Though small in size, the Netherlands offers a variety of benefits to potential investors and expansion-focused business owners. A position as the sixth-largest EU economy and a highly developed infrastructure make the country a major player in the European market.
The country is positioned strategically and offers access to the major markets of the region, including Europe, Africa and the Middle East. Despite the country’s enticing benefits of favorable business climate and strategic location, specific challenges exist to businesses considering expansion into the region.
The country’s regulatory, tax and legal systems can be difficult for newcomers to navigate, which makes having local assistance on the ground highly valuable.
Check out our country guideto learn more about this popular region’s business environment, entity types, taxes, incorporation requirements and more.
Advantages of doing business in the Netherlands
Strategic location
As one of the world’s more advanced economies, the Netherlands combines first-rate infrastructure with a strategically advantageous position in mainland Europe. Forbes ranked the Netherlands as number four among its Best Countries of Business in the World. Due to its strategic location, the country has found favor from European, Asian and American companies that want to expand their own reach.
The Netherlands’ economy also plays a critical role as a European transportation hub. The country has access to 95% of Europe’s most lucrative consumer markets.
Competitive tax rates
Adding to this myriad of location benefits is the fact that the country has competitive tax rates and pro-business policies. The taxation policy favors foreign direct investments. The Netherlands also actively promotes engaging in R&D activities through a favorite corporate tax structure and specific R&D tax incentives to stimulate innovation.
The standard corporate income tax rate is currently set at 25%, and there are only two taxable income brackets. A lower rate of 20% applies to the first income bracket, which includes taxable income up to 200,000 EUR. The standard rate applies to the excess of taxable income.
CIT (standard corporate income tax) rates are scheduled to decline in the future. The standard rate will reduce gradually from 25% to 22.55% in 2020, and to 20.5% in 2021. The lower rate will decrease from 20% to 19% in 2019, to 16.5% in 2020, and to 15% in 2021.
Innovation
The Netherlands’ government is a major proponent of public-private partnership and technological innovation. This forward-thinking approach allows companies the necessary support to expand and innovate in the region.
The Dutch have a good framework in place to support innovation and foster business expansion. Strong participation in European Framework programs and international co-operative efforts shows the country’s commitment to cultivating and establishing modern approaches and breakthroughs to both private and public sectors.
This commitment is upheld by a record of long-term socioeconomic performance, strong export performance and a valuable human resources base. Tight integration into the global economy, which includes multinationals with global reach, is also a benefit to companies seeking expansion into this region.
Large talent pool
The workforce in the country is highly educated, skilled and multilingual, which offers firms an attractive pool of labor from which to draw. As one of Europe’s great cultural centers, the Netherlands is an appealing place for workers to live.
The region is home to a highly skilled engineering workforce and a rich network of suppliers, which offers major advantages to companies wanting to establish or reshore manufacturing operations in Europe.
Strong financial center
The Netherlands has traditionally been a desirable place for major financial institutions. A strong financial sector plays a major part in the Dutch economy. The Ministry of Finance has worked to make the Netherlands a world financial center, and modern legislation exists for financial oversight. According to the Government of the Netherlands, “the business climate in the Netherlands is stable in every sense.”
This has created a well-developed financial sector, though securing credit can be a challenge due to the absence of public registry coverage.
The challenges of doing business in the Netherlands
Trade barriers
Companies in the U.S. initiate very few trade complaints in the Netherlands. The government tends to support a level playing field in matters regarding trade. A long history of trade and positive attitudes toward trade position the Dutch as “neutral traders” in the European market.
Despite this fact, companies conducting trade in the Netherlands face a complex business culture that includes trade unions, government bodies and industrial associations. A sentiment embracing the importance of achieving consensus is ingrained in most business processes.
A trend exists in the country that favors “buying European” when an appropriate Dutch product is unavailable. This consumer attitude creates a challenge for U.S. companies and is why local representation is advantageous to those seeking to win government contracts. Forming a joint venture with a Dutch or European partner is a potential strategy for U.S. companies.
Ease of doing business
A small internal market is heavily dependent on the economic performance of its partners, especially in the EU. The ease of doing business in the Netherlands last year declined slightly. The country is ranked at the 36th place in the 2019 Doing Business report published by the World Bank, meaning it has lost four positions compared to the previous year.
This ranking is determined by a variety of factors, such as business confidence, industrial productivity, capacity utilization, efficiency of bankruptcy laws and more.
Construction permits
On average, obtaining a construction permit in the Netherlands takes about 161 days due to the many processing steps required by local government. Establishing a warehouse, for example, requires 13 different steps during the permit process.
The country also has a variety of specialized construction requirements, which may include an investigation of soil quality and the requirement to alert regulatory agencies regarding the status of issues such as heating installation.
Securing electricity
Securing electricity for a new building project can be time-consuming and require an external inspection by a utility company. A contract with an electrical supplier is necessary in instances when a meter must be installed.
Additional steps in the process of securing electricity can eat away valuable business resources and time as well as create potential delays to getting business operations up and running.
Cultural differences
The Netherlands is a culture that values respect and formality. Although there is a trend towards egalitarianism in many social encounters, the Dutch might use formal language when greeting older business partners and individuals in higher ranks of business.
A perception of Dutch business communications exists that can be described as straight-talking and direct. The comments of a Dutch business associate may appear critical, but those comments are rarely meant as disrespectful; rather, they are how opinions are culturally expressed.
U.S. companies might perceive the Dutch way of business as being time-consuming. Instead of giving a direct order, the Dutch might give detailed instructions and include the “why” pertaining to that order. The Dutch like to consider all aspects of business for every action taken. Providing detailed background information rather than simple orders is part of the process.
Starting business off on the right foot
Lack of local knowledge can result in financial penalties, lost business, and criminal and civil litigation. That’s why, when you’re ready to expand your business to the Netherlands, it’s essential to work with an experienced partner.
With our experience and global footprint, CT Corporation delivers the products and servicesyou need to keep you compliant as you do business in the Netherlands.
