The Netherlands has several kinds of legal forms (rechtsvormen) for businesses. These structures can be divided into two groups:
- Unincorporated business structures (no legal form required)
- Incorporated business structures (legal form required)
Unincorporated business structures (Rechtvormen zonder rechtspersoonlijkheid)
An unincorporated business structure does not require a legal form such as a notarial deed. This means that you (and your private assets) are not protected from the debts of your business.
Unincorporated businesses can be set up directly at the Dutch Chamber of Commerce (KvK) without requiring the services of a civil law notary.
Tax and unincorporated businesses
The tax types that businesses with no legal form need to pay are BTW, income tax and payroll tax (if there are employees). There are also several attractive tax breaks available. Unlike businesses with a legal form, unincorporated businesses do not pay corporation tax.
Liability and unincorporated businesses
The main drawback of businesses with no legal form is that there is no distinction between your private and business property. If you run up debts in your company then the debtors are entitled to claim your personal assets. If your business goes bankrupt and you can't personally cover it then you also go bankrupt. This also applies to any assets you share with a spouse - if you’re married under community property. To avoid such an eventuality you can always change your nuptial agreement.
Business structures with no legal form
The four unincorporated Dutch business structures are:
- Eenmanszaak: sole trader
- Vennootschap onder firma (VOF): general partnership
- Maatschap: professional partnership
- Commanditaire vennootschap (CV): limited partnership
Incorporated business structures (Rechtvormen met rechtspersoonlijkheid)
An incorporated business structure requires a legal form, also known as a legal entity or corporate personality, in the shape of a notarial deed. The legal form is necessary to protect the owners from any potential debt that the company incurs.
Dutch business structures with a legal form
The five incorporated business structures in the Netherlands are:
- Besloten vennootschap (BV): private limited company
- Naamloze vennootschap (NV): public limited company
- Stichting: foundation
- Vereniging: association
- Coöperatie: cooperative or collective
Businesses with a legal form must be set up via a civil law notary (notaris) who draws up a notarial contract and also registers the business at the Dutch Chamber of Commerce (KvK). It is also important to note that incorporated business forms usually have an additional level of tax implications.
Incorporated businesses and liability
The defining aspect of an incorporated business is that, by establishing the company as a legal entity or "legal person", you and your private assets are protected from the debts of your business. However, in cases of negligence, you may still be held personally accountable. It is essential that you fully understand the responsibilities of establishing an incorporated business, as failing to fulfil your administrative and tax obligations can result in fines from the Belastingdienst (Dutch Tax Office) or, in more severe cases, legal action.
Incorporated businesses and taxation
Dutch businesses with a legal form are taxed differently to individuals or businesses with no legal form.
Most notably, businesses with a legal form are required to pay corporation tax (vennootschapsbelasting), or company income tax on profits. There are some cases where foundations and associations are not required to file corporation tax.
Corporation tax has considerably lower rates than income tax, which is a major influencing factor in why some entrepreneurs choose an incorporated business such as a BV. However, the administration is more complex and annual costs can be higher. A greater turnover is usually necessary to offset these expenses.
Dutch corporation tax rates 2019
The corporation tax rate for 2019 is:
|Taxable amount||Tax rate|
|Up to & including 200.000 euros||19%|
|More than 200.000 euros||25%|
From 2019, the corporate income tax rate will be reduced step by step. In 2020, the rates will be decreased to 16,5% and 22,55%, and in 2021, the rates will further decrease to 15% and 20,50%.
BVs and NVs also need to pay a dividend tax (dividendbelasting) of 15 percent on any profits that are paid out to shareholders. Shareholders must then pay 25 percent tax on their received amount.
Annual financial statements
Incorporated businesses must compile and submit annual financial reports and accounts to the Belastingdienst and the KvK.