The Netherlands is widely regarded as one of Europe’s most attractive countries for international business. With a strategic location, highly educated workforce, extensive tax treaty network, and strong infrastructure, many entrepreneurs choose to serve Dutch clients or establish a Dutch company without ever relocating to the country.
The good news is that it is entirely possible to do business in the Netherlands while living abroad. However, entrepreneurs should be aware that operating a business in the Netherlands involves more than simply registering a company. Issues such as VAT registration, tax residency, substance requirements, and banking can create challenges if they are not properly addressed from the beginning.
This article explains the key considerations for foreign entrepreneurs who want to enter the Dutch market.
Doing Business in the Netherlands Without Living There
In most cases, foreign entrepreneurs can provide goods or services to Dutch customers without becoming Dutch residents.
For example, you may:
- Provide consulting services to Dutch businesses.
- Sell software to Dutch customers.
- Operate an e-commerce business serving the Dutch market.
- Supply products to Dutch wholesalers or consumers.
- Run an online business from another country.
Many businesses successfully trade with Dutch customers while maintaining their operations abroad. Whether a Dutch legal entity is needed depends on the nature and scale of the activities.
Can a Foreign Resident Own a Dutch Company?
Yes. Non-residents can own and manage a Dutch private limited company (BV).
There is generally no nationality requirement for shareholders or directors. Entrepreneurs from within and outside the European Union can establish a Dutch BV and act as its sole shareholder and director.
The incorporation process is relatively straightforward and is completed through a Dutch civil-law notary. Once incorporated, the company is registered with the Dutch Chamber of Commerce (KVK).
A Dutch BV offers several advantages:
- Limited liability protection.
- A respected and internationally recognised corporate structure.
- Flexibility for holding and operating company structures.
- Access to the Dutch business environment.
However, establishing a BV is only the beginning. The more difficult questions often arise afterwards, especially regarding VAT, tax residency, and banking.
VAT Registration: Physical Presence May Be Required
Many foreign entrepreneurs assume that obtaining a Dutch VAT number is automatic once a company has been incorporated. In practice, the Dutch Tax Administration may conduct additional reviews before granting a VAT registration.
Particularly where a company is owned and managed from abroad, the authorities may want to determine whether genuine business activities exist in the Netherlands.
In certain situations, entrepreneurs may be asked to demonstrate factors such as:
- A genuine business purpose.
- Commercial activities in or connected to the Netherlands.
- Access to business premises.
- Contracts with customers or suppliers.
- Operational activities.
For companies perceived as having little or no connection with the Netherlands, for example in case of a virtual address and no Dutch resident personnel, obtaining a VAT number can sometimes take longer than expected.
Foreign entrepreneurs should also be aware that a Dutch company does not automatically qualify for a Dutch VAT number simply because it is registered with the Chamber of Commerce. The Dutch tax authorities assess VAT registration separately.
The Importance of Business Substance
A common misconception is that anyone can establish a Dutch company and immediately enjoy all the advantages associated with Dutch business structures.
In reality, tax authorities increasingly focus on “substance” and economic reality.
Questions that may be considered include:
- Where are management decisions made?
- Where does the director work?
- Where are contracts negotiated?
- Where are employees located?
- Where are business records maintained?
- Where is the company’s actual office located?
A company that exists only on paper may face additional scrutiny from tax authorities, banks, suppliers, and business partners.
For businesses with international operations, maintaining sufficient substance is increasingly important.
Tax Residency: Where Is the Company Actually Managed?
One of the most important international tax issues concerns corporate tax residency.
A company incorporated in the Netherlands is generally subject to Dutch corporate tax rules. However, the analysis does not stop there.
Many countries determine corporate tax residency based on the place of effective management. If a Dutch BV is managed entirely from abroad, foreign tax authorities may also claim taxing rights.
For example, if a director lives permanently in another country and makes all strategic decisions there, questions may arise regarding where the company is actually managed.
Potential consequences include:
- Dual tax residency issues.
- Additional reporting obligations.
- Tax treaty complications.
- Disputes between tax authorities.
- Increased compliance costs.
This does not necessarily mean that the structure is invalid. However, it does mean that international tax planning should be considered carefully from the outset.
A tax advisor experienced in cross-border structures can help determine whether a company may be viewed as tax resident in more than one jurisdiction.
Note that with some jurisdictions the dual tax residency risk is lower because the authorities are not very aggressive in claiming tax residency. Also risks can be reduced by holding regular board meeting in the Netherlands whereby the important decisions are prepared and taken in the Netherlands.
Having a company in the Netherlands and a main company in the home country can also reduce the dual tax residency risk because in case the Dutch operations are strongly supported from abroad, a proper application of the arm’s-length-principles makes that a large part of the profits shall be allocated to the main company anyway.
Permanent Establishment Risks
Foreign companies doing business in the Netherlands, without having set up a Dutch legal entity, should also consider whether they may create a Dutch permanent establishment.
A permanent establishment may arise through:
- An office.
- A branch.
- A warehouse.
- Certain construction projects.
- Personnel carrying out activities in the Netherlands.
When a permanent establishment exists, part of the company’s profits may become taxable in the Netherlands.
The precise rules depend on domestic legislation, tax treaties, and the specific facts of each case.
Because the concept is highly technical, businesses expanding into the Netherlands should seek professional advice before hiring employees or creating a physical presence.
Opening a Dutch Bank Account Can Be Challenging
One of the most underestimated challenges for foreign entrepreneurs is opening a Dutch business bank account.
Although the Netherlands has a sophisticated banking sector, banks are subject to strict anti-money laundering (AML) and know-your-customer (KYC) regulations.
As a result, banks often perform extensive due diligence before accepting new corporate clients.
Foreign-owned Dutch companies may be asked to provide:
- Identification documents of directors and shareholders.
- Proof of residential address.
- Details regarding business activities.
- Contracts with customers and suppliers.
- Evidence of expected transactions.
- Information regarding the source of funds.
- Corporate structure documentation.
- Details of ultimate beneficial owners (UBOs).
For straightforward businesses, account opening may be relatively smooth. However, internationally owned structures sometimes experience delays or even rejections.
The challenges can become greater when:
- The director resides outside the EU.
- The company has complex international ownership.
- The business model is regarded as higher risk.
- The company has limited operational history.
- The company lacks Dutch substance.
Alternatives to Traditional Dutch Banks
Because of increasing compliance requirements, some foreign entrepreneurs explore alternatives when opening a traditional Dutch bank account proves difficult.
Examples may include:
- Electronic money institutions.
- International payment providers.
- Multi-currency business accounts.
- Fintech banking solutions.
These alternatives can often facilitate international business operations, although they may not always provide the same services as a traditional bank.
Entrepreneurs should carefully assess whether an alternative solution satisfies their operational and regulatory requirements.
Why Entrepreneurs Continue to Choose the Netherlands
Despite the administrative challenges that may arise, the Netherlands remains one of Europe’s most attractive business destinations.
Key advantages include:
- A stable legal system.
- Excellent infrastructure.
- Strong international connectivity.
- An extensive tax treaty network.
- A highly educated workforce.
- Access to the European market.
- A business-friendly environment.
These advantages help explain why thousands of foreign entrepreneurs and international groups continue to establish Dutch entities every year.
Conclusion
It is absolutely possible to do business in the Netherlands while living abroad. Foreign entrepreneurs can sell products and services to Dutch customers, establish a Dutch BV, and build successful operations without relocating to the country.
However, entrepreneurs should not underestimate the practical and tax-related challenges involved. Obtaining a Dutch VAT number may require demonstrating genuine business activities, tax residency issues can arise when management is conducted from abroad, and opening a Dutch business bank account can be significantly more complicated than many expect.
The most successful international entrepreneurs approach the Dutch market with a clear understanding of these issues and seek professional guidance before establishing their structure. A qualified accountant or tax advisor can help assess VAT obligations, tax residency risks, substance requirements, and banking considerations. With proper planning, foreign entrepreneurs can benefit from the many advantages that the Netherlands offers while avoiding costly compliance problems later on.
