Do you want to start a business in Netherlands as a foreigner? If YES, here is a complete guide plus legal requirements for starting a profitable business in Netherlands.
Okay, having provided an in-depth analysis of the 50 best small business opportunities in Netherlands and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in Netherlands. So put on your entrepreneurial hat and let’s proceed.
A recent report released by the World Bank and the International Monetary Fund shows that the Netherlands was the 18th largest economy of the world in 2012, while the country has a population of about 17 million people. GDP per capita is roughly $48,860 which makes it one of richest nations in the world. Between 1996 and 2000 annual economic growth (GDP) averaged over 4 percent, well above the European average.
Why Start a Business in Netherlands?
When it comes to the ease of doing business, you can be rest assured that you are in safe hands because the Netherlands was ranked 28 out of 190 countries in the World Bank’s Ease of Doing Business Survey for 2017, the same ranking as the previous year.
As a matter of fact, the Chamber of Commerce in Amsterdam ensures that interested entrepreneurs who want to start a business in the country have access to start-up resources, including workshops and business events on marketing, finance and administration.
If you are looking towards starting a business in Netherlands, it is important to point out that no matter the city that you decide to register the business, company registration is relatively similar across the country. In most areas of the Netherlands, the local Chamber of Commerce office isalways ready to offer professional assistance and advice to foreigners who want to start a business there.
Here are some of the steps that you are expected to follow if you intend starting a business in Netherlands;
Starting a Profitable Business in Netherlands as a Foreigner – A Complete Guide
Step One: Check for Your Eligibility of Starting a Business in Netherlands
What is the point of traveling all the way from your country to Netherlands for the purpose of starting a business only to realize that you are not eligible to start a business in the country or you are not eligible to start a business in the industry that you are interested in. This is why it is important to check for your eligibility before forging ahead.
If you are not sure of your eligibility of starting a business in Netherland, then you should read the information below;
EU/EEA/Swiss citizens who are interested in starting a business in the Netherlands enjoy the same benefits as Dutch citizens, because they don’t need to obtain a residence permit (MVV) or work permit (TWV) regardless of their activity.
This includes citizens from Belgium, Bulgaria, Cyprus, Denmark, Germany, Estonia, Finland, France, Greece, Hungary, Ireland, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Norway, Malta, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, the Czech Republic, the United Kingdom, and Sweden.
Swiss nationals are – under certain circumstances – classified as equal to EU/EEA citizens, where their employers are exempt from requiring a separate Dutch work permit. Newer EU members, however, are still required to obtain a Dutch work permit, currently applicable to citizens from Bulgaria and Romania.
A personal registration number (BSN number) is usually issued to EU/EEA/Swiss citizens following their registration with the local municipality. Your BSN number acts as your social security and tax number.
For Non-EU/EEA/Swiss citizens, or third country nationals, who are interested in starting a new business in the Netherlands, they will be required to follow Dutch immigration procedures and obtain a residence permit (MVV) or work permit (TWV).
If you want to apply for residence permit as an independent entrepreneur, you will be required to prove that your business will meet an essential Dutch interest and earning a certain number of points in a points-based application. Please note that investors cum entrepreneurs from the United States of America and Japan are exempt from the points-based system via certain treaties and can follow a less rigorous process.
Step Two: Choose a Business Niche and a Name for Your Business
If you have confirmed your eligibility of starting a business in Netherlands, the next step to take is to choose a business niche and a name for your business. The truth is that when it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents.
Before choosing a name for your business, it won’t cost you anything to go online and check out the names of the leading brands in the industry you intend starting a business in so as to be properly guided.
In order to get it right, you can contact the Benelux Office for Intellectual Property (BOIP, or Benelux-Merkenbureau) to check for eligibility of your business name and even your trademark if you intend registering one.
Step Three: Write a Workable Business Plan
Part of the requirements of registering a business in the Netherlands is to produce a comprehensive business plan document. The truth is that in order to successfully run a business, you would need to have a good and workable business plan in place.
So if you want to start your own business in the Netherlands, you are required to write a detailed business plan that can pass reality test when subjected to it; you should work with the facts, figures and other indices in the industry as it applies to the location you intend establishing your business.
The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detail guide on how to effectively run your business. Your business plan should outline strategies on how you intend to manage your business.
The rule of thumb in writing a business plan is to try as much as possible to be realistic and never to over project when putting figures on income and profits et al. As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in.
Step Four: Choose a Company Structure (Business Legal Form) for your Business
The industry you want to operate in and of course the size of the business you want to start are key components that should guide you in making a choice of the business structure you want to build your business on. In the Netherlands, there are different regulations and legal forms for different business structures. If you are a freelancer, you are regarded as sole trader or a single-person business and a standard business are considered to be a private limited company or BV.
In the Netherlands, unincorporated business structures and incorporated business structures are the two most common legal forms (rechtsvormen). Unincorporated businesses are known as ‘rechtvormen zonder rechtspersoonlijkheid’ (legal forms without incorporation), meaning you are responsible for your business income and potential debt.
In other words, there is no distinction between your private assets and business assets. With incorporated businesses, or ‘rechtvormen met rechtspersoonlijkheid‘ (legal forms with incorporation), you have separate accounts and protection from your business debts.
Here are the different types of unincorporated businesses in the Netherlands
- Sole trader/single-person business (Eenmanszaak or ZZP)
- Limited partnership (Commanditaire vennootschap or CV)
- General partnership (Vennootschap onder firma or VOF)
- Commercial/professional partnership (Maatschap).
Here are the different types of incorporated businesses in the Netherlands:
- Private limited company: ltd. and Inc. (Besloten vennootschap or BV)
- Public limited company: plc. and Corp. (Naamloze vennootschap or NV)
- Cooperative and mutual insurance society (Coöperatie en onderlinge waarborgmaatschappij)
- Foundation (Stichting)
- Association (Vereniging).
Please note that in the Netherlands, there are clear – cut differences between legal requirements and the business structures. A single-person business or ‘freelance’ and ‘ZZP’ (zelfstandige zonder personeel or self-employed without staff), for example, can be set up without a notarial deed (although company registration is still mandatory), whereas a larger company (BV or NV) requires a notarial deed of incorporation.
NVs require a minimum initial business capital of EUR 45.000. Both BVs and NVs should have shareholders, and the capital requirement was abolished for BVs in 2012, though start-up costs are estimated at around EUR 1,500–2,500 and higher, depending on the business structure.
Step Five: Register Your Business at the Chamber of Commerce (Kamer van Koophandel or KvK)
If you have settled for a business structure, then the next step to take is to register your business with the Chamber of Commerce (Kamer van Koophandel or KvK).
You are expected to meet the basic requirements and you are expected to pay a fee of EUR 50 for the registration, provide a valid form of identification (residence permit, Dutch driving license or passport), a business name and comprehensive business plan, and proof of proficiency in the line of business you want to start.
In order to successfully complete the registration of your business, you will be required to also provide:
- A recent bank statement (less than 30 days old)
- For home offices, a proof of your home address
- A rental contract (or official letter of intent) if hiring a premise.
Please be note that, when your registration is approved, you will be issued a unique company registration number that you can use on all your business documents, outgoing invoices and mail et al.
Step Six: Register Your Business at the Dutch immigration service (Immigratie en Naturalisatiedienst or IND)
Once you are successful with the registeration of your business with the Chamber of Commerce (Kamer van Koophandel or KvK) and you are a citizen from any of the EU/EEA countries, you are required to register at the Dutch immigration service (Immigratie en Naturalisatiedienst or IND).
They are in the position to issue you with a special ‘Burger van de Unie’ stamps in your passport, if and when certain conditions with regard to paid employment are honored. In order to check for the requirements, you can contact the IND for further information.
Step Seven: Register Your Business with the Various Tax Authorities in the Netherlands
After your business must have been successfully registered with the Chamber of Commerce, by default, the details of your company will be passed to the Dutch tax office (Belastingdienst). Your company will be given a VAT registration number (BTW-nummer).
As a business owner in the Netherlands, you will have to pay tax to both the government and also to the municipality. You are expected to pay various taxes such as wage tax (loonbelasting), income tax (inkomstenbelasting), national insurance contributions (volksverzekeringen), employee insurance contributions (werknemersverzekeringen) and VAT (omzetbelasting).
Dutch corporate tax must be paid by sole proprietors (ZZP) as well as companies. According to the Ministry of Finance, ‘natural persons (such as the self-employed) pay tax on their profits through their income tax returns’.
Please note that if you are a Self-employed business person in the Netherlands, you are responsible for registering your business with the Dutch Tax Service (Belastingdienst), and then submit your own tax declarations. No doubt, corporate taxes in the Netherlands can seem complicated for the self-employed, but in a nutshell, Value Added Tax (BTW) returns, also known as turnover tax, must be filed quarterly, and income tax must be filed annually.
As a new business in the Netherlands, it is mandatory for you to file VAT returns, you must get your VAT number from the Dutch Tax Service; unincorporated businesses/ZZP can receive their VAT number when registering their Dutch business at the KVK. Currently, the standard VAT rate in the Netherlands is 21 percent, meaning it is your responsibility to request an additional 21 percent on each invoice sent to clients.
In order to make sure VAT is paid on time, Dutch law requires sending a dated invoice no later than the 15th day of the month following the one in which you completed the good or service for a client. VAT returns are filed electronically, no later than one month after the last day of each quarter, and payment for any additional VAT owed must also be paid at this time.
After registering at the KVK, self-employed workers will receive a letter in the mail with their username and password that allows access to the tax website, where you can view the status of your tax return or file a digital tax return.
If you are a Self-employed business person in the Netherlands, you must pay annual income tax and file a tax return declaring all taxable income from the year. Taxable income comprises of your business profits (revenue minus any deductible expenses, such as equipment, travel and materials), salary from employment contracts, and freelancing as a secondary activity.
In as much as tax is compulsory for all business owners, The Netherlands allows private entrepreneurs a number of extra tax deduction, under the name of Entrepreneurs Deduction (ondernemersaftrek), as well as a general tax credits and labor tax credits.
The Entrepreneurs Deduction allows for the following tax exemptions:
- The general self-employment deduction allowance (zelfstandigenaftrek)
- Research and Development activities (aftrek speur- en ontwikkelingswerk)
- Co-operating partner deduction (meewerkaftrek)
- Start-up deduction in case of disability (starters aftrek bij arbeidsongeschiktheid)
- Liquidation deduction (stakingsaftrek).
Step Eight: Set Up Your Business Structure / Administration
Part of the process of setting up a business in the Netherlands include setting up your business structure (business administration procedures). Even if you are coming in as a one – man business person, the law requires that you keep up with all aspects of your business’ administration, including invoices, bank statements, contracts and business expenses, as required by the Dutch tax authority.
Invoices require a certain format and must contain specific information. Online accounting software can be helpful for doing this personally, as well as the assistance of a certified Dutch accountant for both administrative needs and paying taxes.
In the Netherlands, a legal invoice which is called factuurs, must include:
- Date of invoice and a unique sequential number
- Date of delivery, service or when a payment was made (if different from the invoice date)
- Your client’s name and address
- Your KvK-isued business number
- Your VAT number (BTW-nummer) and amount of payable tax
- If applicable, the nature and quantity of goods or services (excluding VAT).
You are also expected to comply with personal data processing procedure in the Netherlands. Besides, the processing and storage of personal data is regulated by the General Data Protection Regulation (GDPR) (Algemene Verordening Gegevensbescherming, AVG).
Please note that even before the official launch of your business in the Netherlands, as you often incur expenses, make sure you create your business accounts in a well – structured manner. It will help you because in the Netherlands, the law mandates every business owner to maintain accounts and to retain them for a period of seven years.
Step Nine: Sort Out Your Insurance Policies Check whether you need insurance
As a business owner in the Netherlands, as long as you live in the Netherlands or earn income here, it is compulsory to buy health insurance and to pay Dutch national insurance contributions. As a self-employed business person, you are not covered by any company insurance schemes, hence you are responsible for insuring yourself.
In addition to that, there are several ways you can insure your business’s assets in the event of legal liability or any other any other risk you can’t afford to cover.
The different types of personal and professional insurance that you would need are Dutch health insurance, business liability, pension and unemployment insurance. ZZP Nederland provides information for freelancers in the Netherlands, as well as discounted ZZP-insurance products, although many providers exist depending on your needs.
Step Ten: Choose a Location for Your Business / Company
If you are done with most of the administrative stuffs, then you are set to start your business and you cannot operate without choosing a location to open your office or factory. Depending on the nature of business you want to run, Amsterdam which is the capital of the Netherlands and of course the largest city, has enough options when it comes to office space, from modern co-working spaces in startup hubs through centrally located retail space to fully equipped corporate facilities.
If you are new to the City of Amsterdam, you can contact a realtor to help you with choosing a location for your office or you can go online to check commercial property listings for businesses. In whatever you do as regards choosing a location for your business, it is compulsory that you consult the zoning plan in the city because the choice of your business location must be in line with the municipal zoning plan.
So also, you are expected to consider environmental regulations as it relates to the location you intend opening your office. The truth is that if your business operation is going to impact on the environment, you must submit a notification of environmental management to your local municipality.
Lastly, you must consider fire safety requirements for your business premises. If you occupy a business property, you have to put fire safety measures in place. In most cases, you must submit a notification of occupancy to your local municipality. If your business has a higher fire risk, you must also apply for an All-in-one Permit for Physical Aspects (Omgevingsvergunning).
Please note that after leasing a facility for your business and you want to make alterations or renovate your business premises, you will you will be required to apply and obtain an All-in-one Permit for Physical Aspects (Omgevingsvergunning). You can obtain this permit from your local municipality.
Step Twelve: Open Your Doors and Start Welcoming Customers
If you have been able to successfully carry out step one to ten, then you have indeed come a long way and it shows that you are truly ready for business. You cannot generate sales from your products or services if you do not open your door for business. In essence, the last step to take when starting a business in the Netherlands is to ensure that you open your door for business.
In conclusion, it is important to state that this article only covers basics steps of starting a business in the Netherlands and there are other legal issues as well as financial cum accounting requirements such as setting up accounting procedures, acceptable software apps, money laundry issues, obtaining necessary business or trading licenses and notifying regional authorities, that is not covered but are also important procedures when starting a business in the Netherlands.
We will advise that you contact business lawyers or consultants to guide you through the processes of starting a business in the Netherlands.