Foundation with a business: what do you need to do and arrange?

Why do business with a foundation?

In social entrepreneurship, profit is not the most important thing. Social entrepreneurs want their business to contribute to society. There is no separate legal structure for a social enterprise. Commonly used forms are a foundation, a BV, or a combination of both.

Reasons for choosing a foundation include:

• You can only get certain subsidies if you have a foundation.
• You want to show that your business has an idealistic approach.

When do you pay corporate income tax?

Foundations without commercial activities receive their money only through donations, inheritances, loans, and subsidies. A foundation without commercial activities does not pay tax. A foundation with a business (stichting met onderneming) actively tries to earn money, for example by fundraising, selling goods, or organising paid events. If you carry out commercial activities, your foundation usually pays corporate income tax (vennootschapsbelasting) on profits. But not all income falls under a business for corporate income tax purposes.

Company for corporate income tax

The Netherlands Tax Administration uses 3 conditions to determine whether you have a foundation that is a company for corporate income tax:

1. People are regularly active for the foundation. This is also known as the sustainable organisation of capital and labour.
2. The foundation sells products or services to people or organisations outside the foundation. This is also called participation in economic traffic.
3. The foundation wants to make a profit from these sales and not just cover its costs. It is not only about what you have stated in the articles of association about making a profit. It is also about what profit you make in practice.

Filing a corporate income tax return

You file a corporate income tax return:

• if the foundation has a business for corporate income tax purposes
• if you receive an invitation from the Netherlands Tax Administration
• or if the foundation competes with commercial companies that offer roughly the same products or services

Sometimes you do not need to file a corporate income tax return

In some cases, you do not need to file a corporate income tax return. You can use an exemption (in Dutch) if:

• your profit is below a certain amount (in Dutch)
• you carry out exempt activities (in Dutch) and meet the conditions

Register your business with KVK

Does your foundation have a business for corporate income tax purposes? Then you must register the business in the Business Register. You can do this using Form 8: Registration of a legal entity. Please note: this is not the same registration as the registration of the foundation itself.

Choose a trade name for the business. This can be a different name from that of your foundation. When choosing the name, you must take the Trade Name Act into account.

Submitting financial statements

Does the foundation have a business and a minimum turnover of €6 million per year for two years in a row? Then the foundation must file its financial statements with KVK.

Foundation and VAT

Does the foundation regularly supply goods or services in return for payment? If so, the foundation may be an entrepreneur for VAT purposes. This applies even if the foundation does not make a profit or does not have a business for corporate income tax purposes.

How do I know if the foundation is an entrepreneur for VAT purposes?

After registration of your foundation with KVK, KVK will pass on information about your activities to the Tax Administration. The Tax Administration will then assess whether your activities are subject to VAT (turnover tax). If they decide that you are indeed a VAT entrepreneur, you will receive your VAT numbers.

Do I need to file a VAT return?

If you are an entrepreneur for VAT purposes, you do not always have to file a VAT return. You do not file a VAT return if:

• the activities of your foundation are exempt from VAT (in Dutch)
• you make use of the small businesses scheme (KOR)

Your activities change

Suppose that your foundation is not an entrepreneur for VAT purposes at the time of registration with KVK. But you start commercial activities at a later date. For example, you start selling goods. In that case, you may now be a VAT entrepreneur.

Read more about foundations and VAT (in Dutch), or do the Check for foundations and associations (in Dutch).

Social entrepreneurship: differences between foundations and private limited companies

There are important differences between a foundation and a BV (private limited company). A foundation has no shareholders and may not distribute profits to its directors. All profits must be spent on the foundation's objectives. A BV can distribute profits to its shareholders. Different rules also apply to receiving wages. Read more about the characteristics of a foundation and a BV.