Why companies convert

Legally, the branch is the same company as the foreign parent. Every Dutch obligation and every claim against the branch is therefore a claim against the head office. A BV is a separate company with its own liability and its own balance sheet. Dutch clients, banks and licence authorities treat it as a local company. See branch vs BV for the first comparison.

The sequence

  1. Incorporate the BV. This happens alongside daily business, through the standard incorporation process.
  2. Transfer the activity: the head office transfers the assets, stock and staff to the BV with an asset transfer agreement. Employees keep their terms under the rules on transfer of undertaking.
  3. Transfer the contracts (novation): clients and suppliers agree to transfer their contracts to the BV. Start this step as early as possible.
  4. Update the registrations: register the BV for VAT, wage tax, EORI (the EU customs number) and licences. Then close the branch registration at the Dutch Chamber of Commerce (KVK).

Compare the Netherlands with Ireland and Germany on tax, substance, running costs and time. See setting up a Dutch subsidiary for a foreign parent company.

Tax at conversion

The head office sells the activity to the BV at a market price (at arm's length). The branch files its own final return for its last period. Converting at the end of a financial year makes the split between the two administrations easier. Agree on this point early with your adviser.