The foundation

Have you teamed up with others to pursue a social, idealistic, or societal goal without profit as an objective? Then a foundation is a suitable legal form for you. Here is everything you need to know about foundations.

What is a foundation?

A foundation is a legal entity that pursues a social, idealistic, or societal goal. For example, providing education, organising cultural events, or managing the community centre. In a foundation, board members are not personally liable. The foundation is a legal entity under the law, which makes it liable. Foundations can own assets and properties and even have a bank account and it organises activities.

A foundation 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 foundations often have a supervisory board, which oversees the managing board.

A foundation is not meant to make a profit. It will often have a cash flow to achieve its goals. Foundations have income and expenses, such as donations, contributions from the founders, collections, inheritances, grants, and funds, which may result in a positive balance. This 'profit' can only be used to achieve the foundation’s goals and may not be distributed among its directors.

Establishing a foundation

A foundation can only be established by a civil-law notary. The civil-law notary prepares the deed that sets out the foundation's articles of association. The contents are determined by the civil-law notary in consultation with the founder(s). The articles of association are the 'rules and regulations' of the foundation. They specify matters such as the name and purpose of the foundation, the powers of the board, and the destination of the assets if the foundation is dissolved.

You must register the foundation and the directors of the foundation in the KVK Business Register. It is customary for the civil-law notary to arrange for this when the foundation is incorporated.

When establishing a foundation, the civil-law notary also registers the Ultimate Beneficial Owners (UBOs) with KVK. These are the people who are the ultimate stakeholders of the foundation, such as people who are entitled to more than 25% of the foundation’s assets. A foundation may have one or more UBOs. To register UBOs in the UBO Registry, the civil-law notary uses Form 31 (in Dutch).


A foundation has no minimum start-up capital. Establishing a foundation will cost between €400 and €1,000 in notary fees. This depends on the civil-law notary you use and how complex the foundation's articles of association are. In addition, registering the foundation in the Business Register also carries a fee.

In addition to the costs of setting up the foundation, the financial management of the foundation also costs money. Costs for designing a corporate identity or logo, insurance, bank services, the board, meetings, and records must always be considered.

A foundation that also runs a business must file annual financial statements once its turnover reaches a certain level. Which data you are required to submit depends on the size of the business. The average annual record-keeping costs of a foundation are between €600 and €1,800.

Liability and debts

A foundation is a legal entity. This means that the foundation is liable for debts and the directors, in principle, are not. There are exceptions to this rule, as directors are liable in case of mismanagement. Please make sure to notify KVK of any board changes within 8 days. Directors who have resigned but are still listed in the Business Register 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 foundation. 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.

Board changes

Keep in mind that changing directors may affect the municipal permits, financing, insurance, pension fund or bank account of the foundation. Consult the website of the institution in question to find out what to do if you decide on a board change.

Are you in debt?

The foundation is liable as a legal entity. If the foundation is dissolved and there are debts, you and your fellow directors are not liable for them unless the foundation was mismanaged.

If the foundation can no longer pay vendors and outstanding debts, there are various ways to quickly call for assistance. Check out debt flowchart to find out how to handle your business and/or private debts.


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

Corporate tax

Foundations usually do not have to pay corporate tax on their profits unless they are 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 association is operating a business, it may be entitled to corporate tax credits, such as various forms of investment credits.

Administrative records

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

You must keep records of income and expenses. A foundation’s income consists of its own activities, donations, and grants.

The treasurer is responsible for keeping records, which include detailed financial accounts, receipts, agreements, correspondence, or digital data.

Since 8 July 2020, foundations that make grants must keep a separate grant register. This register must contain the names and addresses of persons to whom a grant was made, as well as the date and grant amount. This only applies to grants that do not exceed 25% of the total amount eligible for distribution in the fiscal year in question.

If a foundation makes a grant that exceeds 25% of the distributable amount in a fiscal year, the person to whom this grant is made must register in the UBO register.

This grant register is not public, it may be viewed only by the Tax Administration. The board of the foundation must maintain the register of grants with great care. Not doing so may lead to improper governance. As a board member, you are liable for improper governance. 


A foundation 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 foundation are volunteers and are therefore unpaid. You may choose to offer directors an expense allowance in the form of travel and subsistence expenses. Another way to compensate directors is with attendance fees, which means they get a fee for attending meetings. With this approach, directors are not employed by the association.

Another option is to employ a salaried director, in which case there must be an authority relationship, a clearly defined salary and work must be done for said salary. In this case, the foundation is 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, up to €190 per month and €1900 per year.
  • Compensation for your efforts is capped at these amounts.

If you volunteer for several organisations and you accumulate compensation exceeds the compensation cap, you must report the compensation in your income tax return, which means it is subject to income tax, unless it serves only to cover your expenses.

Dissolving a foundation

To terminate a foundation, 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 the foundation's records for another 7 years. The board shall designate the person responsible for doing so. This person is registered in the KVK Business Register.

Keep in mind that dissolving your foundation 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 to do if you decide to dissolve a foundation.

Foundation or association?

Foundation or association, which is best for you? Foundations and associations are two distinct types of legal entity, and they are subject to different rules. The main issues to consider when choosing between these two legal entities:

  • Foundations must be set up with a civil-law notary and listed with KVK. This does not apply to associations. It is recommended, however, because it lets you limit the joint and several liability of the directors.
  • An association has members, while a foundation does not. A foundation only has a board of directors and sometimes a supervisory board or a board of trustees. The members of the association elect the board, which means that association are usually more democratic in nature.
  • In an association, decision-making about important matters is more complex because members also have a vote. In a foundation, the final decision lies with the board, as foundations do not have members.
  • An association is usually preferred if you want to engage in social activities together - sports clubs and neighbourhood communities are good examples of associations. A foundation is usually set up to achieve or work towards an idealistic goal. Charities are good examples of foundations.
  • Unlike associations, a single person can establish a foundation.