When you incorporate a company in the Netherlands, it is referred to as a ‘Dutch’ company under Dutch law. However, according to Tax Law, your ‘Dutch’ company may not be considered a resident company. This can have an impact on your tax status, so it’s critical that you understand how to determine whether your company is a ‘resident company’ or a ‘non-resident company.’ This article focuses on the VAT definition of “residence.” Please keep in mind that other conditions may apply to Corporate Tax.
It is crucial that a business owner is based in the Netherlands or has a permanent establishment here in order to evaluate if a Dutch firm is even subject to VAT. But when does a business become a local one? What elements influence this?
Board Members/Partners Live Abroad
Numerous court cases have discussed how the location of a business is determined by the seat of business operations. The location of business operations can be determined based on the country of residence of the board members who make daily business decisions. In the case of a General Partnership (VOF), the Partners’ country of residence may be deemed decisive unless the Partnership is effectively managed from the Netherlands.
Main Factors Regarding Seat Location
According to earlier European case law, various factors must be considered when determining a corporate entity’s tax residency. The most important is the registered office, which is the location of central management, where the company’s directors meet, and where the general policy of the company is determined.
In fact, we have seen that it can be important for VAT purposes if the company engages in any activities in the Netherlands, such as dealing with Dutch suppliers or customers.
Furthermore, if the company lacks a fully functional office or warehouse, this could lead some people to believe that it is not really operating in the Netherlands. Although using a “registered office” is permitted legally, there may be limitations when it comes to taxes; nevertheless, this will depend on the overall circumstances of the firm. Technically, even if a fully functional office is not present, it is nevertheless feasible to be treated as a tax resident in the Netherlands, for instance when a business collaborates with third parties like a shipping or storage provider.
