Expanding abroad involves structurally conducting business in another jurisdiction, via export, representation, a local entity, or an acquisition. At Musch Legal, we assist Dutch entrepreneurs with this step almost weekly. Starting legally at the wrong area often costs time and money. A structured approach with the correct sequence makes the difference between smooth expansion and costly corrections later on.
What is the legal problem? (Why is the sequence important?)
International expansion touches upon corporate law, tax law, employment law, contract law, and sector law simultaneously. Starting with contracts lacking legal form and a tax structure leads to suboptimal outcomes and subsequent corrections. Different thresholds apply per country for permanent establishment, permits, VAT registration, and employment law. An incorrect starting structure often costs more than complete legal preparation.
What does the law say? (Which legal frameworks apply?)
For company law, Book 2 of the Dutch Civil Code applies under Dutch law; foreign legal forms follow local law. For permanent establishments abroad, Article 5 of the OECD Model Convention and local tax law apply. For contracts, Rome I (Regulation 593/2008) and Brussels I-bis (Regulation 1215/2012) apply. For sanctions, Regulation 2021/821 and the Sanctions Act 1977. For the GDPR, Regulation 2016/679. EU freedom of establishment (Article 49 TFEU) simplifies structures within the EU.
Structure
When appropriate
Point of attention
Direct export
Initial exploration
Rome I + Brussels I-bis in contract
Permanent establishment (branch)
Permanent but without legal personality
Tax liability at the local level
Local subsidiary
Structural presence
Local company law
Joint venture
Local partner essential
SHA with deadlock mechanism
Acquisition
Rapid market entry
Due diligence + R&W
Structure
When suitable
Point of attention
Direct export
Initial exploration
Rome I + Brussels I-bis in contract
Permanent establishment (branch)
Permanent but without legal personality
Tax liability locally
Local subsidiary
Structural presence
Local Corporate Law
Joint venture
Local partner essential
SHA with deadlock mechanism
Acquisition
Rapid market entry
Due diligence + R&W
What risks do companies face? (What goes wrong with the wrong structure?)
Unintended permanent establishment under Article 5 of the OECD leads to tax liability and social security contributions abroad. Local licensing requirements can block activities. Employment law pitfalls regarding secondment. GDPR claims regarding unregulated data transfers. Awkward contract models that do not align with local law. Fines and corrections are often many times higher than the initial savings on legal advice.
Practical example from our practice (How did Musch Legal guide a SaaS expansion?)
Musch Legal advised a Dutch SaaS company on expanding into Germany, France, and the UAE. We drew up a phased plan: year 1 export under a Dutch BV with adapted contracts and SCC-DPAs; year 2 establishing local sales offices; year 3 local subsidiaries where volume justifies it. Total cost of legal expansion: 90,000 euros versus estimated scenario of 280,000 euros for an unstructured rollout.
What can you do? (Which steps do you take first?)
Start with market and legal analysis per country. Choose legal form: export, branch, subsidiary, or JV. Align tax structure with a tax specialist. Construct a standard contract with choice of law and forum. Register trademarks via the Madrid Protocol. Implement GDPR compliance and sanctions screening. Plan permits and VAT registrations. Engage Musch Legal for an international expansion plan. See also our article on How to choose the right legal form in the Netherlands?