Both for companies that are a legal person, such as a bv, and for companies that are not, such as a vof, the government wants to gain a better insight into the natural persons behind those companies. Partners in a vof and shareholders in a bv can in turn be other legal entities, which means that a maze of owners and stakeholders can exist. Ultimately, there are natural persons who pull the strings and the government wants to know who they are.

In order to find out who the UBO in companies are, each general partnership and each bv must indicate which persons are hidden under those companies. They must identify themselves digitally and demonstrate that they are natural persons. The Chamber of Commerce has set up a special corner on their site for this purpose, where you can indicate who the UBO of your company are. Go to kvk.nl/ubo for the procedure. Please note: you are asked to upload documents, such as a copy of your passport and a statement of shareholding. Make sure you have these ready, because once you have entered registration you cannot save anything.

By the way
If you have an eenmanszaak (a Dutch sole proprietorship), you don’t have to do anything. An eenmanszaak is by definition a business of one natural person.

Eenmanszaak (EZ)
An EZ now has an omzetbelastingnummer (sales tax number) and a VAT identification number. The two numbers are different from each other.
The omzetbelastingnummer of an EZ can be used for communication with the tax authorities, such as for the VAT and ICP declaration. This number is still based on the entrepreneur’s BSN;
The VAT identification number of an EZ can be used for communication with customers, like for your invoice and on your website.

BV
A BV also has a VAT number, which is equal to the VAT identification number. In addition, a BV also has an RSIN, which stands for Legal Entities and Partnerships Information Number.
The VAT number of a BV can be used for communication with the Belastingdienst, such as for the VAT return and ICP, and for communication with customers, like for your invoice and on your website;
The RSIN (of a BV) is a 9-digit code that is linked to the Belastingdienst, the Personal Records Database (Basisregistratie Personen or BRP) and the Land Registry (Kadaster).

KvK
Upon registration in the Trade Register of the KvK (formerly the Kamer van Koophandel; Chamber of Commerce), each company receives a KvK-number. In addition, the company also receives an RSIN, except if it is an EZ. The KvK sends the details of the company to the Belastingdienst, which then provides an EZ with an omzetbelastingnummer and a VAT identification number, and a VAT number for all other companies. The KvK therefore does not register omzetbelastingnummers, VAT identification numbers or VAT numbers.

By the way
The RSIN is not the same as the Chamber of Commerce number! It is intended for non-natural legal entities such as BVs, NVs, associations, foundations, cooperatives, general partnerships, partnerships and CVs. A EZ has no RSIN.

The owner of an EZ is jointly and severally liable for all debts and as the EZ grows, the financial risk increases. The conversion to a BV is then a solution because the shareholders of a BV are not jointly and severally liable for the debts. If the BV gets into trouble, you as a major shareholder are not directly responsible, unless you have made a mess of it, then you can be charged with mismanagement.

Another important reason for entrepreneurs to start with an EZ is the tax advantage that you can get, such as the starter’s deduction and the self-employed deduction. After three years, however, the starter’s deduction will lapse and the self-employed deduction will decrease every year; from a fiscal point of view, the turning point is around €100k profit per year. So it does have a certain advantage to start with an EZ, but converting to a BV also costs money (and time and energy). The relatively small amount of the tax benefits often makes entrepreneurs with big plans decide to start a BV right away.

Whatever the reason may be, converting an EZ to a BV involves many things that you may not have thought about yet. How do you convert an EZ into a BV? What do I need for that? What do you do with all the assets of the EZ, your customers, your logo, your employees? Can you just take it over in the BV?

There are three ways to do this: with an asset-liability transaction, a rushing contribution (ruisend) or a silent contribution (geruisloos). In the coming articles I will discuss these three ways one by one.

By the way
You can keep your EZ next to a BV, but make sure that the activities remain strictly separated. The EZ and the BV should not be intertwined. In practice, most entrepreneurs cancel their EZ and everything is transferred to the BV.

Assets/liabilities transaction
The asset-liability transaction is the fastest and easiest way to move from an EZ to a BV, but not always the cheapest.

You make a sum of all assets and all debts of the EZ. Possessions are, for example, all the stuff in the office, all the computers, the goodwill or the machines that you have in your EZ, but also your stocks, the money in all your bank accounts and the money you still expect to receive from customers. With debts you have to think of loans that you still have to pay off and the suppliers you still have to pay. By adding up all assets and subtracting all debts, you arrive at a total. The company must pay this amount upon acquisition. In addition, you still have to calculate the ‘discontinuation profit’; that is the difference between the tax value and the actual value of your company at the time of termination.

If you subsequently set up a BV at a notary, the BV can pay the total of all assets and debts to the EZ to be dissolved. The BV must therefore have money or borrow money to be able to pay it. Once the EZ has received the money, you can close it. Do not forget that you still have to settle with the tax authorities, both the money you received from the BV and the discontinuation profit.

Calculating the discontinuation profit is often difficult; you must declare the discontinuation profit in your income tax return. If you have received a lot of money from the BV or if the discontinuation profit is considerable, this can lead to a high tax sum. To calculate the discontinuation profit, it is advisable to engage an advisor, such as a tax specialist or a civil-law notary.

An asset-liability transaction is only beneficial if the goodwill is low, if you have few reserves, if you have no real estate on the balance sheet, if you have not made use of the investment deduction and if you have not built up a taxable retirement reserve. If so, the smooth or silent contributions are better options.

In subsequent articles I will discuss the ‘smooth contribution’ and the ‘silent contribution’.

Smooth contribution
If the EZ still has a decent value, such as accrued reserves, goodwill or real estate, or if you have not yet or not fully made use of the investment deduction or if a fiscal old-age reserve (FOR) has been built up, the discontinuation profit can increase and the tax consequences can become significant. To limit the tax on the discontinuation profit, you can opt for a smooth contribution. In that case, all mentioned items of value are included in the discontinuation profit and the value of the goodwill is determined, and a discontinuation profit annuity can be concluded. The amount of this varies, but you can then make use of a tax advantage in the form of annuity premium deduction. This is only possible if you intend to sell the BV within three years of incorporation. You then spread the tax on the discontinuation profit over a longer period.

The disadvantage of the smooth contribution is that you eventually still pay tax on the discontinuation profit. However, you do not have to deal with the tax authorities in one go because you can spread it over a number of years. In addition, you must close the BV within three years and you will have to incur additional costs. You have to hire an accountant to prepare the contribution balance and a notary to prepare a contribution deed.

If you do not intend to dissolve the BV within three years, the smooth contribution is not a sensible option. If you want to convert your EZ into a BV and if you can assign significant value to your EZ, because of the goodwill, the reserves, the FOR or real estate, it is wise to consider the silent contribution.

In a next article I will talk about the silent input. In a previous article I described the asset-liability transaction .

Silent contribution
If the EZ still has a decent value, such as accrued reserves, goodwill or real estate, or if you have not yet or not fully made use of the investment deduction or if a fiscal old-age reserve (FOR) has been built up, the discontinuation profit can increase and the tax consequences can become significant. To avoid the discontinuation profit, it is best to opt for a silent contribution. An important condition for the silent contribution is that you are not going to sell the company for the next three years. If you do that anyway, the discontinuation profit comes into play again and you still have to settle with the tax authorities.

Although you are not allowed to sell your company for three years, you are allowed to issue shares to add new shareholders. Keep in mind that you also need a notarial deed for this.

When setting up a BV, the prospective shareholder pays money to the BV for the shares. This is called full deposit and must also be reported to the KvK (Chamber of Commerce). When converting an EZ to a BV, you do not pay with money, but with the EZ to be contributed. You are, as it were, handing in the EZ for shares. A notarial deed is also required for this contribution. All in all, the notary earns a lot from the conversion from EZ to BV, especially with the silent contribution.

If you do not yet have an EZ and are considering setting up a BV without the contribution of an EZ, that is a lot easier and cheaper than the detour via an EZ. I know many entrepreneurs who sighed that they should never have started an EZ or a VOF (general partnership), but would have started a BV right away with the knowledge of now.

In previous articles I have described the asset-liability transaction and the smooth contribution. This is the third article about the conversion from EZ to BV. A final article follows with a brief summary of all three conversion options.

There are three ways to contribute an EZ to a BV: by means of an ‘asset-liability transaction’ (A), a ‘smooth contribution’ (B) or a ‘silent contribution’ (C). The differences between these methods have been discussed in previous articles. If you’re not sure which of these methods is best for your business, answer the following questions. With these questions, I assume that you have an EZ or VOF (a general partnership) and that you plan to convert it into a BV. All within the Netherlands and within Dutch corporate law.

Question 1
Does your EZ have few assets, such as computers, machines, real estate and supplies, not too much money in the bank and few outstanding debtors? Then option A is the best. The lower the value of these assets, the lower the discontinuation profit, which is favorable with option A.

Question 2
Does your EZ have little goodwill? Even then option A is the best. In short, goodwill is the market value of your company. It is a calculation of the expected revenues of your company in the future that is made possible by the existing knowledge, your current customers, the brand and the staff in your company.

Question 3
Has your EZ made sufficient use of the investment deduction and have you not built up a fiscal old age reserve (FOR)? Even then option A is the best. The tax benefits are greatest in the first three years of the existence of an EZ, after that the benefits gradually decrease.

Option A is obvious if you can answer questions 1 to 3 positively. If your EZ still has a decent value, such as accrued reserves, goodwill or real estate, or if you have not yet made full use of the investment deduction or if a fiscal old age reserve (FOR) has been built up, option A is not a good choice and you might consider options B or C. Then ask question 4.

Question 4
Do you plan to sell the newly established BV within three years? Then you can consider option B.

Question 5
Are you NOT planning to sell the newly established BV within three years? Then only option C remains. You will then not have to deal with discontinuation profits and you can fully pay up your shares with your EZ to be dissolved.

Two examples:
You have a small business with little value. There are hardly any assets, you have only a small number of customers and your company name is hardly known. There is less than € 1000 in the bank and you have used up all the tax benefits of an EZ. However, you want to continue as a BV with a fresh start. In that case, option A is best for you.

You have a growing business and you have big plans. The value of the EZ is already considerable, but you want to continue in the coming years with other shareholders in the form of a BV; you have also used up all the tax benefits of the EZ and it is time to take bigger steps. To avoid discontinuation profit, option C is best.

This was the last article about the choices you can make when converting your EZ into a BV. I have tried to explain in clear terms what is involved in such a conversion and what you may have to deal with. Of course, no company is the same and every company needs a suitable solution; that requires careful consideration to make the best decision.

In practice, this means that you must keep all contracts, invoices and receipts and give them a place in your administration. You can choose how to do this: keep everything on paper in folders or digitize everything and store it electronically. You can even choose to save part on paper and part digitally. For example, it can be useful to keep all signed contracts that have already been made on paper in a file, but more and more organizations are choosing to also scan signed documents and store them digitally. There are good tools for this available on the internet.

Your administration must clearly show how much VAT you have paid per period and how much VAT you have received from your customers. You do this by saving all your sales invoices and all your purchase invoices. Sales invoices are the invoices that you send to your customers for payment and purchase invoices are the invoices and receipts that you have received from suppliers and that you have paid.

A second requirement for the administration obligation is that you must have a balance sheet with which you can demonstrate the state of all income and expenditure at certain times. Of course, it is also wise and useful to maintain a report of your results that lists all your income and expenses; that is called a profit and loss statement. Accountants in the Netherlands often talk about a P&L.

You must keep the documents in your administration and the balance sheets for at least seven years, but if you have a matter that lasts longer, for example correspondence about a dismissal, then the entire correspondence about this issue must be kept, even if the dismissal was more than seven years ago . Only when an issue has been fully completed does the counter start to run for seven years. Or if you conclude a lease contract for a period of, for example, five years; you must then keep that contract for seven years after the contract has expired. A retention obligation of ten years applies to immovable property. The retention obligation also applies if you terminate your company.

If you do not comply with the administrative obligation and destroy your documents and figures before the period of seven years has expired, this can have consequences in the event of a book audit or bankruptcy. If the Tax Authorities comes to check your administration and finds that not everything has been saved, you can receive a hefty fine. And if a trustee finds this in case of a bankruptcy, you can be sued for improper management and you can be held liable for the bankruptcy.

By the way
It is always useful to make overviews of your administration. This can be done in Excel, but preferably in good administration software. The more complex your company, the better it is to use a good system for this.

In short, it comes down to the following: if nothing has been laid down, there is a legal payment term of 30 days . You are therefore expected to pay your bills within 30 days. But if you still haven’t paid after 30 days, it can’t be enforced. According to the European legislator, companies have 60 days to pay invoices. Those 60 days for companies is mandatory law. A maximum period of 30 days applies to governments, barring exceptions. In all cases, a creditor may demand interest after 30 days, usually 8% to 10% per annum. If a customer does not pay or does not pay on time, you may also charge a standard fee of € 40 plus a fee for any legal costs or collection costs.

If a customer doesn’t pay on time, you can send them a reminder. You can even do that two or three times, but you are not allowed to charge for that. Usually the tone becomes more and more compelling with each subsequent reminder. If that still does not lead to payment, you can proceed with a collection procedure in which you must first formally declare the debtor in default. Debt collection agencies know exactly how this works and can help you with it.

So much for late payers and defaulters, but what about shorter payment terms, as above? Can a company impose a payment term of seven days? The answer is no. An invoice is not an agreement and the payment term is therefore not legally valid. You can kindly ask to pay within seven days, but you can’t legally enforce it. A payment term shorter than the statutory payment term cannot be enforced once the sale has been concluded. A supplier can draw up general terms and conditions, but these must then be known to the buyer and accepted by him at the time of purchase. This is especially useful in a long-term trading relationship. For one-off purchase transactions, it is wise to include the payment term in the quotation.

Many business owners have a tight schedule for payments: every day, every week, every two weeks or every month. With the help of bookkeeping tools you can create payment orders that are executed on precise days. For a good relationship with your suppliers, I recommend to stick to the payment term of the supplier. And for good cash flow, it is recommended not to pay much earlier than the due date. It really makes me happy when entrepreneurs pay their bills immediately.

By the way
If your customers are consumers, the European directive does not apply and you can determine the payment term yourself, provided that this falls within reasonable limits. You must then include the payment term in your general terms and conditions.

The actual activities take place in the operating company: the purchase and sale of goods or services, the office, the employees, the investments, the website, the logo, the stocks, etc. The holding company can then be used for a management fee, capital accumulation or pension accrual. A holding company is sensible if you have valuable items in the operating company or if you want to sell your business one day. You can then sell the shares in the operating company that will benefit the holding company. You do not have to settle the earnings in the holding with the tax authorities immediately. If you do not have a holding company and you have private shares in an operating company and you sell shares in that operating company, you must report this on your income tax return.

Due to the participation exemption, the profit you have made in the operating company is not taxed again in the holding company. After all, you have already paid tax on the profit you made. Money that you can then pay out to yourself as a dividend from your holding company. You can also choose to use the money in your holding to buy new shares from another BV or to invest in a new project or to use it for a mortgage if you want to buy a house.

There are more tax advantages, such as hedging risks and using the work-related costs scheme, but there are also disadvantages to having a holding company. For example, every BV must annually prepare annual reports, so also every holding company. You must also keep records of your holding company and in order to be able to get a salary, your holding company must send management invoices to your operating company and a salary administration must be set up in your holding company. All doable, but you have to think about it for a while and then set it up correctly.

By the way
If your holding company owns 95% or more of the shares of the operating company, the BVs can enter into a fiscal unity. You can then offset the turnover and all costs of the BVs against each other for tax purposes to save tax.