest the money in shares of the next company. Or make another investment. That is the purpose of the holding structure, to be able to reinvest the proceeds of one investment in the next investment within the bv of the holding. Taxation will not eat the investment activity.
Will you ever sell your company?
To answer the question if you need a holding structure, we need to ask if you have or will have a BV company? If yes, will you sell your company. If the company is very much you. Clients purchase your service or product because it is you. Or you are the only inspiration of the company that creates the revenue. Then you cannot sell the company. The answer is no.
Will you reinvest the money?
The true advantage of the holding structure is when the proceeds of one sale are invested in the next project. If you sell your company, will you reinvest? Most people will not. They want to pay off the mortgage and purchase a nice car. But what will happen if you have the holding structure with cash and you are a human being?
Holding BV made EUR 50.000 profit on the sale of the shares. You loan money from the holding BV for a holiday, you deserved that. Or the sports care, you deserved that.
Then you have a EUR 50.000 loan to the BV that you cannot pay back. Nor can you pay the wage tax or dividend tax. Now you have a true problem.
Holding structure and accounting costs
The holding structure implies that you need to file tax returns for both the working BV and the holding BV. The accounting costs are more or less identical. Maybe a little less for the holding BV as the holding has nearly no bookkeeping.
After the first year you probably are already annoyed by the accounting costs for a company in which nothing has happened. This will over the year only result in more annoyance. And if you in the end make the profit, but you pay that directly to yourself as a dividend or salary. You paid all those years accounting costs for no purpose.
Tax is exciting
We think tax is exciting. We are not always excited about holding structures. There are true situations in which it goes without saying that a holding structure should be in place. However, there are many more situations in which no structure is much better.
If there is no intention to reinvest. No intention to sell the shares of the BV company. If there is no possibility to sell the company, a holding BV company is costly to have and in our opinion not necessary. Keep it simple with one BV company. Should you be able to sell after all the company for a substantial profit, the payment of the tax instantly reliefs you from more obligations.
The Dutch BV company setup, what is required. What needs to be done from an accounting point of view?
Dutch BV company setup – incorporation
The Dutch BV company setup is done incorporated by a Dutch notary. The notary draws the article of association in the deed of incorporation.
In such a deed is for instance determined the amount of share capital, in line with your desire. The possibility is to issue for EUR 0,01 share capital, we think that is silly. On the balance the EUR 0,01 will always be rounded off to zero. That could raise questions by investors, creditors or about the liability of the director.
We recommend a serious amount. An amount that can pay for the initial set up costs. Maybe for the deposit of the office rent etc.
What happens after incorporation?
Once the notary incorporated the BV, the notary will inform the Chamber of Commerce. The Chamber of Commerce will register the company and update the Dutch tax office. The Dutch tax office will issue a Dutch corporate income tax number to the company.
The Dutch tax office
The Dutch tax office automatically issue a Dutch corporate income tax number and a Dutch Value Added Tax number. However, if the management of the BV is not in the Netherlands, the BV company being an VAT entrepreneur is not automatically assumed. Hence a VAT number needs to be applied for.
Also not automatically issued, but rather important is the wage tax number. The first employee is the director. We think the wage tax number could be automatically issued as well. Instantly the Dutch minimum salary requirements for the director apply.
What do we see happening after these procedures?
We experience that it is more or less standard that the fresh international entrepreneur lacks to file the first Value Added Tax return. Whether a BV is set up or a one man company, the first VAT return is nearly always forgotten.
The assumption by the entrepreneur is that the company has not made turnover yet, therefore no VAT can be paid to the Dutch tax office. That is not how it works. You are to file the VAT return in the set deadline, whether you have done business or not. If you did make costs, like setup costs, but not make turnover yet, the VAT return will result in a refund. This refund is actually paid out, not compensated or credited. The VAT return is suddenly exciting!
The Dutch tax office is eager to remind the starting entrepreneur with a EUR 5.000 VAT assessment, which often has the aimed result. The entrepreneurs looks for accounting assistance.
Dutch BV company setup – accounting assistance
The Dutch BV company is required to run a bookkeeping that is open for audit in a fortnight period upon request of the tax office. Accounting companies are well equipped to provide this service. The BV company needs to file a quarterly VAT return, a monthly wage tax return and an annual corporate income tax return.
The policy of the Dutch tax office is very simple. If you are too late, you get a penalty. The more often you are too late, the higher the penalty. Tax paid too late results in a penalty being a percentage of the amount that was to be paid. This can hurt a lot.
The monthly payroll, the payroll setup, 30% ruling application and minimum required income questions are handled by the payroll team, firstname.lastname@example.org
The fine tuning of the setup of the BV, the international issue questions, the tax questions nobody was able to inform you about while you run international operations. That is the territory of our specialist: email@example.com
If you are looking or the simple overall quote of our services, request one at firstname.lastname@example.org We are happy to issue our quote. We will not chase you, remind you or have you sign up for anything. We operate like we like to be treated ourselves as well.
Setting up a Dutch BV company while the shareholder resides abroad is a challenge. What this challenge is about, we explain in this article.
Setting up a Dutch BV
The Dutch BV company is the equivalent of the LTD, the Limited Liability company. A company with a share capital set up via a Dutch notary. A BV company is set up in accordance with Dutch rules and regulations, hence Dutch corporate income tax is to be paid. Or is it?
BV being a Dutch tax resident
A BV company is always a tax resident in the Netherlands due to its formation under Dutch law. However, when the decisions are being made in another country, the BV company can be a tax resident of that country as well. The person of a limited company that is in charge of decision making is often the director.
This can cause issues in the situation that the incorporator, that is also the shareholder, who is also the director of the BV company. And this person is not a Dutch tax resident. That could imply the BV company is a resident of 2 countries according to my claim made above.
Being taxed in two countries is an undesired situation. Fortunately, The Netherlands has a great network of tax treaties that will avoid double taxation at the end. We might be able to guide you through these issues.
BV is not always a Dutch VAT entrepreneur
In order to get a VAT number in the Netherlands, A BV company must have activities, services or sales) in the Netherlands. If the services or sales take place in another country, according to the location definitions in the law, than a VAT number may be rejected. We can look at your business case and might be able to achieve your goals.
BV and limited liability
The limited liability is most likely the aspect that gave inspiration to incorporate the BV company. It is then important to know that the limited liability does not start until the share capital has actually been paid in the BV business bank account.
In the situation that the shareholder of the BV company is not a Dutch tax resident, Dutch banks are not willing to set up a business bank account for the BV company. That is not a desire of the Dutch banks, but an instruction from the Dutch national bank. Ofcourse such rules do not apply for giant companies like Google, Amazon or Coca Cola. And the latter hurts hard with well intended entrepreneurs that are eager to pay Dutch corporate tax. While some of the large companies do not actually pay corporate tax locally, or less than would have been expected.
Does the BV needs a Dutch business bank account?
The rule is that the share capital is paid into the BV business bank account. The rule does not state the bank account needs to be a Dutch bank account. Crucial is that the bank account is owned by the BV company. This opens opportunities we believe.
Tax is exciting
We think tax is exciting. We are excited to assist you. For the above mentioned situation we have in the office our experienced specialist in the international tax field: Hans. Hans will be able to assist you, to guide you in the set up of a BV where the shareholder is not (yet) a Dutch tax resident. Jurisprudence has provided a lot of opportunities to be able to run a Dutch BV from abroad. Contact Hans@orangetax.nl for your service need.
A person being a permanent establishment causes a tax obligation in the Netherlands. What is a permanent establishment, and which person?
A permanent establishment
A company is subject to taxation of its results in the country where the company is a tax resident. In which country is the company a tax resident? A company is a tax resident in the country where the owner of the company is a tax resident.
Or, when the company is a limited liability company, in the country where the director of the company is a tax resident. Not the shareholder, but the director. As the director is in charge of the daily activities of the company, this person determines where the company is a tax resident.
Opening an office abroad
The limited company can open an office abroad. This is referred to a permanent establishment. Such a permanent establishment then becomes subject to taxation in relation to that office in the other country. The director of the company stays in the home country, hence the full company has not moved to the Netherlands. Only an office was opened.
Owner or director moves resident
The moment the owner of the company or, in case of a limited liability company, the director moves his or her residence. In such a situation the full company stops being a tax resident in the present country and starts being a tax resident in the next country.
We experience on a daily basis that a sole shareholder and director of a limited company accepts a contract in the Netherlands. This person then moves to the Netherlands to work, which nearly always makes this person a Dutch tax resident. That implies the LTD has become a Dutch tax resident.
The latter was never the intention of this person. The intention is to work in the Netherlands, but being taxed in the other country. Unfortunately the presence of the director as Dutch tax resident in the Netherlands makes all Dutch rules apply to the result of the entire company. From corporate income tax, to Value Added Tax and the minimum salary rules.
A person of importance moves to the Netherlands
A person of importance can be the director of the company. It can be a person with the title vice president. It can be a person with no title, but with an authorization to commit the company via contracts.
Such a person of importance creates a permanent establishment in the Netherlands by simply moving its residence to the Netherlands. The obligation then exists of the company needing to register itself with the Dutch Chamber of Commerce. The Dutch tax office will request the company to file a Dutch tax return for the activities of this person.
It can happen the rules come upon you unexpectedly by the sequence of events that happened. Such as a move of the director or vice president.
The company is often not aware of the consequence of such a move. Such a move regularly is initiated by personal objectives. We then recommend to resign from the position, which solves the issue. Should that not be an option, we are glad to assist the permanent establishment to comply with the Dutch rules.
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