Most groups arrive at this decision having already made it, usually on the basis of a sentence heard from someone who did the same thing five years ago. A branch is cheaper and faster. A subsidiary is cleaner. Both statements are true often enough to be dangerous, and neither is a reason. The two routes create different legal objects, are entered in the trade register in different ways, allocate liability differently and are taxed on different premises. The question of which is right for a given entry is answerable, but not from the outside.
What follows is what actually happens in each case, and where the two paths diverge in ways that matter after the first year rather than during the first week.
What each route actually creates
Incorporating a bv creates a new Dutch legal person. It has its own name, its own capital, its own board and its own liability. The foreign parent becomes a shareholder and nothing more, subject to the ordinary rules on shareholder and director liability. Under article 2:175 of the Dutch Civil Code the company is formed by notarial deed, and under article 2:177 its articles must state its name, its seat and its objects, with the seat located in the Netherlands.
Registering a branch creates nothing. There is no new legal person and no new set of articles. The foreign company itself begins operating in the Netherlands through an establishment there, and that establishment is recorded. Every contract signed at the branch is a contract of the foreign company, every debt incurred is its debt, and every asset held is its asset. The branch is a location, not an entity, and the word office in the phrase branch office is the accurate half.
What the trade register records in each case
The distinction is visible in the statute. Article 5 of the Handelsregisterwet 2007 lists which undertakings are registered, and includes an undertaking belonging to a foreign legal entity that has a main or secondary establishment in the Netherlands. Article 6 lists which legal entities are registered, and its first paragraph is confined to those whose articles give them a seat in the Netherlands. A branch registration therefore enters the undertaking and its Dutch establishment; it does not enter the foreign parent as a Dutch legal entity. The parent appears as the owner of the undertaking, and article 10 attaches to it the particulars that article 12 prescribes for legal entities.
Under article 11 the register records, for each establishment, a unique number, the trade names, the postal and visiting address and the dates of first use and termination. Under article 12 it records for a legal entity, among other particulars, the name, the legal form and the statutory seat. The act also has a specific concept, the hoofdnederzetting, for the Dutch establishment of a business established abroad, which where there are several establishments is the one the business designates. Where the business is established outside the Netherlands, article 18 places the obligation to file, in addition to the owner of the undertaking, on whoever is in charge of the day to day management of that establishment or, if there is none, on the authorised commercial agent the business designates.
The documents differ accordingly. A branch registration is supported by evidence from the home jurisdiction. The KVK’s guidance on registering a foreign company asks for proof of registration in the country of formation not older than one month, certified copies of the constitutional documents and a document showing who the directors are, such as a certificate of incumbency, in Dutch, English, German or French. There is no Dutch deed to produce because none exists. The one off registration fee is the same as for any other first entry in the register: the KVK registration fee is eighty five euros and fifteen cents in 2026.
The notary, and the deadline the statute imposes
The most repeated argument for the branch is that it avoids the notary. That is true, and it is worth less than it used to be. Article 2:175a of the Civil Code now provides for incorporation by electronic notarial deed by one or more nationals of a member state of the European Union, and allows a model deed of incorporation to be used for that purpose. Where the company is founded exclusively by natural persons using the model deed, the notary must complete the incorporation within five working days, and within ten working days in other cases, counted from the later of the date on which all formal requirements for incorporation by electronic deed are met and the date of payment on the shares. If the notary cannot meet that period, the founders must be told the reasons for the delay.
Those periods are statutory time limits for the notary, not a promise about the whole project. They run only from the moment the formal requirements are met, so they do not cover the client due diligence that precedes instruction, and the electronic route to which they belong is framed around founders who are nationals of a member state, so a corporate founder from outside the European Union should not assume they apply to it. But they dispose of the idea that incorporation is inherently slow. Where a Dutch entry has stalled, the notarial step is rarely the reason.
Liability, and the sentence that decides most cases
For a subsidiary, the exposure of the parent is in principle limited to what it puts in: article 2:175 provides that a shareholder is not personally liable for what is done in the company’s name and need not contribute to its losses beyond what it must pay up on its shares, subject to the obligations article 2:192 allows the articles to impose. That remains subject to the general rules on directors’ and shareholders’ liability and to whatever guarantees the parent gives. For a branch, there is no separation at all. A claim arising from the Dutch activity is a claim against the foreign company itself, and its assets are not confined to the Dutch operation.
That single sentence resolves the choice more often than any tax analysis. Where the Dutch activity is a sales presence with modest contracts and the parent is comfortable standing behind it, the branch is a rational answer. Where the activity carries product risk, employment risk, licensing exposure or contracts with public bodies, putting the parent’s balance sheet directly behind a new market is a decision the board should be asked to take consciously rather than inherit from a registration form.
There is a reporting consequence too. A subsidiary falls under the annual accounts title of Book 2 and, unless an exemption in Book 2 applies to it, must publish its accounts by filing them with the trade register under article 2:394, with the size regimes of articles 2:395a to 2:397 governing how much of them it must disclose. Outside the formally foreign company regime discussed below, a branch of a foreign company does not draw up separate Dutch accounts, which groups sometimes read as an advantage. It does not make the parent’s numbers any more private than they already are at home. Under articles 24 and 25 of the Handelsregisterbesluit 2008, a foreign capital company with a Dutch establishment deposits with the Dutch register the most recent version of its own accounting documents, to the extent and in the form in which it must publish them in the country of its statutory seat, and the government guidance on branch offices and subsidiaries likewise points to the parent’s financial statements rather than accounts for the branch. The parent’s own position is what stands behind the Dutch operation, and where the parent must publish accounts at home, those are the accounts counterparties will see. Where it need not, those provisions add no accounts filing of their own, and counterparties who want accounts will ask the parent for them.
The formally foreign company trap
A branch route taken to an extreme has its own regime. The Wet op de formeel buitenlandse vennootschappen applies to a capital company with legal personality, incorporated under a law other than Dutch law, that carries on its activity wholly or almost wholly in the Netherlands and has no real connection with the state under whose law it was formed. Under article 1(2), its provisions, with the exception of article 6, do not apply to companies governed by the law of a member state of the European Union or of a state party to the European Economic Area agreement.
Where it does apply, the consequences are real. Under article 2 the directors must state in the trade register that the company meets the description and deposit an authentic or director certified copy of the deed of incorporation and of the articles, in Dutch, French, German or English, together with the home register, the registration number and the date of first registration, and details of the holder of all the shares where there is one. Under article 3 all documents, printed matter and announcements to which the company is party or which it issues, telegrams and advertisements excepted, must give its full name, legal form, statutory seat, the place of establishment of its undertaking, its home registration particulars where its law requires registration, its Dutch register number and the fact that it is a formally foreign company, and it is prohibited to suggest contrary to the truth that the business belongs to a Dutch legal entity. Under article 4 the Civil Code provisions on directors’ liability named there apply by analogy to distributions to shareholders, share repurchases and repayments on a capital reduction, and until the article 2 filing has been made the directors are jointly and severally liable alongside the company for every act that binds it. Article 5 requires annual accounts and a management report drawn up under the Dutch rules and filed with the trade register, and a fresh proof of home registration before 1 April each year. Acts under the legislation cannot be done by power of attorney, and article 7 treats those in charge of the day to day management as directors for these purposes.
The practical reading for a group from outside the European Union and the European Economic Area is straightforward. A company incorporated in a third jurisdiction, with no real connection to it, and then operated wholly or almost wholly from the Netherlands through a branch is not outside Dutch company law. It is inside a specific and disclosure-heavy corner of it, and one that brings back the Dutch accounts the branch route was supposed to avoid.
Tax: permanent establishment against separate taxpayer
A subsidiary is a Dutch taxpayer in its own right from incorporation; article 2(5) of the Wet op de vennootschapsbelasting 1969 treats a body incorporated under Dutch law as established in the Netherlands for most purposes of the act. A branch is different. Under article 17(3)(a) the foreign company is taxed on the profit of a business carried on through a permanent establishment or a permanent representative in the Netherlands, so whether the branch profit is taxed depends on what the branch does. The government guidance gives a sales outlet, a factory with an office and a workplace as examples of a permanent establishment, which brings corporate tax and value added tax obligations with it, and treats branches engaged only in supporting activities, such as a warehouse or a research department, as not being one.
That threshold looks like an opportunity and is usually a trap. The activities that make a market entry worth doing are the activities that create a permanent establishment, so a group that structures for the threshold tends to end up with a Dutch presence too thin to sell anything. Meanwhile the analysis is performed twice, by two revenue authorities with opposing incentives, and the branch has no statutory accounts of its own to fall back on when the question is asked.
Attributing profit, whichever door you use
Both routes require the same discipline and groups routinely assume that only one does. A subsidiary transacting with its parent must price those transactions at arm’s length under article 8b of the corporate tax act, and article 8b(3) requires it to keep records showing how the prices were set. A branch must attribute profit to the permanent establishment as though it were a separate and independent enterprise dealing with the rest of the company on arm’s length terms: the Besluit winstallocatie vaste inrichtingen 2022 aligns Dutch policy with the functionally separate entity approach of the OECD, allocating assets, risks and capital on the basis of a functional analysis. There is no intercompany contract in the branch case, because a company cannot contract with itself, which makes the attribution harder to evidence rather than easier to avoid.
The first year is where this is either done or lost. Functions performed, assets used and risks assumed have to be established while the people who know the answer are still available, not reconstructed from invoices two audits later. Our note on transfer pricing in the first year of a new Dutch entity deals with the mechanics, and the whitepaper on transfer pricing end to end with the documentation architecture.
How the choice is actually made
Take the questions in an order that produces an answer. Does the Dutch activity carry risk the parent should not carry directly? If it does, the subsidiary decides itself. Will the operation need its own bank relationship, its own credit, its own employment contracts and its own counterparty-facing balance sheet? A branch can hold all of those in law and will find several of them harder in practice, because it presents to every counterparty as a foreign company.
Then ask whether the parent is prepared to expose its own accounts and its own directors to the disclosure and liability that the branch route brings, particularly where it is incorporated outside the European Union and the European Economic Area and falls within the formally foreign company rules. Only after those answers is it worth comparing formation costs, and by then the comparison rarely changes anything. The branch is a genuine option for a light, low-risk, temporary presence. For a market entry meant to last, the subsidiary is usually the answer, and the notarial deed is the smallest part of what it costs.
This article is informational and does not constitute tax advice. Each engagement is subject to scope and applicable regulation.