How to operate an UK Ltd in the Netherlands might answer the questions you have. UK Ltd companies are operating in the Netherlands. Many of them comply with the Dutch rules.
How to operate an UK Ltd in the Netherlands
This question is raised on a weekly basis. Our reply is not always digested pleasantly, hence the article. An UK Limited liability company is a legal entity. The tax residence of the legal entity is based on facts and circumstance. The person being the director is the individual determining the country of tax residence of this UK limited company.
The formal United Kingdom rules to which the Limited Liability company has been incorporated make that regardless where the fiscal residence of the company is situated, an UK corporate tax return is to be filed. This will be a nil return, if no operations took place in the UK.
Dutch tax residence
The director of the UK Ltd is what we call a walking permanent establishment. Where the director is a tax resident the UK Ltd is a tax resident. This can be avoided by appointing a UK tax resident as director next to you. Then the company stays in the UK tax wise.
That said, if you remain the director as well and you become a Dutch tax resident, the UK Ltd will have a branch in the Netherlands. That implies the company needs to be registered with the Dutch Chamber of Commerce. A corporate income tax obligation is issued. Dutch Value Added Tax is to be charge over Dutch services. The rules for the wage tax apply and Dutch or EU invoice requirements apply.
Dutch wage tax rules
The problem we see often occur is the Dutch wage tax rules being a challenge. In the United Kingdom it is possible to have a low salary and a high dividend. In the Netherlands that is not possible.
To prevent the Dutch social system intended for the less fortunate being used by high dividend rollers earning a low salary, lead to our minimum salary rules. The salary of the director cannot be less than EUR 51.000 (2023). The director salary cannot be less than the best paid employee. The salary cannot be different from a person performing a similar position who has no shares in the company.
The latter criteria in a country (The Netherlands) where nobody tells you the truth about their income is difficult to meet. In practice we see that if you are making a substantial profit and you are well above the EUR 51.000 salary, then the tax office needs to proof the salary is not good enough. That is not easy.
Final remark about the salary. From a tax point of view a low salary is desired. Then suddenly the opportunity to purchase a house opens itself, for which a mortgage is required. Then over a period of three years enough salary is to be earned to get the loan of your desire. That desire is much higher than the initial EUR 51.000 salary.
Dividend payment to the director of a UK limited company in the Netherlands is complex in my opinion. Dutch dividend rules apply, as the company is in the Netherlands and the shareholder. However, in the United Kingdom this dividend also need to be processed.
The point is, a dividend payment cannot jeopardize future obligations of the company. If that does happen, the dividend should never have been paid. This is an economic offence. Economic offences are bad.
Tax is exciting
We think tax is exciting. Our excitement is not shared by everybody, especially those working in the Netherlands using a UK Ltd. Once we explain the rules, we often never hear again from this person. I doubt our fees spoked them, as these are very reasonable. The Dutch rules might have done the trick. Operations continue in the Netherlands, but UK rules are followed. That is not correct.