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Netherlands

 
   
Executive Summary
The Netherlands is situated in the North-Western part of Europe, it boarders with Belgium and Germany by land. Amsterdam is its capital, while Hague is the seat of the government. The Netherlands is the democratic constitutional monarchy, and it is often called Holland, which is not a formal synonym, as South and North Holland are only two out of twelve provinces of the Netherlands. The word Dutch refers to the language and people pertinent to the Netherlands.

The Netherlands is the member state of the EU, NATO and OECD, and many international political, economic and judiciary bodies choose the country to become the location of their central office. The population of the Netherlands is densely concentrated over the country. This country is internationally known for its tulips, cheese and bicycles, as well as social tolerance towards drugs, prostitution, homosexuality and euthanasia.

The government has significantly reduced its role in economy since 1980ies. Predominant industries are wood-processing, chemicals, petroleum refining and electrical machinery. The economic development level of the Netherlands is above the European average. It is a member of the Eurozone.

Geography
Rhine, Waal and Meuse – biggest rivers of the country, divide its territory in two main parts, causing significant historical and cultural differences. Significant changes of the weather through the year cause problems of sea and rivers water level change. Maritime climate determines mild winters and comparatively cool summers with the average January temperature being around 0 degrees C, and around 12 degrees C in July.

The country is rich with lakes, woods and dunes, nature reserves and there are 20 national parks in the Netherlands.

Map, Flag and Coat of Arm


Types of Company

Private Limited Liability Company (BV)

18,000 Euro is the minimum capital necessary to establish this type of company which is a legal person. The shares must be registered and cannot be freely transferred. The Ministry of Justice checks persons who establish a company for previous bankruptcy or frauds cases. The liability of directors corresponds to the investment size into the structure.

Sole Trader
There is one owner of the company who can employ several people. There is no distinction between the business and owner’s personal assets.

Partnership
Partnerships are formed by the representatives of liberal professions such as doctors, lawyers and designers, and the partnership agreement includes all the information on partners’ obligations and rights. Each partner is considered to be a self-employed person, and should pay taxes on a personal profit.

Limited Partnership (CV)
It is a special form of general partnership (VOF). The active partner of such a partnership is an entrepreneur, while a sleeping or limited partner participates in the business only by investing into its development. Such a partner cannot perform the same actions as an active partner and his name must not be used for the purposes of the partnership business.

The partnership agreement includes information on its duration, contribution, authority and profit distribution between different partners. Limited partners have no liability to third parties, and in the worst case can only lose the money invested in the business activity.

Partnership under common firm (VOF)
A limited partnership, in which two or more partners work together, and the partnership contract outlines the contribution, authority, profits arrangement and resignation of every partner. Each partner pays taxes according to the same scheme as if he was a self-employed person.

Holding Company
It is one of the most interesting corporate structures which is possible to incorporate and run in the Netherlands, which attracts international investors to the jurisdiction.

If a Dutch company holds 10% or more of another EU company’s shares, there will be no withholding tax applied on dividends remitted by the subsidiary. Dutch holding companies can benefit from the extensive Double taxation treaties network that the Netherlands has signed with more than 100 countries.

In case the Dutch holding company satisfies the following rules, all the income received by the Dutch company from the subsidiary is tax free – a) Dutch holding company should have at least 5% of the subsidiary’s shares (which is significantly bigger in other jurisdictions). Another attractive trait of the Dutch holding company is that is not an obligatory requirement for such a company to have the only activity – hold shares of the subsidiaries, as in other countries, and a Dutch holding company may also participate in trading. b) Shares of a subsidiary must belong to a Dutch company from the beginning of a tax year in order to achieve an exempt status. c) A subsidiary must pay all the taxes in the jurisdiction it is resident in. d) A holding company’s management should be actively involved in the subsidiary’s management. e) A subsidiary must not be a tax exempt portfolio investment company.

Association
It is a partnership of two or more persons who work together for realizing a common goal. Associations may be of two kinds: a) with complete authority under the law, and b) with limited authority under the law. Corporation taxes are to be paid on the association’s performance.

Foundation
These structures are usually established for socially-responsible objectives and are separate legal persons. Profits can be made, but certain rules on their allocation must be followed. Therefore, foundations and associations are not the most popular forms for new entrepreneurs for their business establishment and management. Corporation tax must be paid on the foundation’s profits.

Taxation
Taxation year coincides with the calendar year.

Personal

Residence in the Netherlands is determined by a person’s principle place of living and “durable ties of a personal nature”, including family home, employment, registration in a municipal register. Residents are taxed on their world-wide income. Non-residents are taxed only on several sources of the income generated within the Netherlands, excluding real estate, interest on a loan secured on a Dutch real estate, and sale of shares.

Income tax rates may change from year to year, but are calculated at a rising scale, depending on the amount of income, starting with 33.5% and ending with 52% taxation rate at present.

The 30% Ruling is a regulation in the Netherlands that is applied to foreign employees who have come to work in the Netherlands because certain skills are scarce in the country. Personal income taxes are very high in the Netherlands that might not be attractive to foreign labor, therefore, there is a number of personal allowances and benefits available to certain kind of the workforce.

Corporate
Whether a company was incorporated in the Netherlands or its central management and control is effectuated from the jurisdiction, such an organization is deemed to be resident in the country.

Non-resident companies are only liable to certain income generated within the Netherlands. Such sources as profitable sale of shares in a Dutch registered company, dividend income from shares in a Dutch registered company, sale of Dutch real estate at a profit, interest repayments on loan secured on Dutch real estate and administrative office (that does not trade, but solely provides information) are not taxed.

Income tax rate differs depending on the company’s income, with the minimum of 20% and maximum of 25.5%. Dividends are taxed at 15%. The standard VAT rate is 19%, which corresponds to the current VAT system applied in the EU. Capital gains tax is not levied separately in the Netherlands, but in the relevant cases is integrated into the corporation tax.

 
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