Open a Branch office in the Netherlands. The advantages to start a Branch office in Holland.
International expansion means establishing business in another and unknown jurisdiction. Opening of a ltd company, a Branch office or a subsidiary remains a decisive question. It is necessary to ensure that the type of legal structure is adequate for your international project. Generally, if you are starting your business in the Netherlands, a branch office is often the best strategy.
Liability of a Dutch Branch office
Firstly, the legal responsibility of a Branch relates to the foreign parent company. Indeed, this is the legal regime of the parent’s home country that defines the liability of the branch office, and not the dutch system. However, a branch is conducting its business with a personal trade name which is different from the parent name. This branch office is only acting on behalf of its mother and all its activity is subject to the of the group home country’ regime.
Even if the branch office is not independent, this entity is driving its business on in an autonomous manner as it concretely have an action on a new market. For this reason, this is a requirement for the branch office to be listed an to appear on the local Dutch commercial registry of the Netherlands. Indeed, you have to register your branch office at the chamber of commerce of the Netherlands. Additionally, in most of the European countries, it is mandatory that the business name of the branch office is including, at the end of its title, shows the name of the parent companies. This obligation enables all third party to identify the main body the branch office belongs to.
Is a branch office the opposite of a subsidiary?
In a certain way, a branch office in the Netherlands appears as very different to a dutch subsidiary. A subsidiary is an autonomous structure with a distinct registration. The subsidiary is most of the time sharing a common asset and intellectual property with its parent company. However, the subsidiary is a different company that is legally independent. Indeed, as you register your company as a standard dutch company but with foreign shareholder which are the parents, this entity is independent and liable under the dutch regime.
By contrast, a branch joins its responsibility with its parent company. This means it is subject to the laws governing foreign businesses, in opposition with those governing national businesses.
There is a decent argument to claim that a holding company is also the opposite of a subsidiary. Creating an holding company enables to buy and hold the stock of other companies. Meanwhile, for a subsidiary, another company is owning a majority stake, which can be a holding company.
What are the requirements for a Dutch branch office ?
In all EU countries, there is a requirement of registration with the local company registry, which is done in Netherlands with the Dutch Chamber of Commerce. As well, branches have the obligation to register with the relevant Tax and Vat authorities.
The Dutch social security office must also proceed to the identification of the Branches. For this reason, a branch structure has to register the social security administration. This is even more important if the branch office has employees.
Finally, as the branch office is virtually a local arm of the parent company, the local structure must comply with the requirement to publish the informations regarding the controlling (parent) companies and their activities.
The benefits of establishing a branch office includes :
To conclude, branche offices are useful for gaining an understanding of the local and finding out whether the business finds a niche there. The international strategy consists in creating initially a branch office to discover the market and incorporate a subsidiary or a BV if in a second hand when the business is good locally.
A Branch is also incredibly cost efficient, with less tax liability due to small annual turnover, and few overhead costs due to its size.