Every year thousands of businesses choose to expand their reach to a global audience by incorporating in the Netherlands. With its exceptional infrastructure, liberal tax regime and strategic location in Europe, the Netherlands is the ideal operating base for businesses with global ambitions.
However, an incorrect perception of high cost and time-consuming bureaucratic procedures has meant many SMEs fail to take advantage of operating a Dutch company, instead choosing other less established regions.
To challenge this perception, INCO Business Group has developed specialized solutions for SMEs making the entire process significantly more straightforward and affordable. This has resulted in an influx of SMEs taking advantage of the various benefits afforded to businesses in the Netherlands.
These days many of our SME clients benefit from the Dutch philosophy of supporting the foreign entrepreneurial endeavor. A range of attractive tax policies and immigration procedures make the Netherlands an attractive and convenient choice for foreign SMEs.
A Tax Friendly Business Environment
As a nation of traders, the Dutch have long understood the importance of creating an open and welcoming business environment to entice foreign business. A key tactic for achieving this has been to implement tax incentives that stimulate entrepreneurship and foreign investment in the country.
Corporate Tax Exemptions
The standard corporate income tax (CIT) is set at 25% with a reduced rate of 20% applicable to taxable income below EUR 200,000. Businesses may also have certain income exempted from CIT where they meet the requirements for the Participation Exemption.
Furthermore, the comprehensive network of tax treaties the Netherlands has in place with multiple jurisdictions mean most foreign businesses avoid double taxation on international profits. Even where no treaty is in place, the Dutch tax system provides for regulations that unilaterally lower a resident company’s taxes in order to account for foreign tax obligations.
Tax Breaks To Drive Innovation
In keeping with its reputation as a hub of entrepreneurial innovation, Dutch tax law provides for a special regime that applies to profits that come from a self-developed intangible asset. This regime, known as the ‘Innovation Box’ sets a lower effective tax rate of 5% on taxable profits that derive from these intangible assets.
Dutch Ruling Practice Provides Certainty
A difficulty that many businesses (in particular SMEs) face when incorporating abroad is uncertainty in terms of their tax liabilities. Complicated tax regulations often mean a business cannot be certain of their liabilities until they’ve already invested.
To combat this uncertainty the Dutch Ruling Practice is a feature of the Dutch tax system that makes it possible to get pre-approval and agreement on certain operations or transactions from the Dutch Tax Authorities. Businesses can get binding tax agreements that are OECD and EU law compliant.
Internal Monitoring Over External Audits
Another feature of the Dutch tax scheme that gives greater freedom and flexibility is the system of ‘Horizontal Monitoring’. In certain conditions, Dutch Tax Authorities will rely on a company’s own internal compliance monitoring, reducing the need for external tax audits.
Based on a relationship of mutual trust and transparency, horizontal monitoring provides a framework that is more efficient, less intrusive and helps to reduce the time and costs typically associated with ensuring tax compliance. Applicable to CIT, VAT, wage tax and social security, horizontal monitoring is symbolic of the Netherland’s innovative approach to supporting business and entrepreneurship.
Dutch Residence Permits For Foreign Entrepreneurs
The Netherlands recognizes the value of entrepreneurs and the impact they have on stimulating economic growth. A belief that entrepreneurs are a source of economic renewal and job creation has seen the implementation of a progressive immigration policy towards businesses and start-ups.
Residence Permits As a Director or Shareholder
In order to reside and work in the country, business owners and entrepreneurs must secure a self-employed residence permit. These permits are issued on the basis of a points system designed to attract entrepreneurs who will contribute to the Dutch economy. Practically speaking, the points system is weighted in favor of experienced entrepreneurs who bring in investment and create new jobs.
The procedure takes a period of 3-6 months and if granted lasts for 2 years. Once the residence has been visa granted 3 times consecutively, the entrepreneur will be eligible to apply for permanent residency with the possibility of applying for Dutch citizenship.
The Startup Visa
The Netherland’s drive to support the entrepreneurial spirit saw a new regulation introduced in 2015. Ambitious entrepreneurs can apply for a temporary residence permit without the requirements of the self-employed residence points system. Under this scheme, a foreign entrepreneur with an innovative business can apply for a one-year residence visa during which they can launch their startup in the country.
If after completion of the one year the entrepreneur can satisfy the requirements of the points system, they can then apply for the self-employed residence permit.
Residence As A Highly Skilled Migrant
In instances where an applicant may not be able to gain enough points to get a self-employed residence permit, it is possible to apply as a highly skilled migrant.
To satisfy compliance requirements for this permit, the entrepreneur must transfer 80% of their company’s shares to a nominee or Foundation, who then make the application on their behalf. The company acts as the entrepreneur’s sponsor. Once a company has attained ‘sponsorship status’ from the Dutch immigration service, a fast track procedure allows for resident permits for highly skilled migrants to be issued in just a few weeks.
A Simple Formation Process Makes the Difference
All the tax and immigration incentives in the world won’t bring new business if entrepreneurs struggle with the formation process.
INCO offers SMEs a streamlined, flexible and transparent formation process. With a range of company types available to suit different needs, overseas entrepreneurs can set up a Dutch company remotely without the need to appoint a resident director.
This simple process, along with a national government that recognizes the pivotal role foreign entrepreneurs play in the economy, makes the Netherlands one of the most sought after locations for businesses around the world.
About the author
Dennis Vermeulen - INCO Business Group, Amsterdam