The first year of your BV: administration, tax and accounting after setup
Jan 5, 2022
Once you have set up your BV, you can start doing business in the Netherlands. But a BV also entails certain responsibilities in terms of tax and accounting. As a non-Dutch speaker you will almost certainly hire an accountant to do this work for you. But in the end these are your obligations so you need to know what’s going on. In this article we will briefly touch on all aspects in a chronological sequence.
Open a bank account
This is not a tax or accounting obligation, but you’re going nowhere without this. You are going to need a corporate bank account. Be sure to take this into consideration when you're making plans. Dutch banks have tightened their KYC (know your customer) procedures, so they may subject you to a thorough questioning when onboarding you.
Pay up nominal share capital
Upon incorporation, you need to pay up your nominal share capital. This is the amount into which your shares are divided. If you have 120 shares of € 1 each, your nominal share capital is € 120. You need to pay this to the company bank account under Dutch law. Use the description “pay up nominal share capital” and that’s it. If you forget thist, you may be held personally liable for debts of the company when it becomes insolvent in the future. Don’t be that person.
Once you set up your company, you receive a VAT ( “BTW”) number from the Dutch Tax Authorities (“Belastingdienst”). You need this number before you can do any business or send any invoices. This is due to the fact that you are obliged to charge VAT on your goods or services. The Dutch VAT regime for almost all products and services is 21%. Exceptions are food and other things considered necessities. For a full list see here (in Dutch).
Remember that VAT is a neutral tax for businesses. It is a consumer tax, after all. This means you return any VAT you charge to the Tax Authorities and you may reclaim from them any VAT you pay for business costs. VAT returns take place at the end of each quarter. You have one month to complete this.
Income Tax (“IB”)
If you set up your own business, you are likely to become its director as well. That means you will enter into an employment relationship with your own company, unless you use a personal holding construction. In the latter case, the employment relationship shifts to your personal holding, instead of the operating company, so you will have the same situation there. In employment relationships, income tax is levied from the employee but collected from the employer at the moment of payout. If you have a 30% ruling, it is applied here as well. If you are self-employed in an eenmanszaak, you need to pay your IB yourself at the end of the year, so you need to make reservations for this.
Be mindful of the fact that Dutch law requires a shareholding ( >5%) director of a BV to receive a minimum director’s salary of € 51,000 per year (2023). You only need to actually pay this if the company can afford it, but it is expressly forbidden to pay out a lower salary than this and pay out dividend (see below) instead. See this article for more about this subject.
Dutch income is taxed as follows : 36,93% over income up to € 73,071 and 49,50% over all income above (2023).
Employer’s Taxes (“Werkgeverslasten”)
People tend to forget that the tax man takes more than just income tax over your income. There are also unemployment insurances and other social security dues that the employer needs to pay out of his own pocket, not out of the income paid. These taxes are collectively referred to as Employer’s Taxes. This amount may vary according to circumstance and perhaps a collective labour agreement (CAO) applies here. But you should take 30% as a rule of thumb here.
Corporate Tax (“VPB”)
In Holland this is called Vennootschapsbelasting or “VPB”. This tax is levied on the profits your BV makes during a year. It does not apply to the Eenmanszaak. Your profits can of course only be established after year’s end, in the same period where you’re making your annual accounts. When you start up your business, you will not be taxed for VPB before this point.
The rates for VPB are as follows: 19% over profits up to € 200,000. 25,8 % over all profits above that (2023)
If you receive dividends or other benefits from a participation in another BV, you can make use of the “participation exemption” here. This means profits which you receive from a “daughter” or “operating” company will not be subjected to VPB again in your BV. Profits here can mean dividends or the sale price you receive on shares.
Annual Accounts (“Jaarrekening” or “JR”)
A BV has an obligation to file annual accounts. The annual accounts show the financial position of your company in broad strokes. There is a 100% chance you will be hiring an accountant to do this for you, so we’ll skip the details here. Just keep track of the deadlines. The annual accounts need to be prepared within 5 months after the end of the book year. The responsibility for this lies with the BV’s directors. The BV’s general meeting of shareholders may grant the directors 5 months respite, but that’s final. Once they have been prepared, the general meeting of shareholders needs to adopt the annual accounts within 2 months. After adoption, the director’s have the obligation to submit the annual accounts at the Dutch Chamber of Commerce within 8 days.
This process is simplified when the BV’s shareholders and directors are the same person (as is the case when you run your own business). In that case the preparation of the annual accounts also constitutes an adoption. If you file your annual accounts too late or not at all, you may be fined by the Dutch Chamber of Commerce. If at a later point in time your company becomes insolvent and cannot pay its creditors, be sure you have filed your annual accounts correctly or this may be held against you as “bad administration”. In the worst case, this can lead to personal liability of the directors.
Dividend Tax (“Dividendbelasting”)
As soon as the financial year of the BV has ended, the accountant will start preparing the financial statements. This shows how much profit is left at the bottom of the line. This profit can then either be held in reserve, or be distributed to the shareholders. If your business has performed well, you can start thinking about paying out a dividend to the shareholder(s). Be mindful that you can only do this, if you have paid all shareholding (>5%) directors of the company the minimum director’s salary of € 51,000 per year (2023).
Dividends paid out are subject to dividend tax. Dividend tax is a so-called “Box 2 tax” on a receiver who holds 5% or more shares in the BV. If the receiver holds less, he or she is instead taxed under the Dutch Box 3 régime, progressively up to 1,76%. The rate for dividend tax (aanmerkelijk belangheffing) in 2023 is 26,9%, flat rate.
Beware of two things:
Dividend tax is levied partly at the BV, partly at the receiving shareholder. So it requires accounting work on both sides. Check out this article for more explanation.
Dividend tax is only levied if the receiver is a natural person. That’s another reason why many people choose to hold shares through a personal holding company instead. In a personal holding the dividends are treated as profits which have already been taxed under VPB and are therefore off the hook under the “participation exemption”.
Current accounts ( “rekening-courant”)
In order to make life easier for business owners, the Dutch Tax authorities have ruled that you can let cash flow between you and your BV “without consequence” up to € 17,500. This means you can loan money from your BV to pay for private expenses, or vice versa, without having to charge interest over it. For this, you need to have a current accounts agreement in place and you must stick to the maximum of € 17,500. If you surpass it, the entire amount (not just the amount with which you surpassed) will be considered a loan for which you must pay commercial interest (c.a. 5%).
If you need help with your accounting and compliance, we have partners who can help you out. Feel free to reach out!