Brexit, e-commerce and a VAT presence in the Netherlands – at what cost?
By Toon Hasselman, EJP Accountants & Adviseurs
In VAT land, we have weathered through some storms in the recent past to help non-EU established companies continue their business activities within the EU. We have been able to come up with numerous solutions depending on the specific needs of the business. These solutions ranged from a change in the supply chain, such as a Single Point of Entry with a Limited Fiscal Representative (“LFR”), to the incorporation of a Dutch entity.
- A LFR handles the import VAT and next VAT-able event. It is liable for any VAT mishaps. This service is often offered for free by logistics companies if they control/handle the whole distribution chain. Third party LFRs offer their services at a cost of EUR 750 upwards per shipment or per month, based on individual conditions.
- A General Fiscal Representative (“GFR”) allows a business to have its own VAT ID and import VAT deferment license. It is not bound to one logistics partner but can freely ship, store and distribute as it pleases. The set-up costs are about EUR 3,500 (including VAT ID and VAT deferment license). Annual costs are about EUR 5,000. In view of Brexit, the tax offce often accepts a minimum security of EUR 5,000 (max EUR 500,000). Cash deposits are cheaper and quicker, while costly back-to-back bank guarantees often create delays.
- The costs of setting up and running a private limited company (BV) are quite different, as substance is essential in the form of a domiciliation (offce) and a local director to establish the company in the Netherlands. If it is essential that the BV qualifies as such, the following costs are inevitable:
- A Dutch director (“A”) must be involved in all business decisions, possibly in conjunction with a nonlocal director. A professional Dutch director company (often a trust company) must perform a full Know Your Client investigation (UBO, source of wealth, PEP), easily costing EUR 4,500. We find that foreign groups have diffculty involving A beforehand in any decision. However, it is essential to involve A in order to avoid that a BV is considered to be established in the country of the client.
- A is responsible for keeping the company in good standing (legal and tax obligations). The costs of A in combination with domiciliation start at EUR 5,000 a year.
- A must also continuously monitor the business (e.g. two-way authorisation of bank transfers, trade monitoring) and arrange any management, supply and services agreements, current account facilities, and sales conditions. These costs will depend on the volume and complexity of activities, but an average yearly amount of EUR 25,000 for an active trading company is not unusual.
- Standard accountancy and tax compliance (CIT, MDR/MLI check not included) for a BV will cost between EUR 2,500 and EUR 10,000 depending on the specific needs and wishes of the client.
- Opening a bank account (based on a full KYC file) in the Netherlands is usually successful. Alternatively, a bank account can be realised via a correspondent bank of the foreign company operating in the Netherlands. In a worst-case scenario, the foreign company can open a bank account in the name of the Dutch company with their home bank outside the Netherlands. However, obtaining a Netherlands bank account can be very time consuming.
The simple questions of how much it costs and how much time it takes to incorporate a Dutch entity can’t be answered with a simple “EUR 3,500 and a day” (documents allowing). If the entity is not set-up and run properly a later “fix” of any shortcomings can be very costly.
The costs of an external LFR/GFR are almost negligible in comparison with those of interposing a BV for VAT purposes only. However, there may be other additional reasons, such as marketing (some customers prefer to trade with an EU entity), a first foothold (sales, distribution to follow), or even for holding activities (Dutch tax treaty network). The costs of a BV with a professional director are then transient by comparison.
Toon HasselmanGGI member firm
EJP Accountants & Adviseurs
Auditing & Accounting, Corporate Finance, Tax
s-Hertogenbosch, The Netherlands
T: +31 73 850 72 80
EJP Accountants & Adviseurs are auditors, advisers, and challengers. Their 40 auditors and international tax lawyers have a wide range of expertise. Their main fields of expertise are Dutch corporate and personal income tax, international taxation, Dutch royalty, interest and dividend withholding tax, estate planning, and wage tax. They have an AFM license to perform audits for the larger mid-size companies.
Toon Hasselman is an experienced (30 years) high-level VAT and customs specialist to both national and international companies. He provides simple and practical solutions and quick “outsidethe- box” alternatives if necessary, and promotes a no-nonsense approach with a conclusive solution at fair cost. Toon is also the Global Vice-Chairperson of the GGI Indirect Taxes Practice Group.
Published: Indirect Taxes Newsletter, No. 12 Autumn 2021 l Photo: Ron van der Stappen - stock.adobe.com