better to incorporate
Why is it better to incorporate or form a company, rather than a branch registration?
Are you an entrepreneur, ready to start a business in The Netherlands? You might be considering to form a new local company, or to register your current headquarters as a branch in the Netherlands…
So how do you decide which option is best for you?
In many cases it’s better to incorporate a new local company, rather than registering a branch. But this depends on your situation, and your priorities.
Do you urgently need a Dutch company registration number, in order to deal with the Dutch government, or maybe even a Dutch (online) marketplace like Amazon or Bol.com?
In this case, you typically do not worry about the long term considerations for your corporate structure, and maybe not even worry about any potential liabilities in the company?
A similar mindset would be relevant, if you would need to open a Dutch bank account for practical purposes, for example to be able to deal with a certain Dutch partner or client.
In such cases, the main goal is to comply with the requirement. Such as getting a company number, or opening a bank account.
You will probably want to keep the costs down, bureaucracy at a minimum, and get a result as fast as possible.
The registration of a Dutch branch of your existing company, could be the best solution in this case. Especially if your current company is incorporated in a country like United Kingdom, or Cyprus, or Germany, which does not require any translation of your statutory documents, and where it’s easy to obtain a legalised extract from the Companies Registrar.
The statutory documents and company extract, are required to register your company as a branch in The Netherlands at the Chamber of Commerce.
This registration process of the branch can be fast, and be ready within 1 or 2 days! The advantage when registering a branch, is that a Public Notary is not involved in The Netherlands, which can save time and keep bureaucracy at a minimum.
Let’s say you want to employ staff in the Netherlands, while you don’;t have a Dutch business yet. This could be the case, when you have a customer in The Netherlands, that requires your resources, for example for an IT project. In that case, you are outsourcing staff, and a local branch registration in The Netherlands is required. you would also have to register as Employer of Record.
But, to incorporate a local Dutch company would also be an option.
What will you do?
If you expect the project to be relatively short term, and you are not planning to have an ongoing presence in the Netherlands, it might make sense to register a branch in The Netherlands, rather than incorporating a Dutch company. This is simpler, but would also avoid the requirement of drafting a Financial Statement based on Dutch laws. Furthermore, your Dutch customer expects your overseas company to be liable for any shortcomings anyway, to the branch will not necessarily expose you to bigger risks, then when you would form a local company (which would limit the liabilities of the overseas company).
So when would you incorporate a Dutch company?
Company formation in the Netherlands would make sense, if you are planning to have an ongoing presence in the Netherlands, which requires a local image for your potential market, and which failure should not affect your existing business.
Another reason to form a Dutch company, is because there will be local shareholders or investors involved, who should not share in the total group’s profits.
More differences between the branch and the legal entity/subsidiary can be found in this article.
INCO’s tax advisors can assist you to make the right decision. We can provide full costs overviews, tax calculations, and explain you the consequences of registering a branch, or the company formation in The Netherlands.
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