Main Differences between a Dutch Subsidiary and a Branch

Foreign companies seeking to set up operations in the Netherlands have three main options: the branch office, the subsidiary, and the representative/liaison office. Out of these, the first two will allow them to undertake commercial activities in the Netherlands, while the liaison office can be created as a temporary office for marketing and research purposes.

Considering both branch offices and subsidiaries are viable options for foreign investors, our Dutch company formation specialists have made a presentation between the main differences between these two business forms. We would also like to inform you that we can help you register branches and subsidiaries in the Netherlands.

The subsidiary in the Netherlands

Under the Company Law in the Netherlands, the subsidiary can take the form of a limited liability company, being treated like any other domestic company. In other words, the subsidiary will be registered by following the same regulations imposed on local companies. It will also be treated like a Dutch-resident company.

The subsidiary comes with several advantages which can be explained in detail by our company registration agents in the Netherlands.

The Dutch branch office

Compared to the subsidiary, the branch office is not a domestic company, being seen as an extension of the parent company. Both local and foreign companies can set up branches in the Netherlands.  The branch is also considered a permanent establishment of a foreign company, case in which it attracts a series of tax advantages under the Netherlands’ double tax treaties.

You can obtain more information on the branch office from our Dutch company formation consultants.

Similarities between Dutch branches and subsidiaries

Before we get to the main differences between the subsidiary and the branch office in the Netherlands, we will explain the few similarities between the two business forms:

• -          both subsidiaries and branches can be registered by local and foreign companies in the Netherlands;
• -          both types of entities must comply with the regulations imposed by the Dutch Company Law;
• -          both Dutch subsidiaries and branch offices are extensions of their parent companies;
• -          the registration procedure of both subsidiaries and branches is quite easy in the Netherlands.

If you have difficulties in choosing the right type of business form for your company, our Dutch company registration advisors can guide you in selecting the right entity.

The subsidiary vs. the branch office in the Netherlands

If the similarities are few, the differences between a subsidiary and a branch in the Netherlands are more.

When having to choose between opening a branch or a subsidiary in the Netherlands, here is what you need to consider:

1.           the subsidiary will offer limited liability to the parent company, compared to the branch office which will not offer it;
2.           on the other hand, the registration procedure of a branch office is cheaper than that of a subsidiary;
3.           the branch office will only be allowed to complete the same activities as the parent company, compared to the subsidiary which offers a higher degree of independence;
4.           the subsidiary is usually preferred for setting up holding companies in the Netherlands, while branches are often used in the financial sector;
5.           from a taxation point of view, the subsidiary is treated as a domestic company, while the branch is not treated the same way.

From a registration point of view, the documentation required to register a branch office in the Netherlands is less extensive, however, the establishment of a subsidiary is just as simple, even if more documents need to be executed.

Our company formation specialists in the Netherlands can help with the preparation of the documents which need to be filed with the Trade Register upon the opening of subsidiaries and branches in this country.

The branch and the subsidiary from a taxation point of view

As mentioned above, from a taxation point of view, the subsidiary is treated like a domestic company, which means it will be subject to the corporate tax imposed by the Dutch tax authorities. Compared to it, the branch office will be taxed in the Netherlands only on the profits resulted from the activities undertaken here. However, the branch office will not be levied any withholding tax when remitting dividends to its foreign shareholders. The subsidiary is liable to withholding taxes in the Netherlands.

If you cannot decide on the entity for your foreign company in the Netherlands, please contact our local experts who can help you make that decision. You can rely on us for the registration of both branches and subsidiaries in the Netherlands.