Once you start a business in the Netherlands, you will soon experience that this country has a strictly regulated professional environment for corporations and businesses. The financial statement can be seen as the basis of the corporate regime in Holland, as well as audits and publications of audits. In this article we will offer you more information about specific Dutch accounting and audit requirements.
Preparing financial statements in the Netherlands
Every single corporate entity in the Netherlands is obligated to prepare (annual) financial statements, this requirement is stated in the law and generally also incorporated in the statutes of the corporate entity. Do you have a branch office in the Netherlands, or would you like to open one? Then you are also required to file a copy of your annual accounts with the Trade Register of the local Chamber of Commerce, in the region where your branch office is located. Then again, a branch office generally does not need to prepare its own financial statements. In all other cases you will need to.
Why is this necessary?
Financial statements can be seen as a capstone for the legal system in the Netherlands, since it offers transparency into your business activities. Next to that; financial statements are the basis of corporate governance. The primary reason financial statements are required is the fact that it serves as a report to your shareholders. The shareholders are then supposed to discharge the board once the financial statements are accepted, based on their performance.
There is also a second important reason for the necessity of preparing financial statements, namely that creditors are protected and know the state of your business. The Trade Register can be accessed by the public, generally for a small fee. It’s considered as a very important source of information and offers transparency for other corporations and potential investors and clients. Last but not least; financial statements are also crucial for taxation. The financial statement in essence serves as the basis.
Dutch accounting standards
All Dutch accounting rules and regulations are regulated by law. For example, The Dutch Generally Accepted Accounting Principles (GAAP) are mostly based on EU directives. The Dutch GAAP applies to all legal entities, such as the B.V. and N.V. Some partnerships also fall under the same scope. There are also some extra rules for companies that are stock listed, as well as insurance companies and certain financial institutions.
Although the Dutch GAAP is different from the International Financing Reporting Standards (IFRS), it is obligatory since 2005 to comply with the IFRS on a structural basis. This also applies to the aforementioned insurance companies and financial institutions. If you own a B.V. or an N.V., you can apply the IFRS if you wish to do so. Just keep in mind, that this will also mean an audit will be required.
What does a Dutch financial statement need to contain?
A standard Dutch financial statement needs to contain a certain minimum of information. This entails at least a balance sheet, but also a profit and loss account. Next to that, notes need to be added to the accounts in case of discrepancies or unclear information. Sometimes extra requirements will be applicable.
Information about Dutch accounting principles
Accounting in the Netherlands is ruled by certain principles. These formulate a set of rules, which ensure that the financial statement and information is clear and concise. The information provided needs to be:
In general, the financial information provided needs to reflect the corporation’s or company’s position honestly and clearly, in accordance with the principles. All the necessary documents such as the balance sheet, the notes and the profit and loss account need to present the shareholders’ equity at the balance sheet date consistently. Next to that, the profit that you made during the year should be an example of the corporation’s liquidity and solvability.
The balance sheet and profit and loss account together with the notes, should present fairly and consistently the shareholders’ equity at the balance sheet date and the profit for the year and if possible should present the company’s solvability and liquidity. These accounting principles need to be clearly represented in the financial statements, plus they can only be changed if there are solid reasons for any change (at all). In these cases, both the reasons for the specific change and the effect the changes will have on the financial position of the company need to be disclosed in the notes. This is exactly why the notes are so important. The Dutch law and legislation provides all the important disclosure and valuation requirements; it speaks for itself that every Dutch company needs to comply with these.
1. Consolidation requirements in the Netherlands
If you own a parent company with one or more controlled subsidiaries in the Netherlands, you should be aware of the fact that you will need to include the financial data of these subsidiaries in the consolidated financial statements as well. What is a controlled subsidiary? According to Dutch law, it is a legal entity that allows the companies to exercise at least 50% or more of the voting rights in the shareholders meeting. Also, the legal entity is authorized to either dismiss or appoint more than half of the supervisory and managing directors. If you own a partnership and the legal entity is qualified as a full partner, then this also falls under the category subsidiary.
In certain cases you won’t have to include the financial data of a group company or subsidiary. This applies only when:
- The importance of the data is negligible when you compare it to the entire group as a whole
- It would become very expensive to obtain the information in proportion to the need for the financial information
Next to that, there is also a possibility of omitting consolidation, if:
- The subsidiary or company can be seen as a small company according to Dutch Statutory purposes
- The company is a so-called personal holding, meaning that it is not the head of a group of companies
- The intermediate holding regime can be applied
- The required financial information for consolidation will be or is included in the financial statements of the larger or parent company
- The company has not received an objection against not consolidating within a period of 6 months after the end of the financial year
- The consolidated statements as well as the annual report are prepared in accordance with the stipulations of the 7th European Directive
2. Audit requirements in the Netherlands
Only companies that are considered either medium or large are by Dutch law required to hire an independent, registered and qualified Dutch auditor to make up the annual report. This auditor also needs to be appointed by the general meeting of shareholders of your company, or the managing or supervisory board. The audit report always needs to contain the following points:
- It needs to state whether the information provided in the financial statements is in accordance with the accounting principles that are generally accepted in the Netherlands.
- It also needs to state whether the financial statements provide an accurate representation of the financial result and position of the company for the year.
- Whether the report from the management board meets all legal requirements, and
- Whether all necessary additional information has been provided
The auditor always needs to report to managing and/or supervisory boards. The competent body should take notice of the auditor’s report, before determining or approving the financial statements. Is an audit not obligatory for your company? Then you have the option of a voluntary audit.
3. Publication requirements in the Netherlands
Next to the consolidation and audit requirements, there are also requirements concerning the publication of the financial statements. These must be prepared and also approved by the managing directors, within a maximum period of 5 months after the end of the financial year. After the managing directors approve the financial statements, the shareholders need to adopt these within a period of 2 months. Once this has also happened, the company needs to publish the annual report in a timeframe of 8 days. This entails filing a copy of the statements at the Dutch Chamber of Commerce, with the Trade Register.
The total preparation period for the financial statements can be extended in some cases, with a maximum of 5 months. The publication date then needs to fall within 12 months after the end of the financial year. Please keep in mind, that in the case of the shareholders also being the managing directors, the approval date will also be the adoption date. The deadline for publication will then be 5 months without an extension and 10 months with a maximum extension.
Intercompany Solutions can assist you with accounting and audit requirements
Would you like to know more about the specific requirements for your company? Please don’t hesitate to contact us, our professional team can assist you with any question you might have regarding setting up and running a business in the Netherlands.
Are you a business owner who is based in a country other than the Netherlands? Do you supply services or goods to the Netherlands? If so, you might be classed as a foreign entrepreneur in terms of VAT. You may need to file a turnover tax return in the Netherlands and you might also need to pay VAT in the Netherlands. ICS can provide you with more information about the latest VAT regulations in the Netherlands as well as calculating VAT, filing VAT returns, paying VAT, and how to deduct or claim a VAT refund.
VAT registration for foreign business owners
In certain cases, a foreign entrepreneur who has to cope with Dutch VAT can opt to register for VAT with the Dutch tax authorities.
This is a possibility, for example, if a businessman does not want to offer bank guarantees, as is a requirement for General Tax Representation. Another benefit is the fact that the latter is more straightforward to arrange than a General Tax Representation permit.
There are certain disadvantages for a non-Dutch national to register for Dutch VAT. This is because foreign entrepreneurs are not entitled to a permit under Article 23 (VAT reverse charge) because it is only for people who live in the Netherlands as an entrepreneur or are established there. Since the VAT cannot be transferred it is a given that it must always be paid.
VAT on foreign receipts
First of all: all expenses must be made for your business can be deducted. If so: you can deduct the costs.
For VAT: on hotels outside the NL, VAT of the country of the hotel will be applicable.
So for example you stay in a hotel in Germany, German VAT will be applicable. You can’t deduct this German VAT in your Dutch VAT declaration. There are possibilities to ask this VAT back with the German tax authorities, but a threshold applies and it is a time-consuming process.
This is therefore only interesting when it concerns large amounts. The costs of the hotel can of course be deducted from the Dutch profit. For airline tickets no VAT is applicable. You can deduct the costs of the profit (if it is a trip for business).
It would good to discuss with your suppliers when it is possible that suppliers do not charge you VAT. If you have an active VAT number in the Netherlands, they can verify that with the EU Vies register. And see that they are allowed to invoice you at 0% reversed charge. For other countries outside the EU, other rules apply.
How to apply for a Dutch VAT number
When foreign entrepreneurs want to apply for a Dutch VAT number, they only have to submit a few documents, but they must first complete an application form from the tax authorities. As soon as the Dutch VAT number is supplied, a foreign entrepreneur is legally able to trade in any country within the European Union.
Adequate VAT administration is needed for this and this is where a company such as ICS can provide valuable assistance. An international company can opt to have this administration undertaken by an administration office based in the Netherlands. The Tax and Customs Administration carries out strict checks, especially when reclaiming VAT so it is extremely important to ensure that the correct paperwork is always in order. If the administration is outsourced to an accounting office, this office is not responsible for the activities with which the foreign company is involved in the Netherlands.
Do you want assistance with applying for a VAT Registration for foreign entrepreneurs? The experienced VAT specialists at ICS will help you on your way.
Our tax specialists in the Netherlands can offer complete accounting services and provide many you other financial solutions, whether a legal entity or a natural person. ICS finance professionals are able to help small businesses, such as sole traders, but they are also able to offer professional accounting and bookkeeping services to multinational corporations. Among the most frequently used accounting services offered by the ICS accounting firm include:
• Assistance with Dutch tax registration and compliance - businesses of all sizes in the Netherlands must be registered for tax purposes and submit various financial documentation, according to their structure as a legal entity;
• Advice on the fiscal framework in the Netherlands
• Filing annual accounts – our tax specialists in the Netherlands can help you gain a full understanding of the timetable for submitting the necessary financial documents and tax returns;
• Payroll and annual statements the Netherlands must submit annual statements;
• Financial advice on the management of a company in the Netherlands – this is a major factor which has a significant influence on the success of a company.
What do I need to know about the Dutch corporate accounting system?
Bookkeeping forms one part of the accounting system in the Netherlands and this broadly refers to the procedure and methods used to register all the necessary financial operations of a business, in accordance with the relevant law. Bookkeeping is a key part of the Dutch accounting system and must be completed with the applicable procedures, and ICS can advise you about these.
People who are interested in starting a business in the Netherlands or those who intend to expand an international company on the local market should be aware that bookkeeping is required to keep track of all the business records that are entered throughout the financial year. This coincides with the calendar year in the Netherlands.
Bookkeeping procedures must follow the International Financial Reporting Standards (IFRS), which acts for accounting procedures adopted at the level of the European Union. However, when it comes to small businesses registered in the Netherlands, accounting principles and bookkeeping procedures can vary to some extent.
A small company in the Netherlands, for example, can opt to comply with the Dutch Civil Code (Book 2), the Dutch Accounting Standards for small entities or medium-sized companies, or the IFRS principles blended with sections of the Dutch Accounting Standards. At ICS, our team of tax specialists can provide advice on the best accounting principles for your business. You should also be aware that the accounting regulations are set out by the Dutch Accounting Standard Board, the primary regulatory organisation in the sector.
How should bookkeeping be done in the Netherlands?
Bookkeeping provides a complete record of the businesses' financial circumstances and, therefore, the methods and procedures used by any accountant should be able to give a coherent picture of the firm’s transactions and its fiscal status at a precise moment. The rules surrounding bookkeeping procedures in the Netherlands stipulate that the financial data submitted by a business must be reliable, clear and comparable - and these are statutory requirements.
Moreover, all bookkeeping documents must be completed in accordance with the accounting principles of this country. Business owners should also be aware that the bookkeeping procedures vary according to the legal entity of the company.
If you are interested in operating a company in the Netherlands and need professional accounting services, contact ICS. Our team of finance specialists is on hand to deliver expert accounting and bookkeeping services in the Netherlands.