Almost every Dutch corporate entity should prepare financial statements according to the law usually incorporated in the statutes of the entity.
A foreign company with a branch in the Netherlands must file its financial statements in its home country and is required to file a copy with the Chamber of Commerce Trade Register, where the main Dutch office is located. A branch is not obliged to prepare its own (Dutch) financial statements, although a stand-alone balance sheet and P&L may be required for tax purposes.
The financial statements are an essential building stone for the Dutch legal system and form the basis for corporate governance.
The Trade Register is accessible to the public and an essential source of information in the Dutch marketplace.
The primary function of financial statements is reporting to the shareholders. The shareholders are supposed to discharge the board of directors for their performance upon acceptance of the financial statements. The secondary function, which is in no way less relevant, is creditor protection.
Almost every corporate entity must register in the Chamber of Commerce Trade Register and publish specific financial data annually, a valuable source of information for (prospective) clients, partners, suppliers, and the Dutch tax office.
The financial statements are also relevant for taxation. Although the tax laws have independent rules to determine the taxable basis, the financial statements are always the starting point.
Depending on the size of the company and how elaborate the publication requirements of a Dutch company are (see further below under Publication requirements in the Netherlands), the financial statements generally must contain at least
The Dutch accounting rules are regulated by law. The Dutch Generally Accepted Accounting Principles (Dutch GAAP) are primarily based on EU directives.
Dutch GAAP applies to a B.V., an N.V., and other entities, such as the Cooperative Society. Special rules apply to stock-listed companies, financial institutions, and insurance companies.
Although Dutch GAAP differs from International Financing Reporting Standards (IFRS), Dutch GAAP is frequently linked with IFRS.
As of 2005, all listed companies in the EU must apply to IFRS. The same applies to Dutch financial institutions and insurance companies. Dutch B.V.s, non-listed N.V.s, and other Dutch companies are allowed to apply IFRS voluntarily, which will automatically create the obligation of a statutory audit.
Accounting principles require that financial information is understandable, relevant, reliable, and comparable. The financial statements should accurately reflect the company’s financial position by these principles.
The balance sheet, profit and loss account, and the notes should present the equity at the balance sheet date and the profit for the year fairly and consistently and, to the extent possible, give insight into the solvability and liquidity.
Companies part of an international group may prepare their financial statements following accepted accounting standards in other EU member states, provided that it is referenced in the notes.
The accounting principles must be set out in the financial statements. These principles, once implemented, may only be changed if there are good reasons for such a change. In the event of a change, the reasons for this change and its effect on the company's financial position must be disclosed in the notes.
Dutch legislation provides for specific valuation and disclosure requirements, which should be complied with.
The Euro is the required currency for reporting. However, if justified by its activities or the international structure of its group, a company may report in a foreign currency.
The publication, consolidation, and audit requirements vary depending on the company size. A company is classified as either micro, small, medium, or large, determined by reference to the following criteria:
The parameters for these classifications are summarized in the table below. The value of the assets, net revenue, and the number of employees of subsidiaries and group companies that qualify for consolidation should be included as well. To qualify for the medium or large categories, at least two of three criteria must be met in two successive years.
|Assets||< € 350.000||€ 350.000 - € 6 m||€ 6 m - € 20 m||> € 20 m|
|Turnover||< € 700.000||€ 700.000 - € 12 m||€ 12 m - € 40 m||> € 40 m|
|Employees||< 10||10 - 50||50 - 250||> 250|
In general, parent companies should include the financial data of "controlled subsidiaries" and other "group companies" in their consolidated financial statements.
Under Dutch law, a "controlled subsidiary" is a legal entity in which the company can directly or indirectly exercise more than 50% of the voting rights at the shareholders’ meeting or is authorized to appoint or dismiss more than half of the managing and supervisory directors. A partnership in which the company is a full partner also falls within the definition of a subsidiary.
A "group company" is a legal entity or partnership which is part of a group of companies.
The deciding factor in consolidation is the (managerial) control over the entities, irrespective of the proportion of shares held.
The financial data of a subsidiary or group company does not have to be included in the consolidated financial statements if:
Consolidation may be omitted if the subsidiary or group company is to be consolidated if:
Consolidation may also be omitted if:
Only medium and large companies and companies that apply IFRS are lawfully obliged to have their annual report audited by an independent, qualified, and registered Dutch auditor. The auditor is to be appointed by the general shareholders meeting or, in case of default, by the supervisory or the managing board.
The auditors’ report must include the following points:
The auditor should report to the managing and supervisory boards. Before determining or approving the financial statements, the competent body should have taken notice of the auditor's report.
When the audit is not mandatory, a Dutch company may opt for a voluntary audit.
The financial statements are to be prepared and approved by the managing directors no later than five (5) months after the end of the financial year. The preparation period for the financial statements may be extended for at most five (5) months at the shareholders’ meeting. Hence, the shareholders must adopt the financial statements within two (2) months after the approval of the managing directors. The deadline for publication will be 12 months after the end of the financial year.
Finally, the company must file an abbreviated version of its balance sheet and notes (the publication accounts) with the Chamber of Commerce for publication in the Trade Register no later than eight (8) days after the determination or approval of the financial statements.
If the shareholders are also the managing directors, the approval date of the financial statements by the managing directors would automatically be the adoption date by the shareholders. Consequently, the filing deadline for the publication accounts will be five (5) months (or ten (10) months if the extension period of 5 months is applicable) after the end of the financial year, plus eight (8 days.
The publication requirements vary depending on the size of the company. They can be summarized as follows:
|Balance sheet and notes||Limited||Condensed||Condensed||Full disclosure|
|Profit and loss account and notes||Not required||Not required||Condensed||Full disclosure|
|Notes and principles of valuation||Not required||Full disclosure||Full disclosure||Full disclosure|
|Management report||Not required||Not required||Full disclosure||Full disclosure|
|Cash flow statements||Not required||Not required||Full disclosure||Full disclosure|
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If you have any questions about the above or wish to receive a specific engagement proposal, contact us via email or by telephone in our offices in Amsterdam (at + 31 (0)20 5709440) or Rotterdam (at + 31 (0)10 2010466).