Accounting and Audit Requirements in the Netherlands

The obligation to prepare financial statements in the Netherlands

Virtually every Dutch corporate entity has the obligation to prepare financial statements. This obligation follows from the law and is usually incorporated in the statutes of the entity.

A foreign company with a branch in the Netherlands which is obliged to file its financial statements in its home country is also required to file a copy with the Trade Register of the Chamber of Commerce where the main Dutch office is located. In general a branch is not required to prepare its own (Dutch) financial statements, albeit a stand alone balance sheet and P&L is likely to be required for tax purposes.

The relevance of the financial statements for businesses in the Netherlands

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 by the public and is thus an important source of information in the Dutch market place.

The primary function of the financial statements is the 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 no way less relevant, is creditor protection.

Virtually every corporate entity has the obligation to register itself in the Trade Register of the Chamber of Commerce and to publish certain financial data on an annual basis, which forms an important source of information for (prospective) clients, partners, suppliers, and of course the Dutch tax office.  

The financial statements are also relevant for taxation. Although the tax laws have their own independent rules to determine the taxable basis, the financial statements are basically always the starting point.

The content of the financial statements in the Netherlands

It depends on the size of the company how elaborate the publication requirements of a Dutch company are (see further below under Publication requirements in the Netherlands), but in general the financial statements must contain in any case  

• a balance sheet,
• a profit and loss account,
• and notes to the accounts. 

Dutch GAAP (generally accepted accounting standards in the Netherlands)

The Dutch accounting rules are regulated by law. The Dutch Generally Accepted Accounting Principles (Dutch GAAP) are mainly based on EU directives.

Dutch GAAP applies to a BV and a NV as well as other entities, like for example the Cooperative Society. Special rules apply to stock listed companies, financial institutions and to insurance companies.

Although Dutch GAAP differs from International Financing Reporting Standards (IFRS), Dutch GAAP is brought in line with IFRS on a continuing basis.

As from 2005, all listed companies in the EU should 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, but this will automatically create the obligation of a statutory audit.

Accounting principles in the Netherlands

The accounting principles require that financial information must be understandable, relevant, reliable and comparable. The financial statements should properly reflect the company’s financial position in accordance with these principles.

The balance sheet and profit and loss account together with the notes, should present fairly and consistently the equity at the balance sheet date and the profit for the year, and to the extend possible give insight into the company’s solvability and liquidity.

Companies that are part of an international group may prepare their financial statements in accordance with accepted accounting standards in other EU member states, provided that reference thereto is made 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 case of a change, the reasons for this change and its effect on the financial position of the company 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, but if justified by the activities of the company or the international structure of the group to which it belongs, a company may report in a foreign currency.

Publication, consolidation and audit requirements in the Netherlands

The publication, consolidation and audit requirements in the Netherlands vary depending on the size of the company. A company is classified as either micro, small, medium or large, determined by reference to the following criteria:

• value of the balance sheet assets
• net turnover, and
• number of employees.

The parameters for these classifications are summarized in the table below. The value of the assets and net revenue and the number of employees of subsidiaries and group companies that qualify for consolidation should be included as well. In order to qualify for the medium or large categories, at least two of the three criteria must be met in two successive years. 

Consolidation requirements in the Netherlands

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:

• its importance is negligible in comparison to the group as a whole
• it is rather expensive or time consuming to get its financial information
• it is only held to alienate

Consolidation may be omitted if the subsidiary or group company to be consolidated:  

• satisfies the criteria for being described as a small company for Dutch Statutory purposes (see the tablel with criteria above under "Publication, consolidation and audit requirements in the Netherlands"), 
• is not quoted on a stock exchange

Consolidation may also be omitted if: 

• the company has not been notified in writing of an objection against not consolidating within 6 months after the end of the financial year by at least one-tenth of its members or by holders of at least one-tenth of its issued shares.
• the financial information which the company should consolidate has been included in the financial statements of its parent company
• these consolidated financial statements and the annual report have been prepared in accordance with the stipulations of the 7th EU Directive
• the consolidated financial statements, the auditor’s opinion and annual report, insofar as these have not been translated into Dutch, have been prepared or translated into French, German or English and are all in the same language.
• within 6 months of every balance sheet date or within one month of a permitted later publication, the documents or translations mentioned in the previous paragraph have been filed at the offices of the trade register at which the company is registered or a notice has been filed referring to the offices of the trade register where the same are available.

Audit requirements in the Netherlands

Only medium and large companies and companies that apply IFRS are required by law 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 board or the managing board.

The auditors’ report must include the following points: 

• whether the financial statements provide information in accordance with the accounting principles generally accepted in the Netherlands and are an accurate representation of the financial position and result for the year. A proper judgement can be made as to the solvency and liquidity of the company;
• whether the management board's report meets the legal requirements; and
• whether the adequate additional information has been provided.

The auditor should report to the managing and supervisory boards. Before determining or approving the financials statements, the competent body should have taken notice of the auditor's report.

If the audit is not obligatory, a Dutch company may opt for a voluntary audit.

Publication requirements in the Netherlands

The financial statements must be prepared and approved by the managing directors no later than 5 months after the end of the financial year. The preparation period for the financial statements may be extended for maximum of 5 months at the shareholders’ meeting. Hereinafter, the shareholders must adopt the financial statements within 2 months after the financial statements have been approved by the managing directors. The deadline for publication will be then 12 months after the end of the financial year. 

Finally, the company must file and abbreviated version of its balance sheet, and notes thereto (the publication accounts), with the Chamber of Commerce for publication in the Trade Register no later than eight days after the determination or approval of the financial statements by the shareholders. 

If the shareholders of the company are also the managing directors of the company, the approval date of the financial statements by the managing directors would be automatically the adoption date by the shareholders. Consequently, the filing deadline for the publication accounts will be then 5 months (or 10 months if the extension period of 5 months is applicable) after the end of the financial year, plus 8 days.

The publication requirements vary depending on the size of the company. They can be summarized as follows:

What we can do for you?

We offer a full range of compliance services, including administration, financial statements/annual report, payroll and tax compliance services.

If you have any questions in relation to the above or if you wish to receive a specific engagement proposal please feel free to contact us. You can reach us via email or by telephone at our offices in Amsterdam (at + 31 (0)20 5709440) or Rotterdam (at + 31 (0)10 2010466).