Dutch trading company
Trading companies in the Netherlands
What are they and what advantages do they offer?
At a first glance, the term “Dutch trading company” might sound a bit redundant (aren’t most companies created to trade, after all?), but nothing could be further from the truth. A trading company is a corporate entity that specialised in all aspects of the import and export of certain products across borders. Opening such a trading company in the Netherlands can offer considerable operational and fiscal advantages over other jurisdictions. At the same time, the use case and the advantages associated with trading companies in the Netherlands are largely dependent on both the core business of your operation and the objectives that need to be reached. Therefore, never hesitate to get in touch with us if you have specific questions regarding the setting up and management of a trading company in the Netherlands, without obligation. We will cover the most important advantages in this article.
What is meant by a trading company in the Netherlands?
As we already mentioned briefly in the intro of this article, a trading company is a specific type of company that specialises in the import and export of products, and everything that has to do with that aspect of international business. In theory, the product or products traded by the trading company in question can be anything, though, in reality, we see that certain sectors, such as raw materials, chemicals, and generic pharmaceuticals, feature more trading companies than others. To put it simply, what a trading company does is buy products in one country or region and sell them in another country or region, one where the trader has a distribution network. A trading company in the Netherlands, for example, provides a trader with access to the entire European Union market, but more about that sizable advantage a bit later.
The actual and practical activities of a trading company are all related to import and export, but they can vary according to the products that are being traded and the way in which the business is run. Generally, a trading company’s day-to-day includes, but is not limited to the identification of dependable suppliers, the negotiation of sales and delivery terms, and the distribution of the products in question through the intended retail network. The management of logistics and transport, as well as that of customs and barriers of international trade also forms a core part of a trading company’s activities.
General advantages of a Dutch trading company.
When it comes to adding a trading company to the structure of your business, there are several advantages in different areas. When set up correctly and to the exact measure of your operation and objectives, these advantages can help compensate for the initial cost of incorporation (which is relatively low for trading companies in the Netherlands, anyway) and the slightly higher operational costs. Some of the major general advantages of a trading company include:
- Fiscal optimisation
As the owner of a trading company, you can generate personal income in the form of salary or dividend payments. As a matter of fact, as a director who holds at least 5% of shares in the company, the company is obliged to pay you an annual wage of a minimum €51.000 plus the accompanying wage withholding taxes. You, therefore, have the option to create a tax contribution structure that is optimal for you. While we will elaborate more on this a bit later, the Netherlands is actually a good example of the potential financial opportunities offered by a trading company. For 2023, the Personal Income Tax rate in the Netherlands is 36,93% – 49,50%, while the rates for corporate tax and dividend withholding tax currently sit at 19% – 25,8% and 15%, respectively. When profitable, all three can be applicable to your trading company’s activities, but contrary to a sole trader, you have the freedom to structure your Dutch trading company in a way that is optimal for you and your business from a fiscal point of view.
- Limited liability
Apart from the previously mentioned potential fiscal opportunities, this is probably the most common reason for trading professionals and entrepreneurs to set up a trading company. In comparison to a sole trader, who works as a self-employed individual and is therefore directly liable for all of the business he or she conducts, a trading company only risks its own capital and assets. This creates a firm and potentially very important separation between your own assets and the assets of the firm. Having said that, there are exceptions based on which a director can still be held liable for his or her own assets, for example when serious negligence can be proven or in cases where the annual accounts are not filed in time.
- Easier to transfer or sell
Imagine running a successful trading company or perhaps you don’t even need to imagine it. Maybe you have managed or are managing one at the moment, and you’re simply exploring the options of opening a trading company in the Netherlands. In any case, there might come a moment when you, for whatever reason, want to cash in on the company you’ve been building. A trading company is much easier to transfer or sell to another party than the activity of a sole trader because there exists a clear separation between your private assets and the assets that belong to the company. When valuing a company, it’s essential to include all of that company’s assets and liabilities in that valuation exercise, which can be a lot harder to determine when you’re operating as a sole trader without a limited liability company. On top of that, when executed correctly, selling a trading company can be much more beneficial from a fiscal perspective.
- Public image
Besides the obvious legal, operational, and fiscal benefits of a trading company, the image often plays a role as well in the decision to set up such an entity. Overall, the perception is that a company projects a more professional and dependable image than a self-employed person. Setting up a Dutch trading company can help to provide some additional confidence to third parties, such as clients, suppliers, or banks.
Advantages of a trading company in the Netherlands
Seeing as you reached our website and this article, you probably have some knowledge of trading companies already, and possibly some (or considerable) experience as well. The general advantages of a trading company are likely no longer a secret for you. What about the specific advantages of opening a trading company in the Netherlands, though? These advantages are considerable, even in comparison to other surrounding jurisdictions like Germany and Poland, so we’ll list some of the most important ones here below.
- As we mentioned before, setting up a trading company provides limited liability for the shareholders (i.e., you) and that goes for trading companies in the Netherlands as well, as long as you pick a Dutch limited company (besloten vennootschap or BV, in Dutch) as a legal entity for the company. This is essential, as it will create a clear and legal distinction between your company’s assets and your private assets. As we mentioned earlier though, a director can still be held liable for his or her own assets in exceptional situations, for example when serious negligence can be proven or in cases where the annual accounts are not filed in time.
- Since 2012, setting up a trading company in the Netherlands has become very inexpensive. Where before, a capital injection of at least €18.000 was required, you can nowadays contribute just 1 euro cent to fulfil the capital requirement. This makes creating the trading company in the Netherlands extremely affordable, but you should take into account that not injecting any capital into the company keeps the risk of personal liability (for you as owner) alive. Also keep in mind that, like in other countries, there are other costs associated with setting up a trading company in the Netherlands as well, such as notary costs, compliance costs (bookkeeping, VAT returns, CIT returns, etc…), and possible legal fees.
- The tax regime in the Netherlands is very favourable for international traders, for several reasons. For 2023, the Personal Income Tax rate in the Netherlands is 36,93% – 49,50%, while the rates for corporate tax and dividend withholding tax currently sit at 19% – 25,8% and 15%, respectively. What’s more, limited liability companies recording annual profits of no more than € 200.000 pay just 19% tax on those profits. With some smart and responsible structuring, the fiscal benefits of a trading company in the Netherlands are practically unrivalled in the European Union.
- Is your trading company in the Netherlands running a profit, but are you not planning to pay out all of it as salary or dividends? You can choose to either leave it as cash in the company and pay the applicable tax over it or reinvest it into your company. The reinvestment of profits into the company is not taxed in the Netherlands. This is also where some of the major benefits of a holding company in the Netherlands can come into play.
- Speaking of the European Union: a trading company in the Netherlands provides you with access to the entire EU market. That’s a single market comprised of 27 countries and a GDP of €14,5 trillion, including some of the world’s most developed populations in terms of purchasing power.
- Broader advantages of setting up a trading company in the Netherlands include the high level of English literacy (around 92%, one of the highest in the world for regions where English is not an official language), the world-class professional infrastructure and international education, and the stability of the economy.
- The Netherlands has been a trading nation for centuries, so it’s no surprise that it has grown into a very strong and innovative financial and business centre in the European Union. The country also boasts a highly educated and multilingual workforce and a generally high standard of living for ex-pats.
Are you considering setting up a trading company in the Netherlands and would you like to know more about the possibilities in regard to the specific situation of your operation? Get in touch with CompanyNL, so we can discuss the optimal approach for you and your company, naturally in an entirely non-committal way!