We often receive the request to set up a BV company. First we make inquiries with respect to why this type of vehicle is being wished to set up. If the BV company is indeed the company to be used, we suggest to visit a notary.
The notary is the public independent person that has been facilitated by the Government to incorporate the vehicle of BV company and NV company. The NV company is only for banking type of businesses. The BV company can only be incorporated if the person incorporating can passed the criteria set by the notary. If the BV company is incorporated by another limited liability company, then the ultimate beneficiary of the tree of vehicles need to pass the criteria.
If the BV has been incorporated and the share capital has been paid, the notary will register the BV company with the Dutch Chambers of Commerce.
Chambers of Commerce
The Dutch Chambers of Commerce is the public institute with whom potential business relations of the BV company can make inquiries with respect to who can sign on behalf of the company etc. Therefore it is important for the Chambers of Commerce that the BV company complies with its reporting obligation. After the financial year has closed, the BV company has 13 months time to publish their publication report with the Chambers of Commerce. If not done so, the company is not in a good legal stand point in case of potential bankruptcy for instance. Not publishing is also an economic offence for which the first time penalty is EUR 900.
The Chambers of Commerce reports the BV company to the Dutch tax office after the notary had registered it.
Dutch tax office
The Dutch tax office will send to the new BV company either a questionnaire to inquire about its business, or simply the corporate income tax number and value added tax number. With these issues is added an overview of the filing obligations. If a payroll needs to be set up for the managing director, this wage tax number needs to be applied for. If the BV company is a pure holding company, then the tax office needs to be requested to terminate the value added tax number, as a pure holding company is not an entrepreneur for value added tax.
Your tax advisor, preferably Orange Tax Services, is now to be contacted.
The tax advisor or accountant is the person you should see as supervisor. The tax advisor supervises your obligations. That starts with the bookkeeping, that needs to be provided to the tax advisor at the times set by the Dutch tax office. In general quarterly. The quarterly bookkeeping result in an annual report. The annual report needs to be approved in the minutes of the shareholders meeting. This is then published with the Chambers of Commerce, while the corporate income tax is being filed.
When this is done, you have fulfilled the regular filing obligations, but you also have other legal obligations.
In order to be able to setup a payroll for the managing director, the managing director needs to have an employment contract with the BV company. In the Netherlands a verbal contract will do, but in case of bankruptcy of the BV company, the curator/liquidator will do its utmost to get the shareholder behind the BV company responsible, as there will be the money. Money to pay for the costs of the curator for instance.
Without an employment contract the curator can take the standpoint that there was no employment agreement and the shareholder needs to pay back immediately what he has received.
Or if you take out of he BV more than your salary, then you have a current account loan. This is a loan, and it can only be a loan, when the contract between the managing director and the BV company contains the loan period, repayment schedule and collateral. The interest percentage needs to be benchmarked, but goes up when there is no repayment schedule or collateral.
A dividend can only be paid if in the minutes of the share holders meeting the dividend has been decided on and a dividend note is the base of the payment.
The BV company is a mature vehicle with many obligations to work with. Only if the BV company has value, value in sense of for instance the participation exemption, we recommend the BV company.
One limited liability company holding at least 5% of the shares in another limited liability company implies that enough shares are held to benefit from the participation exemption. What is that? If you sell the shares of your participation, you are due income tax at 25% if a person holds the shares, over the profit made on the shares. A company pays the corporate rate.
However, the participation exemption implies that the company that held the shares, sold the shares and held at least 5% of the shares, does not pay corporate tax over the profit made on the shares. That implies you can reinvest the gross profit in another project, or you pay out the profit. If paid in a dividend to a private person, dividend withholding tax is due, 25%. If paid as a salary, the progressive tax rate is applicable.
Orange Tax Services
We address the BV company in a nutshell, with the aim to make you aware of the obligations that come with holding the shares of a BV company. If a BV company is not actually required, nor give you advantages as your goodwill will only be personal goodwill. In other words, you can never sell the company because it is you who is the company, then the BV company is not the vehicle of our choice. We prefer the less complex and lower taxed one man company.
If you would like to learn more about setting up a BV company or learn what type of company would suit you, feel free to contact us.