Key Takeaways
1. The Netherlands is one of the world’s most relaxed and liberal countries, and this culture transfers directly to the Dutch world of business.
2. The Netherlands’ central geographic location within Europe makes it an ideal jurisdiction for tapping into other major European consumer markets.
3. Foreign businesses and investors will find that the Netherlands welcomes them with open arms. The country is one of Europe’s most friendly when it comes to accepting foreign commerce. Roughly 50 percent of the nation’s GDP stems from outside investment, in fact.
4. Strong infrastructure and a legal system and tax regime that are all designed to support businesses, make setting up and operating an entity easier than in many other European jurisdictions. However, efficiencies can still be made by using a Global PEO solution, rather than opening up a separate entity.
Doing business in the Netherlands is a useful way to get a business foothold in Europe. Here we set out the main things you need to know about doing business in the Netherlands.
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Doing Business in the Netherlands: A Guide for Foreign Organisations
The Netherlands—often referred to as Holland—is widely regarded as one of the world’s most relaxed and liberal countries, with a laidback approach to, well, almost everything.
This applies to the business world, too; doing business in the Netherlands is an invariably straightforward and stress-free affair thanks to the Dutch people’s openness to and tolerance of commerce.
In addition to this, the country’s central geographical position within Europe, as well as excellent infrastructure and logistics services, attracts numerous European and American firms seeking to set up headquarters and regional offices each year. This trend is only growing, post-Brexit. There is also a growing trend among Asian firms who are doing the same. To date, more than 400 of the world’s 500 largest companies have operations in the Netherlands.
In this guide, we are going to give you an insight into the excellent business environment that exists in the Netherlands and give you some tips on how you can expand your own operations to Europe’s most liberal nation.
Benefits of Doing Business in the Netherlands
There are many reasons why organisations are increasingly doing business in the Netherlands: A pro-business climate, its strategic location within Europe, a stable legal system, a highly educated workforce, and a superior infrastructure are ones that immediately spring to mind.
It was ranked fourth in the world by IMD in their 2020 World Competitiveness Rankings, making it a truly world-class destination for any business that wishes to expand into Europe.
Foreign business activity is so rife in the Netherlands, in fact, that around 50 percent of the nation’s gross domestic product (GDP) is derived internationally. The Netherlands also has one of Europe’s most competitive economies according to the 2019 Competitive Report by the World Economic Forum (WEF), and it is one of the world’s leading countries for business investment. As for the COVID-19 situation, the WEF ranked the Netherlands fourth for general economic transformation readiness in its Global Competitiveness Report Special Edition 2020, which focused on COVID-19 recovery.
In terms of its geographical location, the Netherlands is the perfect launchpad for the European market. The country has one of Europe’s four major airports —Amsterdam Schiphol — and access to most major European consumer markets are within easy reach from there.
Add on a supportive legal and tax structure designed to support — not hinder — businesses: Superior infrastructure, world-class logistics, and a digitally savvy, mobile, and highly-educated populace all begin to explain why many organisations, from start-ups to Fortune 500 corporations, have chosen the Netherlands as their European base of operations.
Business Culture and Etiquette in the Netherlands
As we have stated, doing business with the Dutch is relatively straightforward. That said, there are a few tips that you should take note of as their culture does have some differences from other countries:
- 1. Be Polite but Not Formal
- Compared to the corporate world in North America, Asia, and many other parts of Europe such as Germany and the United Kingdom, the Dutch can be very informal and laid back at work.
- It is perfectly normal for even the highest levels of management to interact in a candid and friendly manner with all levels of employees, with everyone on first name terms. If a lower-level employee refers to the CEO by their first name, for example, this is normal; it does not imply subordination or a lack of respect as it might in other cultures. This is traditional in Dutch culture where everybody is regarded as equal.
- However, when meeting and greeting a new business acquaintance for the very first time, it remains polite to use the appropriate formal title, such as Mr/Mrs/Ms X.
2. Be Very Direct
This lack of formality in Dutch business culture carries through to the way everything is done on a day-to-day basis. This means that there is rarely any beating around the bush when it comes to everything from sharing opinions to closing major deals; the Dutch value those who are direct and straight to the point.
For skilled migrants who have moved to the Netherlands for work, this can be something of a shock to the system, especially if they are more accustomed to watching their tone and biting their tongue when speaking with management or going about their duties. When doing business in the Netherlands, one shouldn’t be afraid of voicing one’s opinions and speaking one’s mind: this is encouraged and will always be well-received.
- 3. Stick to Your Word
- While this might seem like we are stating the obvious depending on where you are from, you should always stick to your word and follow through with any agreements when doing business in the Netherlands.
- A key element of the direct and laid back way the Dutch do business is trust that people will do what they say they are going to do when they say they will do it. Therefore, be careful with your wording because the spoken word, such as a promise or agreement, is treated as seriously as one written down on paper and signed.
- Going back on your word and attempting to renegotiate a deal at the final sprint is likely to put business relations at risk.
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4. Keep Things Casual
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If you are used to doing business in places like the United States, you will be no stranger to standard business dress: suits, ties, shirts, trousers, slacks, and loafers are the norm for men, with conservative dresses, blouses, and business suits the norm for women.
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When doing business in the Netherlands, however, you may be surprised to see just how informal dress codes are. A traditional business suit or dress is usually only required in your major professions (e.g., legal, banking—even then, they are usually only required when meeting clients), or at the higher echelons of business management.
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For “regular” employees, almost anything goes—jeans, custom t-shirts, trainers, and even shorts when the weather is hotter are the order of the day in most Dutch offices. Just don’t wear socks and sandals; that’s not acceptable anywhere in the world.
5. Be Social
Work colleagues enjoy friendly relationships in the Netherlands. This naturally means that there is a huge social element to Dutch business culture where even upper management get involved in group activities outside of the workplace, such as happy hours on Fridays.
Whenever you can, try your best to network with your colleagues about non-work matters.
Do chat about the weather, travel, sport, the latest news, do accept invitations to social events, and do try to avoid talking too much about work during social time.
Opening a Business Entity in the Netherlands
There are several ways to open and operate a business in the Netherlands. One is to work with a PEO (we’ll discuss this below) and the other is to register and operate your own legal entity.
While there are distinctions between corporate entities (i.e., those with a legal personality) and non-corporate entities (i.e., those without), we are going to look at corporate entities as these are the types of entity typically most suited to foreign investors. Non-corporate entities are reserved for partnerships in the Netherlands.
Under Dutch law, two types of limited liability corporate entities exist: the ‘bv’ and the ‘nv’. Both the bv and nv are corporate entities with a capital divided in shares.
bv (naamloze vennootschap)
The bv is a private company that is comparable to the German ‘Gesellschaft mit beschränkter Haftung (GmbH) or the British ‘limited liability’ company (Ltd).
The legislation that applies to a bv makes it very flexible and thus the most popular entity choice, especially for holding companies in international group structures. The current bv characteristics and rules are:
No minimum share capital requirement
Voting rights and profit-sharing rights can be varied through different share types
Shares with no rights to profit must always have voting rights
No transfer restrictions related to transferring shares are allowed
Shareholders hold more ‘power’ over operational managers.
nv (naamloze vennootschap)
The nv is a public company comparable to the ‘public limited company’ (plc.) in the United Kingdom.
In general, the nv is more strictly regulated and is commonly used to incorporate companies that are either i) very large or ii) will be listed on a stock exchange. The main characteristics and rules for the nv are:
- A minimum share capital requirement of EUR 45,000.
- All shareholders have voting and profit rights.
- Transfer restrictions may be allowed as per the articles of association.
- Distributions limited by formal rules on capital and creditor protection.
Incorporating an Entity
Compared to other jurisdictions, incorporating an entity in the Netherlands is incredibly easy: A permit is not usually needed to start a business save for in regulated sectors such as legal or finance where licenses to operate must be obtained.
Incorporation does involve some paperwork in the form of a notarial deed of incorporation.
This can be executed on the basis of a power of attorney by a Dutch civil law notary to cut out unnecessary travel time or delays.
Very little initial capital outlay is needed, with no share capital required for the ‘bv’ private entity and only EUR 45,000 required for the ‘nv’ public entity. For any share capital that is included in incorporation of the ‘nv’ entity, a statement from a bank or auditor confirming that it has been paid up must be obtained prior to incorporation.
A bv or nv entity must be registered with the trade register of the Dutch Chamber of Commerce. While this can take some time, it is possible for companies to carry out business trade prior to the incorporation process being completed.
Why Not Begin with a Professional Employer Organization (PEO)?
Although it is incredibly easy to incorporate an entity in the Netherlands, there are other options for organisations that are in the early stages of exploring the possibility of an international expansion.
Working with a professional employer organization (PEO) is one of these options. By using a PEO’s employer of record and global payroll services, you can take advantage of having access to international employees without having to spend time setting up an entity and ensuring that you meet all the necessary legal and compliance requirements.
This has the obvious benefit of allowing you to take a ‘try before you buy’ approach of seeing if doing business in the Netherlands would work for your business in the long-term with much lower operational risk. By working with a Netherlands PEO, you also get access to a network of local experts who will be able to advise you on everything from international payroll and paying taxes to the best way to recruit local employees.
If this sounds like an arrangement that could work for your business, contact Horizons today for an initial consultation!
