Setting up a Dutch branch office or subsidiary

1. A warehouse

If you only need to store goods in the Netherlands, you can rent warehousing space. For instance, near a port or airport, or a distribution centre. This will not constitute a branch office or a legal entity in itself. The head office abroad remains liable for all costs and damages, for instance for the transport to and from the warehouse. It is possible to take out an arrangement with a company that specialises in logistics.

2. A branch office

A branch office is not a legal entity in itself. It is fully dependent on the head office, and usually comprises only one department (a workplace, the marketing division) of the company. You do need to register a branch office in the Netherlands with the Dutch Business Register (Handelsregister) at KVK. You register as a branch, so not a separate legal entity. The branch office automatically has the same legal structure as the parent company. You do not have to draw up financial statements for the branch office and file them with KVK, but you do need to file your parent company’s financial statements.

Taxes

If your branch office is a permanent establishment, it will be liable for corporate tax and VAT. Examples of permanent establishments are:

• a sales outlet or store
• a factory with an office
• a workplace

The Netherlands Tax Administration (Belastingdienst) considers branch offices that engage only in supporting activities 'non-permanent establishments'. Examples of non-permanent establishments are:

• Advertising department
• Research department
• Service department
• Warehouse

If your branch office is labelled a non-permanent establishment by the Tax Administration, but it has to pay VAT on goods or services it receives, you will probably be able to reclaim or deduct this VAT from your turnover tax return. See the article on claiming a VAT refund on the Tax Administration website.

3. A subsidiary

When you open a fully operational company in the Netherlands, it does not matter to KVK or the Tax Administration that the company is affiliated with a foreign company. A subsidiary is a legal entity in its own right, and carries with it all the liabilities and duties of an independent company in the Netherlands. This means:

• You have to register with the Business Register at KVK. Your subsidiary need not have the same legal structure as your establishment abroad (although this may be convenient for your own purposes), but it can. Read more about using a foreign legal structure in the Netherlands.
• You have to register with the Netherlands Tax Administration, if this is not automatically done upon registration at KVK.
• The company will have to file VAT (BTW) returns and corporate tax returns if your company in the Netherlands has one of the following legal structures: bv, nv, cooperative, mutual insurance society, or an association or foundation that operates a business.
• The company will have to file VAT and income tax returns if it has one of the following legal structures: sole proprietorship (eenmanszaak), general, professional or limited partnership (vof, maatschap, or cv). See also the overview of legal business structures in the Netherlands.
• The company has to file annual financial statements with KVK, depending on its legal structure. Read which legal structures have to file financial statements.
• If your Dutch company imports goods from a sister company abroad, it will have to pay the same taxes, duties and VAT as it would were it to purchase goods from any other company abroad.

Having a fully functioning company in the Netherlands with a Dutch legal structure has advantages:

• Administratively, it is much simpler than having to incorporate the figures from a branch in the overall records.
• Opening a business bank account in the Netherlands is relatively easy, if you are a Dutch company with a Dutch legal structure and no dependencies on a foreign (particularly non-EU) parent company.
• For VAT and income/corporate tax purposes, it is easier to deal with only the national Tax Administration in each country, than it is to deal with the Tax Administrations of several countries. A subsidiary’s tax liabilities are clear-cut.

How to choose between a warehouse, branch office, or subsidiary

To sum up: if you are only looking for a Dutch presence, with no or limited self-management, a warehouse or a branch office may be the choice for you. A warehouse or branch office will make distribution of your products and services easier, and establish a presence for your company on the Dutch market.

If you want your Dutch foothold to be independent, you will want to set up a subsidiary. A subsidiary offers stability and independence. A subsidiary is an expansion of your existing company. You use it to establish your presence in the Netherlands, to diversify your activities, or to be more competitive on the Dutch market.

Before you make a final choice, draw up a clear business plan to outline your wishes and needs, and talk to a legal and business advisor, who can weigh the options for you.