The thriving startup ecosystem of Amsterdam is attracted many entrepreneurs, budding and seasoned alike, to launch their startups in the city. According to the latest Startup Heatmap Europe report, Amsterdam was the third most attractive city in Europe to start a company in 2020. In 2019, the city was in the 5th position. This is based on a survey that reveals the Top 50 cities where founders would like to start a company if they could choose freely.
However, starting a startup in a new city/country is not an easy task. It requires careful planning and making sure you follow the country’s protocols and regulations. Once you find out if you’re legally entitled to start a business in the Netherlands, finalise the legal business structure (rechtsvorm) of your company — Unincorporated business structures (Rechtvormen zonder rechtspersoonlijkheid) or Incorporated business structures (Rechtvormen met rechtspersoonlijkheid) — locked in the name and ideal location for your business, you would need to register your company with the KvK (Kamer van Koophandel), the Dutch Chamber of Commerce. You can find all about the registration procedure, costs, etc, here.
Once your company is registered in the Commercial Register, KVK will pass on your details to the Dutch Tax and Customs Administration (Belastingdienst). Having a strong understanding of the Dutch tax system is imperative before starting your company in Amsterdam. Here are few key things you should keep in mind before launching a startup in Amsterdam, with inputs from Jaap Fox, founding partner at Riverlane Fiscaal juristen, an Amsterdam-based tax law firm. Riverlane is a member of the Dutch Association of Tax Advisers (NOB).
Registering with the Dutch Tax and Customs Administration
According to Business.gov.nl, “Private limited companies and public limited companies have to register via a civil-law notary. The notary will take care of the registration at the Dutch Tax Administration on your behalf. If you do business in the Netherlands, but your company is not permanently established in the Netherlands, you may only need to register with the Dutch Tax and Customs Administration.”
The right tax
To register with the Dutch Tax and Customs Administration, you need to fill the foreign company registration form. The Dutch Tax and Customs Administration, on analysing your information, determines the taxes that are you are required to pay. These include income tax, turnover tax, corporate income tax, payroll tax.
Registering as an employer
Before hiring your employees, registering as an employer for social security purposes with the Dutch Tax and Customs Administration is required. “You will then receive a payroll tax number and several forms to fill in. The payroll tax number is relevant for filing your annual payroll tax return and communication with the Dutch Tax and Customs Administration,” as per Business.gov.nl.
The 30% rule
According to Fox, as an employer, the two tax-centric rules should Amsterdam-based startups keep in mind are the 30% rule and a subsidy on wages called WBSO. Internationals employees who have been recruited from abroad for a position in the Netherlands may be eligible for the 30% tax ruling. According to Iamsterdam, the 30% reimbursement ruling (also known as the 30% facility) is a tax advantage for highly skilled migrants moving to the Netherlands for a specific employment role. When the necessary conditions are met, the employer can grant a tax-free allowance equivalent to 30% of the gross salary subject to Dutch payroll tax. Employees applying for the 30% ruling after January 1, 2019, receive the benefit for 5 years.
The WBSO scheme
Companies that carry out research and development work (Speur- en Ontwikkelingswerk, S&O or R&D)may be eligible for compensation of wage costs and additional costs under the WBSO scheme. According to the Netherlands Enterprise Agency, each year, the Dutch government allocates the WBSO budget as part of the Tax Plan. For 2020, the WBSO budget was €1,281M. f your company is a startup and you received an R&D declaration granting a benefit for new businesses, you may be able to make use of the customary salary scheme or the share option programme for startups.
Tax schemes for new businesses
The Dutch government also offers various tax benefits and schemes for new businesses. If you started a new business in the Netherlands and are liable for income tax in the Netherlands, you may be eligible for tax relief for new companies (startersaftrek). This is part of the entrepreneur allowance (ondernemersaftrek). By utilising this facility, you will end paying less tax. This is because you are allowed to deduct a set amount from your annual gross profit.
According to Business.gov.nl, business owners in the Netherlands may be eligible for the entrepreneur allowance (ondernemersaftrek). Deducted from profit so that the entrepreneur pays less tax, the entrepreneur allowance include: private business ownership allowance, tax relief for new companies (increased private business ownership allowance), working partner’s abatement, R&D tax credit (WBSO), discontinuation relief, and tax relief for new companies in the event of incapacity for work. The maximum rate for the entrepreneur allowance is 46 per cent. Here’s how you can apply for it.
Fox also talks about a special regime for innovative businesses called the innovation box. Introduced by the Dutch government, the innovation box helps to fiscally stimulate innovative activities. It is a special tariff box on your corporate income tax return, that allows you to pay less corporate income tax.
Corporate income tax
As per Fox, once a startup is up and running in Amsterdam, it has to pay corporate income tax, which is currently 15 per cent on profits up to €245,000 and 25 per cent for profits exceeding €245,000.
Are you an entrepreneur?
In order to utilise the tax relief schemes for new companies, the Dutch Tax and Customs Administration must regard you as an entrepreneur. This can be checked here.