Why Branch Registration in the Netherlands is Important to consider as option to enter a new market
Registering a branch is an efficient, cost-effective way to expand your business into a foreign market. The Netherlands, with its robust...
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Advantages of using a Dutch holding company
Sooner or later 85% of the entrepreneurs who set up a BV also set up a holding company. The reason is that there are many advantages to using a holding company, as a corporate shareholder of your operational company. The flexibility, protection and tax benefits make a holding company an interesting tool.
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What is a holding company?
A holding company is really just a BV (Private Limited Company). The holding company is simply the parent company within a group. This means that the holding usually holds 100% of the shares in the subsidiary; the operating company. There can also be multiple subsidiaries. The unique aspect of a holding company is that no activities take place (at all!). All activities take place in the subsidiary.
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What are the benefits?
Spreading risks
One of these reasons is to exclude personal liability for debts of the BV. The BV is therefore usually only liable for these debts itself. But often that is little comfort. If the BV has valuable assets on its balance sheet, you can imagine that a bankruptcy can hurt, despite the fact that your private assets spring from the dance. Do you think that is part of doing business and taking risks? Wrong! You can arrange it even better for yourself. You can place your valuable assets (including A business property, patents, software, surplus liquid assets) in a separate holding company above your BV. This holding company will not carry out any activities, but will give the operating company the right to use these assets. On balance, you can now do whatever you want, but you have separated your high-risk daily operation from your valuable assets, minimizing your risks.
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Bankruptcy of the operating company
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Imagine that, after sleepless nights full of worrying, you decide to set up a BV. After advice from your environment, you choose this legal form because you want to minimize the risk of losing your own valuables - such as your house and your car, for example. Before you set up the BV, you will hear from a friend that his BV, a garage company, has gone bankrupt. The curator has seized all cars, but he has also lost the large garage building. Although you start an electronics store and not a garage, you decide to take his hopeless 'I wish you' advice to heart and set up addition to a BV. After 5 years, your company has had its best time. Yields are low and debts keep rising. Imagine that your software and the business premises were still in the Operational Company; you would have lost that now. In principle, if the operating company goes bankrupt, the creditors cannot access the assets of the holding company.
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Tax benefits
The participation exemption prevents profit, which has previously been taxed at the subsidiary, from being taxed at the parent company again. This concerns, for example, the profit that arises when the mother sells the shares in the subsidiary, or the dividend that the parent company receives from the subsidiary.
Scenario 1
You have a BV (operating company) without Holding.
You sell this BV.
Then the profit from the sale of your company comes to the income and you probably pay 25% income tax on the profit. The result: you immediately lose a fairly large part of the income from your company.
Scenario 2
You have a holding company.
This holding company owns the shares of the operating company BV.
Then the sales proceeds of your shares will go to your holding company. A holding company does not pay tax on this. A holding company is in most cases exempt from tax on the realized profit when the shares in the operating company are sold. Result: you can continue to do business with the money in your holding company or use the amount in a tax-favorable way for your retirement provision.
So if after a few years of doing business you sell your interest in a company for € 1 million, you have to make sure that you do that from a holding company. That way you do not pay any tax on that purchase price and you can use it to further invest and do business from your holding company. If you do not do this, and if you receive the purchase price in private, you must immediately pay income tax on it (25% if your interest is 5% or more). It is therefore very fiscally advantageous to use a holding company. However, please note: this arrangement only applies if the parent company holds at least 5% of the shares in the operating company.
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Category | Business Formation
This article will inform you on the different types of Dutch legal entities
How to start a sole proprietorship in the Netherlands in a few simple steps.
A holding company is really just a BV (Private Limited Company).
In this article we will explain you the details of the Formation Deed, and why they are so important.
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Our Services
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What is House of Companies?House of Companies is in first instance a new concept in offering flexible office solutions and registered office addresses, covering more than 4.000 locations. Aside from full service office facilities (from dealing with your mail, to answering the phone) , we offer a ‘branch out membership’ which provides you the tools to start a new business, or keep your business running, at the lowest costs possible. House of Companies is located at an amazing mansion, on a 50.000m2 estate in the Netherlands offering room for hundreds of companies. But we also offer +4.000 locations in cooperation with partners.
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Can anybody use the services of House of Companies?Yes, basically anybody can use the services of the House of Companies. Even if you are not an entrepreneur yet! Our services are very low-key which allows companies of any sizes to expand overseas. We do have a strict onboarding process in place, and don’t deal with companies focused on tax avoidance, or who have operations in sanctioned countries, as well as certain sensitive industries.
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Is using a registered office address legal?Yes, 100% legal! Our team has over 10 years experience in providing registered office services, and our locations meet the standards of the Dutch Chamber of Commerce. Our locations provide a full time reception, and our locations are always able to provide you a working space when need be.
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Do I pay taxes when I use a virtual office in the Netherlands?A ‘virtual office’ typically does not pay taxes (yet). This is not due to a special tax status, but simply because a virtual office has no actual operations (or substance) yet (or has not started to make a profit, doing sales, or employing staff). In fact, a ‘virtual office’ is typically considered a ‘representative office’ and is not required to be registered at the Chamber of Commerce. Such requirements might change, once you perform any actual services from the Netherlands, or goods are stored and processed here. In case of doubt, it might be necessary to discuss your situation with a lawyer or accountant, but much information on this topic is available in our Dashboard.
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Does a Dutch company require a local address?In many cases a local company registration requires a local business address. Especially in (Western) European countries this is very common. There are some exceptions, especially in case of a branch registration (or a representative office). A registered office address is required to receive official government letters, and in come cases also to open a local corporate bank account.
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Can my Dutch business open a bank account?Yes, a business dealing on the Dutch market can also open a corporate bank account. However, this is becoming more challenging. House of Companies can inform you about European banks that can open bank accounts for any kind of European entity, without a visit to the bank required.
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When is a registered office address convenient for me?A registered office address is convenient for any kind of business, that is planning to expand to a new market, and is taking it step by step. A registered office address (or virtual office) allows you to explore a new market, while limiting your expenses. It’s not about being ‘virtual’, but it’s about avoiding as much bureaucracy and legal expenses as you can, while your business is not yet at its full capacity. Our tools allow you to get an understanding of the legal framework of a country, so you are able to make the decisions for yourself, rather than having to rely on an accountant or lawyer.
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Can I really submit my corporate tax return myself, without any charges?"Yes, anybody can submit their corporate tax return themselves, without any help from an accountant. Our Dashboard provides you the detailed information, step by step, on how to login to your online Tax Portal, and to file your tax return. Obviously, the more complicated your company activities (and transactions) the more complex your tax return will look like. But if you have almost no operations, then you can save thousands of euros in accounting fees, without requiring any accounting skills! Once your company grows, we offer more detailed information, so you can learn along the way. Or you can decide to involve an accountant at that stage.
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