The stichting

What is a stichting?

A stichting is a Dutch legal entity that pursues a social, idealistic, or societal goal. For example, protecting endangered species, organising cultural events, or managing a community centre. 

A stichting is a legal structure with legal personality. This means it has rights and responsibilities. A foundation must pay taxes and obey the law, and is liable for any debts. Your personal assets cannot usually be claimed by creditors. 

Making a profit is not the aim of a foundation but it does have  income. From, for example, donations, collections, inheritances, grants, and subsidies. If this income exceeds the stitching’s expenses then You must use any 'profit' to achieve the foundation’s goals. You may not distribute it to the directors.

Structure of a foundation

A stichting has no members. It does have a board for its day-to-day operations and decision-making. The board usually consists of a president, secretary, and treasurer. One person can also perform these roles. Larger stichtingen often have a supervisory board, which oversees the managing board.

Foundation with company

Sometimes a foundation has commercial activities which meet the criteria for a business. This is called a stichting met onderneming (foundation with company). Whether your foundation has a company depends on various conditions. The Netherlands Tax Administration explains exactly how this works (in Dutch).

If your foundation has a company, you have to file financial statements with KVK if it has more than a certain turnover. The stichting must then also pay corporate income tax and can receive tax benefits, such as investment credits.

Establishing a stichting

A stichting can only be established by a civil-law notary. The civil-law notary prepares the deed setting out the stichting's articles of association. These are the rules the foundation’s director(s) must follow. 

Included in the articles of association are:

• the purpose of the stichting
• the powers of the board
• what is to be done with any assets if the stichting is dissolved

You must register the stichting and its directors in the KVK Business Register. Usually the civil-law notary arranges this.

Ultimate beneficial owner (UBO)

When establishing a stichting, the civil-law notary also registers the Ultimate Beneficial Owners (UBOs) with KVK. A UBO is the owner of an organisation, or someone who can make decisions about the organisation. In the case of a foundation, for example, these are people who have more than 25% of the voting rights in decisions on amending the articles of association. A stichting may have one or more UBOs. 

Costs

There are several costs involved in setting up a foundation:

• civil-notary fees: between €500 and €1,000 in notary fees. 
• a fee for registering the stichting in the Business Register 
• administration costs: between €600 and €1,800 per year

Liability and debts

A stichting is a legal entity. This means that it is liable for debts. If the foundation is unable to pay its debts, it will go bankrupt. 

The directors are not liable with their private assets. There are exceptions to this rule, as directors are liable in case of mismanagement. This is why it is important  to notify KVK of any board changes within 8 days. If you resign but are still listed in the Business Register, you can still be held liable.

Signatory authority

The board, as a whole, has signatory authority. This means that the directors may sign contracts or perform legal acts on behalf of the stichting. The articles of association state which people have full signatory authority and which people need a co-signatory. You can include terms and conditions about signatory authority in the articles of association.

Is the stichting in debt?

If the stichting can no longer pay vendors and outstanding debts, it is important to get gelp quickly. Check out the debt flowchart to find out how to handle your business and/or private debts.

Taxes

Whether the stichting is subject to VAT varies from one situation to the next (in Dutch). Consult the Tax Administration to check whether your stichting has to file tax returns (in Dutch).

Corporate tax

A stichting usually does not have to pay corporate tax on its profits, unless it is running a business. There are three criteria for operating a business:

• sustainable organisation of capital and labour
• engaging in economic activity
• having a profit objective

If the stichting is operating a business, it may be entitled to corporate tax credits, such as various forms of investment credits.

Public benefit organisation status

As a foundation, you can obtain a public benefit organisation status (Algemeen Nut Beogende Instelling (ANBI) status or Sociale Belang Behartende Instelling (SBBI) status). You will then be eligible for certain tax benefits. You can request an ANBI or SBBI status from the Netherlands Tax Administration. 

Administrative records

A stichting must keep records and is required to retain them for 7 years.

You must keep records of income and expenses. A foundation's income comes from its own activities, donations, and grants. The treasurer is responsible for keeping records, which include detailed financial accounts, receipts, agreements, correspondence, or digital data.

Staff

A stichting may employ staff, paying payroll taxes and social security contributions as any other employer would. When hiring your first employee, register as an employer with the Tax Administration and report how many people are employed by you to KVK.

Compensation for directors

Most directors within a stichting are volunteers and are therefore unpaid. However, a foundation can pay directors. This is known as making a distribution. There are 3 types of distribution:

• travel and subsistence expenses. 
• attendance fees (a fee for attending meetings)
• a salary

If you pay directors attendance fees, they  are not employed by the stichting. If you want to employ a salaried director, there must be an authority relationship. That means the director works on behalf of the foundation and is paid an appropriate salary for that work. The stichting is then an employer, and the director will be covered by employee insurance, and will have to pay income tax on their salary.

Volunteer Fee

You can pay volunteers tax-free volunteer compensation (in Dutch). The following conditions apply:

• volunteers receive compensation on an hourly basis.
• volunteers must be 21 years of age or older.
• volunteers receive a maximum compensation of €5 per hour, with a maximum of €210 per month, and a maximum of €2,100 per year

Payment register

If your foundation pays board members or volunteers, you must keep a payment register. Include in it:

• names and addresses of people who received payments
• date of the payment
• amount of the payment

Dissolving a stichting

To end a stichting, the board must dissolve the legal entity. A dissolved legal entity does not immediately cease to exist, as it must be liquidated first. This means that all debts and moneys payable must have been paid. If there is any money left, the articles of association state where the money should go.

After a foundation is terminated, you must keep its records for another 7 years. The board will designate the person responsible for doing so. This person is registered in the KVK Business Register.

Keep in mind that dissolving your stichting may affect the municipal permits, financing, insurance, pension fund, or bank account of the foundation. Consult the website of the (financial) institution in question to find out what you need to do.

Stichting or vereniging?

Stichting or vereniging, foundation or association, which is best for you? They are distinct types of legal entity and are subject to different rules. The main issues to consider when choosing between a foundation or association are:

• A stichting must be set up with a civil-law notary and listed with KVK. This does not apply to an association. It is recommended, however, because it lets you limit the joint and several liability of the directors.
• A vereniging has members, while a foundation does not. A stichting only has a board of directors and sometimes a supervisory board or a board of trustees. 
• In an association, members may vote on important decisions. In a stichting, decisions are made by the board. 
• A foundation can be set up by a single person. A vereniging can only be set up by 2 or more people.