Using the Netherlands as a business gateway to Europe
The Netherlands can be an attractive country of establishment or transit to companies outside Europe due to its location and infrastructure, but financial and tax arrangements often prove decisive.
To illustrate some of the issues involved in using the Netherlands as a gateway to Europe, take the example of a large chemical group based in south-east Asia that already has a production facility in Germany and is looking to expand further into Europe.
The group is initially looking to import and resell semi-finished products from Asia on a large scale and picks the Netherlands as its operating base. The country is an attractive place to do businesses thanks to the Port of Rotterdam and good infrastructure connecting it to mainland Europe. In addition, beneficial agreements can be made with the tax authorities in the Netherlands.
To deal with its VAT levy and import duty obligations, one option is for the company to engage a general tax representative to handle its tax liabilities in the Netherlands.
An upside of this approach is that VAT registration in the Netherlands would be unnecessary. A VAT reverse charge mechanism could also be used for the imports to prevent any financing losses.
However, using a general tax representative and the required surety bond to submit VAT returns would involve considerable costs. Moreover, this is not a viable long-term solution if the company also plans to start production and set up a sales office in the Netherlands.
On the other hand, VAT registration would mean that the VAT reverse charge mechanism for imports could no longer be applied. The reverse charge mechanism can only be applied when a tax representative is used, or when the importing party is established in the Netherlands. The nonapplicability of the VAT reverse charge mechanism would mean that VAT would be due immediately on any imports instead of through the regular VAT return. This would result in a considerable financing disadvantage.
An alternative option is incorporating a private limited company in the Netherlands. This is a futureproof solution that avoids the considerable costs and surety bond of tax representation, while keeping a VAT reverse charge mechanism with imports in place.
This also ties in well with the company’s plans to start production and set up a sales office in the country.
To avoid the deployment and related costs of a tax representative, the group can be registered in the Netherlands as a VAT entrepreneur and submit VAT returns autonomously.
For more information, contact:
Peter van der Sluis
KroeseWevers, The Netherlands
T: +31 (0)53 850 4900