setup foundation or a stak
Set up a Dutch Foundation or STAK
A Dutch Foundation (Stichting) is a unique legal entity, and can be considered the ‘civil law’-equivalent of the Anglosakson ‘trust’.
Whereas the ‘trust’ is not a legal entity, but rather a ‘trust deed’, the Foundation is a (self-owning) corporate entity, without any share capital or shareholders.
Its self-owning character makes it an ideal vehicle to start an NGO (or non-profit organisation), but also to use it as a holding company.
The Dutch Foundation can own assets, a bank account, and even decide to perform profitable, and/or non-profitable activities (for which different tax treatments apply).
Dutch case law has established that a Dutch Foundation will not be subject to corporate income tax/VAT in situations where they are considered to be solely a holding foundation. Itself may not make any profit, or at least not more than €15.000 EUR per year.
In case you like to compare the Dutch Foundation with other Dutch business forms, take a look at this article.
Use the Dutch Foundation (Stichting) as STAK
The Dutch Foundation can be used as a Holding Company of a Dutch BV or NV. This combination of legal entities is referred to as a STAK (Stichting Administratiekantoor).
The STAK is popular because it allows investors to involve in the company, without providing them with any voting rights. This way the company is protected from interference, or even hostile takeovers by shareholders or investors.
An alternative for the STAK is to incorporate a Private Limited, that would issue two type of class shares; One class of shares with voting rights, and the second class of shares without voting rights. However, by issuing shares without voting rights, the shareholders of the Private Limited would still be allowed to join the shareholder's meetings, and meetup. The STAK excludes the ‘shareholders’ from any active involvement in the company.
Profit receipts can be issued to investors or shareholders, which allows them to take profits, but without getting any voting rights. In effect, the legal ownership is separated from economic ownership. As it is considered a ‘legal person’, a foundation can be used as the top entity in a group structure and be recognized as the UBO of the structure.
Starting a charity using a Dutch Foundation
A Dutch Stichting is tax-free, if it has no aim to make a profit, and it’s not competing with any other company. This means you do not require to apply for any charitable status, such as the ANBI status.
Donations to ANBIs are deductible for income tax or corporation tax. ANBIs are also eligible under certain conditions for an exemption from inheritance and donation tax, transfer tax and a reduction of energy tax.
The activities of the institution must actually serve 90% or more in the public interest and according to the articles of association. Nor should there be a profit motive for the generally useful activities. In addition, a number of other conditions apply:
Do not have a profit motive. However, it is not enough that the regulations show that the institution does not have a profit motive. The actual behaviour must also be in accordance with this. Incidentally, it is not the case that an ANBI that, incidentally, makes use of operating surpluses and uses them for the benefit of the public benefit, immediately has a profit objective with its actual activity.
Use exclusively or almost exclusively the public interest.
No right of disposal over the assets of the institution for natural or legal persons.
Maintain an equity ceiling.
A remuneration restriction for the policymakers.
An up-to-date policy plan.
A reasonable ratio of costs/spending.
Provide for correct spending of a positive liquidation balance.
Meet requirements regarding the organization of the administration.
Make certain information public via the internet.
From 2010 onwards, apart from these conditions, an integrity test also applies.
Facts about the Dutch Foundation
Profit receipts can be issued to investors or shareholders, which allows them to take profits, but without getting any voting rights. In effect, the legal ownership is separated from economic ownership. Multinationals prefer this setup, in order to prevent hostile takeovers, and put more power at the level of the board of directors. For tax purposes, profit certificate holders are typically treated equally as shareholders. It is not required to issue profit certificates at formation; this can be done later. Please note that only profit certificates can be issued if there is also a Dutch B.V. as a subsidiary of the foundation. In effect, the foundation will be the legal owner, while it ‘transfers’ the economic ownership by issuing profits certificates. We call this setup the ‘STAK’ (Stichting Administratiekantoor).
It does not require tax registration in the Netherlands if it is only involved in passive investments owning real estate, stocks, shares, etc.
The foundation requires only one director, which can be a non-resident corporate entity.
It can voluntarily register for taxes when it becomes ‘operational’. Even if it becomes operational, it’s not required to register for taxes (or pay taxes) as long at the profits do not exceed €15.000 EUR per year.
It has no formal UBO’s, so when opening a bank account in the Netherlands, no UBO’s have to be declared (unless profit certificates have been issued, in that case, the holders will be considered UBO’s if they hold more than 25% of the capital).
The foundation is considered to be an ideal option as a ‘conduit company’, for re-invoicing (royalties, import, export etc.) Since it will not generate any profits, in that case, it does not require any tax registration (note: it will not be possible to utilize tax treaties as well).
In case of death, or similar events, there will be no taxable event, because the ‘next of kin’ will be appointed as new board members, but there will be no transition of assets (instantly).
In the case of divorce, the assets of the foundation (owner) will be protected. In case profit receipts/certificates are issued, they are considered the same as ‘shares’ and are assets that can be seized.
Remote or standard formation?
It’s common practice to visit the Netherlands to establish the Foundation, while such visit formation you will have to visit the Netherlands, which is obligatory if you wish to obtain a Dutch bank account for your business.
There is no legal requirement to open a Dutch bank account, to deposit the share capital of the company, or run the business. If you do not wish to open a Dutch bank account, you might be eligible for a remote formation, which means you will be able to register your company from your home country. Please contact us if you have any questions about what type of formation would suit your situation best.
Please contact us if you have any questions about what type of formation would suit your situation best.
Process & Timeline
In the graphic below, you can see the timeline which you will have to keep in mind when starting your business in the Netherlands. The top bar reflects the timeline for our most sold service, which includes support in obtaining a bank account and demands a visit to the Netherlands. The bar below (with dotted line) reflects the timeline for a remote formation, which could be of interest to you if you don’t need a Dutch Bank account. This will save you the trip to the Netherlands but is more costly.
Running independent legal entities
Although the most common structure is a so-called ‘Holding Company Structure’ (in which an HQ owns the shares of an (overseas) Subsidiary many entrepreneurs decide to operate their overseas activities using independent legal entities nowadays. This means that the legal entities are not connected by a shared holding company. The reason why an entrepreneur would choose to keep the companies independent are typically of a practical nature. For example, it’s easier to incorporate the company in the Netherlands if there is no complex shareholding structure to identify. Furthermore, for the same reasons, it will be easier to open a bank account.
When entrepreneurs do choose for this option, it’s important to know about the possible tax consequences, because in case the Dutch company is making a profit, it can only pay out this profit to the individual shareholder. This can result in a withholding tax, which might have been avoided in a holding company structure.
Overview of Characteristics
easy to (de-)register, without the involvement of a lawyer or notary;
no Annual Reporting requirements (exception apply)
remitted earnings are not subject to withholding tax;
losses of the branch in the Netherlands can be compensated by profits/taxes of the main office;
does not allow issuance of (separate) shares, or profit certificates
does not have a Dutch identity and as such is considered to get less trust/acceptance;
(overseas) HQ is fully liable with respect to the obligations and (tax) debts of its branch in the Netherlands;
Double taxation might occur (if no tax treaty is in place)
The Limited Company
allows you to involve investors and different type of (local) shareholders
provides corporate veil for directors and shareholders, limiting liabilities in case of bankruptcy or (legal) claims
asset protection: allows you to protect your assets optimally
incorporation by local laws means that (potential) contracting partners find more comfort in dealing with your firm
easier to ‘restructure’ your company activities or companies at a later stage (including the planning of a exit-scenario)
tax treaties are in place to lower any relevant withholding taxes (standard 15%)
can be incorporated same-day, but the involvement of a notary is required
can apply for ‘Fiscal Unity’ with it’s holding company.
Branch first, BV later
Most of the entrepreneurs that INCO assists decide to start a Limited Company straight away since they are focused on growth. Once the company is incorporated INCO will assist them to further develop their business.
However, INCO also regularly assists Startups to register a Branch in the Netherlands. These Startups usually do not expect any income or profits yet in their first year(s) of business. This is a very legitimate reason to start with a Branch because this typically means that there are very little liabilities or assets to protect.
The main advantages for Startup entrepreneurs are:
That they save money on the incorporation,
don’t have to worry about local Company Law
and have no requirement to publish a separate Annual Report (saving them money again!). However, they do have to file a Corporate Tax Return in the Netherlands, based on the Annual Report of their overseas HQ.
Once ambitions (and market understanding) grow, the needs for investments grow. - For which a solid corporate structure is required.
Then turnover starts to grow, which means the liabilities of the companies grow along with it. It, therefore, makes sense to anticipate on financing and growth of the company by establishing a Limited Company.
The main advantage of the Branch (as a temporary solution) is that its cheaper to incorporate (no notary is involved) and it's cheaper to maintain, because there is no legal requirement to draft a separate Annual Financial Statement for the Branch.
Getting started with a Dutch Branch
In order to get started with a Dutch Branch, we suggest contacting one of our consultants.
Our Incorporation fees for the Branch are:
750 EUR for Remote Incorporation
450 EUR for Regular Incorporation, for which the director needs to visit the Netherlands for registration.
These fees include a (Tax) Memorandum on the consequences of registering the Branch.
We can register the Branch within approx. 1 week, because we will need to prepare the application carefully.
Our Company Officer Services, or Bookkeeping Services are of interest for any type of entrepreneur and any type of legal entity. Get in touch with our Consultants to find out more!
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