Foreign companies that want to establish their presence in the Netherlands with low costs can establish a branch. This business form is not considered a legal entity but an extension of the foreign company so all the responsibilities for its actions are taken by the parent company abroad.
The actions of the branch in the Netherlands are assured by a representative that will act on behalf of the company based on a power of attorney. The Dutch branch will need to perform the same business activities as the parent company and have the same name. The laws governing its actions will be both Dutch laws but also the laws from the foreign company's country of residence.
The branch is a preferred business form because it provides a permanent establishment with lower costs than other types of companies in the Netherlands and has no requirements for a minimum capital.
Differences between a branch and a local company in the Netherlands
The most important difference between a Dutch branch and other form of business, like a subsidiary in the Netherlands, is that the branch is fully dependable on the parent company abroad. This means that the foreign company will be liable for the debts and obligations incurred by the branch in the Netherlands.
Although the company registration procedure is easier than for other types of companies, like the Dutch BV for example, the branch will need to observe the laws for employment and taxation. For example the law stipulates that the employees of a branch must be registered for the social insurance. If not, the representative of the branch may be personally liable for not paying the contributions. A branch opened in Netherlands is usually subject to the same financial obligations as the local companies.
A number of double tax treaties signed by the Netherlands and other countries can ease the tax burden on branches, provided that the branch qualifies for the reduced withholding tax rate for dividends, royalties or interest.
Branch registration in the Netherlands
Before starting the commercial activities, the branch must register at the local Chamber of Commerce in the Commercial Registry with the appropriate documents and information. The documents must be notarized in the country of origin and followed by an authorized Dutch translation.
The requested documents for incorporation may differ from case to case but in essence the following information is necessary: a proof of existence of the foreign company (an excerpt from the local trade register with the date of registration and details of the company), the certificate of registration, the name and registered office, the name and details regarding the board of directors and secretary (or any form of management), the minute of the meeting when the decision to establish the branch was made, the branch name and address, the name of the appointed representative, the powers of this representative and the activities which will be performed by the branch.
After the branch is registered, the Chamber of Commerce will release the certificate of registration with the unique number of recording. After this step, the branch must register at the tax authorities and at the social security funds. After all of these steps are complete the branch may begin its business activities in the country.
The advantages of a branch in the Netherlands
Because the registration procedure is easier and less time consuming than for companies incorporated directly in the country, foreign corporations will sometimes choose to establish a branch. The lower costs for incorporation are also an advantage and so are the more relaxed reporting and accounting obligations.
The characteristics of Dutch branches are the roughly same as those in any other country. Hong Kong branches for example have very similar registration and taxation procedures. However, it is best to contact a lawyer or a company formation specialist in the country to make sure that you observe all of the country's rules and regulations for company incorporation.
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