The ‘B.V.’ as a legal form
The ‘Besloten Vennootschap’ is the most commonly used legal person in the Netherlands. The B.V. is similar to foreign legal persons such as a GmbH, a BVBA or a Limited. A B.V. is associated with Articles of Association which define who is responsible for making decisions on the B.V.’s behalf. Usually, the board of the B.V. makes decisions regarding day-to-day business affairs. In the event of important decisions, such as appointing and dismissing board members or implementing a dividend payment, a general meeting of shareholders must be convened in order to establish agreement.
The most important advantages of a B.V. are:
- Start-up capital is not required in order to set up a B.V.
- The B.V. is liable for its own debts*. This means that you are not personally liable for the B.V.’s debts. Only the amount that you have paid in shares can be used to pay off creditors.
- The profits of the B.V. are taxed at a maximum rate of 25%. By comparison: a natural person can be taxed at a maximum rate of 52%.
- The participation exemption applies to dividend payments to legal persons who own 5% or more of the shares in the B.V. This means that dividend payments to these legal persons are not subject to Dividend Tax. Dividend payments received by the B.V. from legal persons in which it has a participation of 5% or more are untaxed in the Netherlands.
There are, however, disadvantages too.
The most important disadvantages of a B.V. are:
- A B.V. is always liable for Corporation tax in the Netherlands, whether or not it is actually based in the Netherlands. Of course, an agreement for avoiding double-taxation may determine that the Netherlands cannot claim any tax. In this case, however, a tax return must still be submitted.
- A B.V. must publish parts of its accounts on the website of the Chamber of Commerce each year. The data that must be shared depends on the size of the company.
- Dividend payments to natural persons and legal persons unable to use the participation exemption are taxed at a rate of 25%. In combination with the tax on profits, the tax burden can amount to up to 44%.
Curious about a B.V., or want to set up a Besloten Vennootschap in the Netherlands? Or perhaps you have questions about your own B.V.? Please contact one of our international tax law advisers via email@example.com
*the Netherlands has a so-called board members’ liability. This law means that board members can be made personally liable for the B.V.’s debts if they have deliberately acted to ensure that the B.V. can no longer fulfil its debts. This could include making dividend payments while the B.V. does not have sufficient means to pay both dividends and creditors.
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