Your EU distributor is leaving: set up your own European subsidiary

A termination letter from a European distributor is unwelcome news. It is also a chance to take over the market yourself. The customers, the market knowledge and the margin used to belong to your distributor. They are now available to the company that becomes the new importer of record. Your own company is the best candidate for this role.

Your distributor held several compliance roles: importer of record, EPR registrations, the EU responsible person for product rules and the VAT position. Each of these roles needs a new party in the EU anyway. If your own Dutch BV takes these roles, you get direct customer relationships and the distributor margin. You also own your compliance position.

List the roles your distributor held

A distribution agreement usually involves five roles. These are importer of record at customs, the VAT registration for your sales and the EPR packaging registrations per country. They also include the EU responsible person for product compliance and the contracts with your customers. Make this list first. Your transition plan is the same list, with your BV's name on each line.

How the direct model works

The Dutch BV becomes the importer, with its own EORI number and the Article 23 licence. With this licence, the BV declares the import VAT in its periodic VAT return. Orders are shipped from a warehouse in the Netherlands or a partner warehouse, as shipments within the EU. Your invoices have an EU VAT number that your customers know how to process. The BV registers the compliance roles in its own name once. You can find the requirements per Member State on EU market entry. The customers of your former distributor get the same product from a European supplier. You now earn the margin that your distributor used to earn.

Plan the handover before the last shipment

Incorporate the BV while the old agreement still applies. Transfer the registrations, and make sure the stock is registered under the new EORI number. Send your customers one letter that confirms that the supply continues. You can incorporate the BV from abroad, usually within one week once all documents are complete. Plan everything around your distributor's notice period.

Frequently asked questions

Our distributor handled all EU compliance. What happens to it?

For each role, you need a new party established in the EU: importer of record, VAT registration, EPR registration and the EU responsible person. If you register these roles in your own Dutch BV, you own them. From then on, the roles, the data and the customer relationships are in your own company.

Can we serve the same customers directly?

When your BV is the importer and has an EU VAT number, you invoice European customers as a European supplier. Whether existing customers can switch to you depends on your agreement with the distributor. Have a lawyer review this agreement. New customers can buy directly from you straight away.

How quickly can the structure be in place?

A notary can incorporate a Dutch BV remotely, by power of attorney, usually within one week once all documents are complete. After that, the BV registers for VAT and gets an EORI number. The BV can apply for the Article 23 licence once its VAT number is active. Plan around the distributor's notice period. If you set up the BV at the start of that period, you have the whole period for the handover.

What happens to the distributor's margin?

The distributor used to keep the difference between the wholesale price and the retail price. You now decide how to use this margin, for example for lower prices, marketing or profit. With established sales volumes, this margin is often more than the total cost of the structure.