Everything you need to know about business funds
- Edited 24 November 2020
- 2 min
- Managing and growing
Where there are businesses, there are business associations to represent the common interests of their members and set up a network. From their membership dues, these organisations organise meetings and other activities. When entrepreneurs come up with more ambitious plans, for example to upgrade their local retail area or business park, membership dues alone will not be enough. In that case, they can decide to establish a business fund to finance their plans.
Business funds are created and owned by and for entrepreneurs and are essentially a joint fund owned by a group of entrepreneurs in a particular municipality, retail area or business park. All entrepreneurs in the area in question are obliged to make a financial contribution.
Establishing a business fund
To establish a business fund, you need help from the municipality, which will have to collect contributions from the entrepreneurs and funnel them to a specially created stichting (foundation). It is up to the municipal council to decide whether to establish a business fund, based in part on support for the fund among entrepreneurs. An important criterion is that the fund should not replace activities, facilities, or amenities offered or organised by the municipality and should strictly be an extra source of funds.
The board of the stichting consists of entrepreneurs or their representatives and is responsible for implementing the plan adopted by the stichting. In larger, municipality-wide funds, entrepreneurs based in particular business parks or retail areas or operating in certain sectors have so-called drawing rights, giving them control over their own share of the contribution paid.
There are several models for business funds that all differ in several respects, such as the levy base, the geographical scope of the fund, and rules for determining support and types of spending. The 3 most common funds are described below.
In Leiden funds, named after the city in which the model originated, owners and users of non-residential properties pay a surcharge on their property tax. This surcharge applies to the entire municipality. The funds collected this way can be spent freely, with the municipal council determining whether there is sufficient support.
This fund is financed by a levy on public notices visible from public roads, paid by the person or business who posted or had the notice posted. Advertising taxes can be set for a specific area or apply across a municipality. As in the Leiden model, the funds collected this way can be spent freely and the municipal council determines whether there is sufficient support.
Business Investment Zone (BIZ)
Just like in the Leiden model, members of a Business Investment Zone (users and/or owners) pay a surcharge on the property tax for non-residential properties. A key difference is that a BIZ can only be set up for a specific area, not for an entire municipality. A BIZ has a legal basis (in Dutch), describing, among other things, the term, the amount of the contribution, and the foundation criteria. There are also requirements for determining support and all spending must be related to one of three themes: clean, whole, and safe (activities within public spaces).
Funds in the Netherlands
There are approximately 40 Leiden-model business funds in the Netherlands and an estimated 100 funds based on advertising tax. The total number of Business Investment Zones is higher because a single municipality can be home to multiple BIZs. For example, more than 100 Business Investment Zones have been established in Amsterdam (62), Rotterdam (24), and The Hague (20) alone.