The Netherlands is a European country, the largest logistics centre in the world, a highly developed economy with a favourable investment climate and a focus on innovation. There are no taxes, such as royalty tax, capital gains tax, stamp duty and others. Financial statements can be filed in a simplified form, without audit and without the need to prepare consolidated accounts, provided certain thresholds for company turnover, assets as at the reporting date and number of employees are met.
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Requirements regarding annual accounts are regulated by the Dutch Civil Code based on Directive 2013/34/EU of the European Union.
Annual accounts include:
Along with financial statements and tax accounts, companies must also provide an annual return. Since the Russian law does not have an analog to annual return, we consider it necessary to clarify this term.
Annual return is a short report on the current structure of the company that is prepared annually. Normally, it includes:
In the Netherlands companies must annually file an annual return that contains information on shareholders and directors. In the case of failure to file an annual return, the registrar may come to a conclusion that the company does not conduct business anymore and take steps to remove the company from the register.
The following types of legal entities must file financial statements:
Individual entrepreneurs are not required to file accounts.
A subsidiary is not required to file its own financial statements if it meets the following conditions:
Accounting records must be kept for 7 years in the office of the registered legal entity.
Companies that make financial statements can use Section 9 of the Dutch Civil Code and the Dutch Generally Accepted Accounting Principles (Dutch GAAP) or the International Financial Reporting Standards (IFRS).
Annual financial statements and consolidated financial statements can be prepared in a foreign currency if this currency is the legal entity’s functional currency.
Audit of financial statements must be conducted by an independent qualified registered auditor of a Dutch accounting firm. An auditor must be appointed by the general meeting of shareholders of the company, or by a manager, or by the supervisory board. An audit firm must be registered in the public register of audit firms and have a proper license in accordance with the Audit Firms Supervision Act (Wet toezicht accountantsorganisaties, Wta license). A license can be requested from the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, AFM). There are different Wta licenses depending on the type of business.
Micro and small companies are exempt from audit if they apply Dutch GAAP in financial reporting. Financial statements of medium-sized and large companies must be audited unless group exemption from audit applies. If companies apply IFRS, then irrespective of the indicators of financial statements on the reporting date companies are considered large for the purpose of audit and must be audited.
Companies are classified by size based on the three criteria:
For a parent company total assets and net turnover for this purpose are its own (separate) numbers plus its group data.
A company belongs to a certain category if it meets at least two of the three criteria on two consecutive reporting dates. In the case of incorporation of a new company the 2-year requirement is not applicable. Accordingly, the fact that the company is small or not shall be determined based on the financial statements for the first financial year. Its results apply to the first two financial years.
A company’s financial year is a calendar year unless another financial year is stated in the articles of association. Since the time of a company’s incorporation is often during the calendar year, the first financial period can be shorter or longer than 12 months. A company must disclose in the financial statements the reason for a shorter or longer period, and incompatibility of comparative indicators.
Financial statements must be prepared within 5 months after the end of the financial year for N.V. and B.V. companies, and 6 months, for cooperatives, mutual guarantee associations, commercial foundations and commercial associations. General meeting of members (for commercial associations, cooperatives or mutual guarantee associations), the management body stated in the articles of association (for commercial foundations), or general meeting of shareholders (for N.V. or B.V.) can extend the period of preparation of annual accounts by up to 5 months (for N.V. or B.V.) or up to 4 months (for cooperatives, mutual guarantee associations, commercial foundations or commercial associations). Thus, the maximum period for preparation of annual accounts is 10 months. The original set of financial statements must be dated, approved and signed by the general meeting within 2 months after preparation of the financial statements and filed with the Netherlands Chamber of Commerce (KVK) within 8 days after its approval. If annual financial statements have not been approved on time, companies must provide preliminary financial statements, but in any case annual financial statements must be filed not later than 12 months after the end of the financial year.
Companies’ managers can file financial statements of the company with the Netherlands Chamber of Commerce in electronic form by themselves.
After financial statements have been filed in electronic form, they are immediately visible and available for search in Handelsregister (Business Register).
Normally, tax year coincides with calendar year. A company, however, can choose a financial year different from calendar year, and its tax year will be bound to its financial year. A tax return shall be filed within 5 months after the end of the company’s financial year. The tax shall be paid within 2 months after the date of the tax calculation and order. The tax service issues within a tax year 2 preliminary calculations and orders and at the end of the year the final calculation and order.
If a company’s financial year coincides with calendar year, a profit tax return must be filed by 1 June.
A tax return shall be filed in electronic form. It must be accompanied by all information necessary to determine taxable profit, including the balance sheet, profit and loss statement and other information required by the tax officer.
The standard VAT period is a quarter. Monthly reports are required if the payable VAT is over 15,000 EUR per quarter. Moreover, the period can be shortened to 1 month for companies that systematically delay payment of the VAT. Resident companies whose payable VAT is up to 1,883 EUR per year and supply turnover within the EU is below 10,000 EUR can file a return on a yearly basis.
VAT returns shall be filed within 2 months after the end of the VAT reporting period (month, quarter) and by 31 March if the reporting period is one year.
The deadline for paying VAT for the relevant period coincides with the date of filing the return. The payment can be made electronically.
In addition, if a company makes transactions of purchase and sale of goods and services with companies incorporated in other EU countries, it must register in the INTRASTAT and VIES systems and file information with the tax authority in the prescribed form.
In the case of a delay in filing accounts of more than 13 months, the Economic Investigation Service of the Netherlands can conduct an investigation which will result in the company waiting for a court decision on fines.
The maximum penalty is a 6-month confinement for the company’s directors if serious offences have been found.
In the case of late filing of a return as well as late payment of a tax, an administrative penalty is imposed. A criminal penalty for directors is possible if the fact of fraud or intention is proven.
An administrative penalty for late filing of a tax return can amount to 5,278 EUR at most.
In the case of late filing of a VAT return, a maximum penalty of 131 EUR can be imposed according to the law. Only 50% of this amount is often charged: 62 EUR.
Parent companies must include financial data of controlled subsidiaries and other companies of the group in their consolidated financial statements. According to the legislation of the Netherlands, controlled subsidiary is a legal entity in which companies can directly or indirectly exercise more than 50% of the voting rights at a meeting of shareholders or are authorized to appoint or dismiss more than a half of its managers and supervisory directors. A partnership in which a company is a full partner is also classified as a subsidiary. Group of companies is a legal entity or partnership that is part of a group of companies. The decisive factor in consolidation is management control of enterprises irrespective of the number of shares held by them.
The balance sheet date of consolidated financial statements must coincide with the company’s balance sheet date. Consolidated financial statements cannot be prepared based on data more than 3 months before or after the reporting date. Therefore, companies that are subject to consolidation and whose date of financial year-end is different from that of the parent company can be included in consolidated financial statements of the parent company provided that those companies’ data are dated less than 3 months before or after the reporting date of the parent company.
The following companies are not subject to consolidation:
Listed companies must prepare consolidated financial statements in accordance with the International Financial Reporting Standards.
If consolidated financial statements are prepared in accordance with the IFRS, a company of the group can also use the IFRS to prepare separate financial statements.
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