Foreword by Andrew Chilvers
Despite these uncertain times, expanding overseas can be a key driver for future growth for an ambitious business. International expansion can breathe new life into a company, drive huge value and set it on a path of continued success.
Expanding a business overseas is a strategic opportunity that will help diversify revenue streams, revitalise product development and give high returns on investment. But expanding a business into different jurisdictions takes time – this is a long distance run, not a sudden sprint to the finish line. Furthermore, expanding operations into a new jurisdiction can be fraught with challenges and risks that need to be addressed long before the first boots are on the ground.
For any company turning up in a foreign country, a multitude of tax and legal issues need to be addressed. This can be a labyrinthine experience and not for the faint hearted – but then faint hearted businesspeople seldom set their sights on overseas expansion.
Tax and compliance have to be at the top of any board’s agenda, ensuring the correct steps are taken the moment the company representatives land in-country. It’s pivotal to learn these issues to avoid any costly mistakes from the start.
What are the main government incentives available in your jurisdiction to attract multi- nationals and FDI investment?
The Netherlands offers a competitive and supportive fiscal climate for international companies wanting to do business in Europe. First off, the statutory corporate income tax is being lowered and will be levied at the following rates:
Taxable income 2020 2021
€ 0 – € 200,000 16.5% 15.0%
> € 200,000 25.0% 25.0%
* The tax rates for 2021 have not been officially confirmed yet. The current proposals include lowering the tax rate in the lower bracket to 15% in 2021, and expanding the lowest bracket to include a taxable income up to € 400,000 in two steps over the next two years.
The Dutch government offers a number of attractive fiscal features to stimulate foreign investment and entrepreneurship. The Netherlands has concluded bilateral double taxation and investment treaties with over 100 countries, making it one of the world’s largest networks, and allowing foreign investors to make use of the advantages of the Dutch fiscal regime without risking double taxation. An important feature for start-ups is the possibility to offset losses with profits generated in the previous year, or the next six years.
Another fiscal incentive, particularly attractive to holding companies, is the Dutch participation exemption regime. The Dutch participation exemption provides for a full tax exemption of capital gains realised and dividends received from qualifying participations. This exemption is exceptionally interesting for international companies considering to set up a (European) HQ in the Netherlands.
Companies performing research and development activities can greatly benefit from incentives such as the “innovation box” and a tax credit for research and development (“WBSO”). The innovation box allows companies to benefit from an effective tax rate of only 7% on profits derived from in-house developed intangible assets, whereas the WBSO lowers the wage tax for employees performing R&D activities by up to 32% (start-ups are eligible for a discount of 40%).
Multinationals wanting to bring in their own staff from abroad, can benefit from a special tax regime for expatriates (“30% facility”). Under the 30% facility, employees may receive up to 30% of their wages tax free for up to 5 years.
What industries do you feel there are opportunities in for international investors/ businesses in your jurisdiction? What factors do you think contribute to inward investment?
Geographical location. The Netherlands is strategically located in the heart of the European Union and has a world class infrastructure and logistical capabilities. From here, companies have access to all of mainland Europe’s national markets in only a few hours. This makes the Netherlands an attractive jurisdiction for any multi-national wanting to optimize their trading into or inside the European Union. It is home to Europe’s largest seaport, and one of Europe’s busiest airports. Incoming goods can be transported easily by train or using the extensive network of roads and highways to other European destinations.
Membership of EU. The Netherlands is one of the founding members of the European Union. Doing business in the Netherlands provides foreign companies free access to the largest and wealthiest consumer market worldwide.
Digital infrastructure and education. Apart from the physical infrastructure, the Netherlands also has a dense, high quality digital infrastructure. Furthermore, the Dutch are highly educated, and multilingual. The government’s incentives pertaining to research and development further supplement this high-tech environment. Combined, they offer great opportunities for multinationals and other foreign investors wanting to set-up, improve or expand their R&D department or software/digital development teams. Over the years, Dutch research laid the foundation for many inventions, including Wi-Fi and Bluetooth. On the other hand, non-IT industries like pharma, (petro-)chemical or the food industry can benefit from these advantages as well.
Why is it important to hire a local firm to support international expansion? How can you help smooth the process for your clients and overcome common pitfalls?
Entrepreneurs and investors typically deal with many legal and tax aspects in their home market, and for many they become a routine operation. When moving or expanding their business into other jurisdictions, they may run into differences in culture, customs and bureaucracy. Having boots on the ground who can rec – ognize these differences upfront can save a lot of time, money and headaches. Whether choosing the correct type of legal entity, registering a new company with the trade register, or advising on the specifics of labour law, statutory filing requirements or tax regulations, having a local firm with in-depth knowledge, and who speaks the language and knows the culture, can really make a difference.
Especially for these types of entrepreneurs and investors we have developed the concept of corporate liaison services. Although companies usually have an internal officer looking after their (foreign) affairs, these officers may not always be fully up to speed with all the local regulations and procedures abroad. Our corporate liaison service can advise these officers, if and when needed, on our local legislation and procedures so that they become familiar with them. This ser – vice is provided on demand, meaning that we only step in when we’re needed.
Our involvement is often requested when companies need the assistance of specialized lawyers, tax advisors, real estate agents, insurance brokers or other consultants, but do not know who to engage or what specific questions to ask. Depending on the issue at hand, a very seasoned specialist may be needed, whereas in less demanding situations a generalist will do. This is where we can help, by recommending the most suitable (and not necessarily the most expensive) specialist from our extensive network of advisors.