Nederlandse Accountantsdiensten : Compliance in Nederland

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In the Netherlands, non-resident companies often find it hard to deal with the tricky world of accounting and tax rules.

Dutch accounting firms 'help' foreign companies and people handle their money matters while doing business in the country. These firms are key to staying on the right side of Dutch tax laws and rules. They assist with everything from getting a VAT number to sending in yearly reports. This support is vital for foreign entities to meet their financial duties in the Netherlands.
 

This article explores the main parts of accounting and tax compliance for non-residents in the Netherlands, and lays the foundation of how House of Companies has innovated and simplified Dutch accounting.

It looks at key topics like corporate income tax, bookkeeping rules, and the participation exemption. By getting to grips with these elements non-resident companies can handle their money matters well and take advantage of chances in the Dutch business world.

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Increase your profits with Dutch Accounting by House of Companies

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To sum up non-resident companies doing business in the Netherlands need to navigate Dutch accounting services and tax compliance. This article has looked at key areas like corporate income tax, bookkeeping rules, and the participation exemption.

It has given insights into how the Dutch tax system works and what to consider about permanent establishments. When non-resident companies understand these things, they can handle their financial duties better and take advantage of chances in the Dutch business world.

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The intricate nature of Dutch accounting rules underscores how crucial it is to get expert help to follow the rules and steer clear of possible fines. When non-resident companies stay up-to-date on their tax duties and due dates, they can remain in good shape with Dutch officials and zero in on their main business tasks. 

o save some cash with accounting software and to ask for a demo or rough draft of financial reports, get in touch with House of Companies. In the end non-resident companies need to grasp Dutch accounting services and compliance needs to succeed in the Dutch business scene.

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Overview of Dutch Accounting Regulations

The Netherlands has a comprehensive legal framework governing financial reporting, primarily based on the EU Accounting Directive 2013/34/EU and incorporated into Part 9, Book 2 of the Dutch Civil Code (Burgerlijk Wetboek, BW). This framework is supplemented by the Dutch Accounting Standards (Richtlijnen voor de Jaarverslaggeving) issued by the Dutch Accounting Standards Board (Raad voor de Jaarverslaggeving), judicial precedence, and International Financial Reporting Standards (IFRS) as adopted by the EU.
 

Entities with securities other than shares listed on a regulated market in the EU/EER must comply with additional reporting requirements under the Financial Supervision Act (Wet op het financieel toezicht, Wft). These requirements include publishing annual financial reports within four months of the end of the financial year and half-yearly financial reports within three months after the first six months of the financial year.
 

The annual financial reporting comprises the management board report, audited financial statements, other information, and statements made by the management board attesting to the true and fair view presented by the financial statements and management board report. Entities active in the extractive industry or primary forest logging must also publish an annual report on payments to governments within six months of the financial year-end.

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Difference between a Dutch company with substance (permanent establishment) and without substance (non-resident) for corporate tax and VAT

For corporate tax purposes, a Dutch company with substance, i.e., a permanent establishment (PE), is subject to corporate income tax (CIT) on its worldwide income. In contrast, a non-resident company without a PE in the Netherlands is only liable for CIT on Dutch-source income, such as profits from a PE or income from Dutch real estate.
 

The term 'permanent establishment' is defined in the CIT law (Wet Vpb 1969) and follows the definition in the applicable tax treaty for treaty situations. For non-treaty situations, the definition aligns with Article 5 of the OECD Model Convention 2017.
 

Regarding value-added tax (VAT), a Dutch company with substance must register for VAT and charge VAT on its supplies of goods and services. A non-resident company without a PE in the Netherlands may still be required to register for VAT if it makes taxable supplies in the Netherlands, such as distance sales or e-services to non-VAT registered customers.

In summary, the presence of a permanent establishment is a crucial factor in determining the corporate tax and VAT obligations of a company operating in the Netherlands.

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Legal Entity Types for Non-Residents

Non-resident entities seeking to establish a presence in the Netherlands have several legal entity options to choose from, each with its own set of accounting and tax implications. The most common types include branch offices, subsidiaries, and foreign legal structures.
 

A branch office, also known as a permanent establishment (PE), is not a separate legal entity but an extension of the foreign company. It must be registered with the Dutch Chamber of Commerce (KVK) and is subject to corporate income tax and value-added tax (VAT) on profits attributable to the branch.

The branch office is not required to file separate financial statements with the KVK, but the parent company's financial statements must be submitted.

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Subsidiaries, on the other hand, are independent legal entities incorporated under Dutch law. They must register with the KVK, file annual financial statements, and comply with all Dutch tax obligations, including corporate income tax, VAT, and wage tax. Subsidiaries offer greater administrative simplicity and independence compared to branch offices.

Foreign companies can also opt to use their own country's legal structure when setting up a business in the Netherlands. Dutch company law recognizes all foreign business structures except sole proprietorships. However, using a foreign legal structure may have certain disadvantages, such as increased complexity in dealing with multiple tax authorities.

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Accounting consequences of registering a Branch Office in the Netherlands

Registering a branch office in the Netherlands entails several accounting obligations. The branch must maintain proper books and records, and the foreign company's financial statements must be filed with the KVK. If the branch has employees, it must set up a Dutch payroll and withhold wage tax and social security premiums.

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The branch office's profits are subject to Dutch corporate income tax, and it must file quarterly VAT returns. Transfer pricing rules apply to transactions between the branch and its foreign head office, necessitating proper documentation to substantiate the allocation of profits.

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The decision between establishing a branch office, subsidiary, or using a foreign legal structure depends on various factors, including the nature and extent of activities in the Netherlands, tax considerations, and administrative simplicity.

Non-resident entities should consult with legal and tax advisors to determine the most suitable option for their specific situation. House of Companies can assist with this in the shape of a corporate plan, for a fixed fee of 295 EUR. 
 

Tax Registration Requirements

Non-resident entities operating in the Netherlands must comply with various tax registration requirements to ensure compliance with Dutch regulations. These obligations include registering for value-added tax (VAT), payroll taxes, and corporate income tax, depending on the nature and extent of their business activities in the country.
 

VAT for businesses with VAT taxable transactions

Businesses engaged in VAT taxable transactions in the Netherlands are required to register for a Dutch VAT number. This applies to both resident and non-resident companies supplying goods or services (or importing!) within the country.

The registration process involves submitting an application to the Dutch Tax and Customs Administration, providing necessary documentation such as proof of business incorporation and identification documents, and appointing a fiscal representative for non-resident businesses.

House of Companies has automated the process of obtaining a VAT number, in our eBranch portal.
 

Once registered, companies must charge VAT on their supplies, file periodic VAT returns, and maintain proper records of their transactions. The standard VAT rate in the Netherlands is 21%, with reduced rates of 9% and 0% applicable to certain goods and services. Non-compliance with VAT obligations can result in penalties and legal consequences.
 

Register as Employer when you payroll staff in the Netherlands

Businesses employing staff in the Netherlands are obligated to register as an employer with the Dutch Tax and Customs Administration and deduct payroll taxes from their employees' wages.

Payroll taxes include wage tax, national insurance contributions, and employee insurance premiums.

Employers must file payroll tax returns and remit the withheld amounts to the tax authorities.
 

Before employing staff, companies must register as an employer and obtain a payroll tax number. They are also required to verify their employees' identities and eligibility to work in the Netherlands. Failure to comply with payroll tax obligations can lead to penalties and legal repercussions.

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Tip: It's not required to register a local company in the Netherlands, to comply with the Dutch wage tax regulations. Not even a branch office, unless you outsource your staff to third parties (Waadi). 
 

Corporate Tax Liability for resident companies

Resident companies in the Netherlands are subject to corporate income tax on their worldwide income.

The standard corporate income tax rate is 25.8%, with a lower rate of 15% (19% in 2023) applicable to the first €395,000 (€200,000 in 2023) of taxable income. Companies must file annual corporate income tax returns and make advance payments throughout the year.
 

Non-resident companies are liable for corporate income tax only on their Dutch-source income, such as profits attributable to a permanent establishment in the Netherlands. They are required to file corporate income tax returns and pay taxes on their taxable income.
 

An important question to ask yourself is: Is my company considered resident in the Netherlands? In principle ALL companies which are incorporated by Dutch law, are considered 'resident', unless there is a tax treaty in place, and/or the substance requirements are not met. 

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This means that in theory, you can run a Dutch business, and not report your profits here, but in the country where the company performs it's effective management and control. In our blog more on this topic!

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Bookkeeping and Financial Reporting

Non-resident entities operating in the Netherlands are subject to various bookkeeping and financial reporting obligations under Dutch law. These requirements are primarily governed by the Dutch Civil Code (Burgerlijk Wetboek, BW) and the Dutch Generally Accepted Accounting Principles (Dutch GAAP).
 

Almost every Dutch corporate entity is required to prepare financial statements according to the law, usually incorporated in the entity's statutes.

The financial statements serve as an essential building block for the Dutch legal system and form the basis for corporate governance. They are also relevant for taxation, as they serve as the starting point for determining the taxable basis, although tax laws have independent rules.
 

Content of Financial Statements

Depending on the company's size and publication requirements, the financial statements generally must contain at least:
 

1. A balance sheet

2. A profit and loss account

3. Notes to the accounts
    

The financial statements should accurately reflect the company's financial position, and the accounting principles used 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, and the reasons and effect on the company's financial position must be disclosed in the notes.
 

Consolidation Requirements

Parent companies should generally include the financial data of "controlled subsidiaries" and other "group companies" in their consolidated financial statements.

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.
 

Consolidation may be omitted under certain conditions, such as when the subsidiary or group company meets the criteria for being described as a small company for Dutch statutory purposes or when the financial information has been included in the parent company's consolidated financial statements prepared per the 7th EU Directive.
 

Audit Requirements

Only medium and large companies and companies that apply IFRS are legally obliged to have their annual report audited by an independent, qualified, and registered Dutch auditor.

The auditor's report must include whether the financial statements provide information under the accounting principles generally accepted in the Netherlands and accurately represent the financial position and result for the year.
 

Publication Requirements

The financial statements must be prepared and approved by the managing directors no later than five months after the end of the financial year, with a possible extension of up to five months. The publication requirements vary depending on the company's size, as summarized in the table below:

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Non-resident entities must comply with these bookkeeping and financial reporting requirements to ensure compliance with Dutch regulations and maintain transparency in their business operations.
 

Annual Accounts Filing Obligations

Under Dutch law, almost every corporate entity is required to prepare financial statements according to the entity's statutes, which serve as an essential building block for the Dutch legal system and form the basis for corporate governance.
The financial statements are also relevant for taxation, as they serve as the starting point for determining the taxable basis, although tax laws have independent rules.
 

The content of the financial statements depends on the company's size and publication requirements but generally must contain at least a balance sheet, a profit and loss account, and notes to the accounts. The financial statements should accurately reflect the company's financial position, and any changes in accounting principles must be disclosed in the notes.
 

Parent companies should generally include the financial data of "controlled subsidiaries" and other "group companies" in their consolidated financial statements.

However, consolidation may be omitted under certain conditions, such as when the subsidiary or group company meets the criteria for being described as a small company for Dutch statutory purposes or when the financial information has been included in the parent company's consolidated financial statements prepared per the 7th EU Directive.
 

Audit Requirements

Only medium and large companies and companies that apply IFRS are legally obliged to have their annual report audited by an independent, qualified, and registered Dutch auditor.

The auditor's report must include whether the financial statements provide information under the accounting principles generally accepted in the Netherlands and accurately represent the financial position and result for the year.
 

Audit Requirements for Non-Resident Entities

Non-resident entities operating in the Netherlands are subject to various audit requirements, depending on their size and legal structure.

According to Article 2:393 of the Dutch Civil Code (Burgerlijk Wetboek, BW), only medium and large companies, as well as companies that apply International Financial Reporting Standards (IFRS), are legally obliged to have their annual report audited by an independent, qualified, and registered Dutch auditor.
 

The size criteria for determining whether a company is considered medium or large are based on three factors: the value of the balance sheet assets, net turnover, and the number of employees. If a company meets at least two of the three criteria for medium or large size in two successive years, it is subject to the mandatory audit requirement.
 

The auditor, appointed by the general shareholders' meeting or, in case of default, by the supervisory or managing board, must provide an auditor's report that includes:

1. An assessment of whether the financial statements provide information in accordance with the accounting principles generally accepted in the Netherlands and accurately represent the company's financial position and results for the year.

2. Confirmation that the management board's report meets the legal requirements.

3. Verification that adequate additional information has been provided.

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

Non-resident entities that do not meet the criteria for mandatory audits may still choose to undergo a voluntary audit. This can be beneficial for companies seeking to enhance credibility, access financing, improve risk management, ensure compliance, and make informed strategic decisions.

In cases where a full audit is not required or desired, but a certain level of assurance is needed, companies may opt for a review of the financial statements.
This involves an auditor reviewing the financial statements to determine whether they accurately reflect the organization's financial situation, providing a limited degree of assurance.
 

VAT Compliance for Foreign Businesses

Foreign businesses operating in the Netherlands must comply with Dutch VAT regulations. The Dutch Civil Code (Burgerlijk Wetboek, BW) and the Dutch VAT Act govern the VAT obligations for non-resident entities.

Non-resident companies can choose to become resident for VAT purposes by opening a local office or recruiting local staff. Becoming a resident company simplifies VAT compliance, as it allows for monthly VAT returns and the use of a fiscal representative based in the Netherlands.
 

Alternatively, non-resident companies can maintain their non-resident status and make use of the Art. 23 Exemption, which allows for the deferment of import VAT payments. However, this exemption comes with additional administrative requirements and the obligation to file quarterly VAT returns.
 

Bonded warehouses offer another option for foreign businesses to manage their VAT obligations. Goods stored in a bonded warehouse are not subject to import duties and VAT until they are released for circulation within the EU. This can provide significant cash flow benefits and flexibility in supply chain management.

To store goods in a bonded warehouse, a permit must be obtained from the Dutch Customs Authorities. The permit holder is responsible for maintaining accurate records of the stored goods, including details such as the goods code, customs value, country of origin, weight, and measurements.
 

While goods stored in a bonded warehouse cannot be processed or altered, certain value-added services, known as "usual forms," are permitted. These activities include repackaging, quality control, and labeling, which can be performed to keep the goods in good condition or prepare them for distribution.
 

VAT and excise duties become due once the goods leave the bonded warehouse and are released for circulation in the EU. The deferred VAT and excise duties are payable in the country where the goods leave the warehouse, unless a customs transport permit (T1 document) is obtained for shipment to another EU country.

Dutch GAAP vs IFRS Reporting Standards

Non-resident entities operating in the Netherlands can choose to prepare their financial statements under either Dutch GAAP or International Financial Reporting Standards (IFRS) as adopted by the European Union. The choice of reporting framework has significant implications for the recognition, measurement, presentation, and disclosure of financial information.
 

Dutch GAAP is primarily based on the EU Accounting Directive 2013/34/EU and incorporated into Part 9, Book 2 of the Dutch Civil Code (Burgerlijk Wetboek, BW). It is supplemented by the Dutch Accounting Standards (Richtlijnen voor de Jaarverslaggeving) issued by the Dutch Accounting Standards Board (Raad voor de Jaarverslaggeving), judicial precedence, and IFRS as adopted by the EU.
 

Entities with securities other than shares listed on a regulated market in the EU/EER must comply with additional reporting requirements under the Financial Supervision Act (Wet op het financieel toezicht, Wft). These include publishing annual financial reports within four months of the financial year-end and half-yearly financial reports within three months after the first six months of the financial year.
 

The annual financial reporting comprises the management board report, audited financial statements, other information, and statements made by the management board attesting to the true and fair view presented by the financial statements and management board report.

Entities active in the extractive industry or primary forest logging must also publish an annual report on payments to governments within six months of the financial year-end.
 

In contrast, IFRS is a set of international accounting standards that aims to provide a global framework for the preparation and presentation of financial statements. IFRS is developed and issued by the International Accounting Standards Board (IASB) and is widely recognized as a high-quality, globally accepted accounting framework.

The adoption of IFRS can provide several benefits to non-resident entities operating in the Netherlands, such as:
 

1. Enhanced comparability: IFRS allows for greater comparability of financial statements across different countries and industries, making it easier for investors and other stakeholders to assess the financial performance of the entity.

2. Improved transparency: IFRS requires more extensive disclosures than Dutch GAAP, which can lead to increased transparency and better understanding of the entity's financial position and performance.

3. Access to international capital markets: Adopting IFRS can facilitate access to international capital markets, as many investors and lenders prefer or require financial statements prepared under IFRS.

However, the transition from Dutch GAAP to IFRS can be a complex and time-consuming process, requiring significant resources and expertise.

Non-resident entities should carefully consider the costs and benefits of adopting IFRS and discuss with House of Companies to ensure a smooth transition.
 

Receiving or paying dividends to or from your group company

Dividends from Dutch resident corporations are generally subject to a 15% Dutch dividend withholding tax (WHT) as per Article 1 of the Dividend Tax Act 1965.

However, dividends may be exempted under Dutch tax law, subject to anti-abuse rules, if the recipient of the dividends distributed by the Dutch entity is a resident of the European Union, European Economic Area, or another state with which the Netherlands has concluded a tax treaty that includes a dividend article.
 

No withholding tax consequences for a branch office

A foreign company with a branch in the Netherlands is not obliged to prepare its own Dutch financial statements, although a stand-alone balance sheet and profit and loss account may be required for tax purposes. As a branch is not a separate legal entity, there are no withholding tax consequences for transactions between the head office and the branch.
 

How to represent a subsidiary on your Dutch balance sheet

Parent companies should generally 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 (Article 2:24a Dutch Civil Code).
 

Process incoming or outgoing dividend payments on your balance sheet

Dividend payments received from a subsidiary should be recorded as financial income on the parent company's profit and loss account. The corresponding receivable should be recorded on the balance sheet until the payment is received.

Outgoing dividend payments to shareholders should be recorded as a reduction in retained earnings on the balance sheet, with a corresponding liability recorded until the payment is made.
 

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Annual Reporting Deadlines and Requirements

According to Article 2:210.1 of the Dutch Civil Code (Burgerlijk Wetboek, BW), the management board must prepare the financial statements within five months after the end of the financial year, unless the general meeting has extended this period by a maximum of five months due to special circumstances.
 

The financial statements must be adopted by the general meeting within two months after their preparation.

If the financial statements are not adopted within seven months after the end of the financial year, the management board must disclose this fact to the Trade Register, along with the reasons for the delay and the expected date of adoption (Article 2:210.2 BW).

Filing Requirements
 

Once the financial statements have been adopted, they must be filed with the Trade Register within eight days (Article 2:394.1 BW). The filing must include:
 

1. The adopted financial statements

2. The management report

3. The auditor's report (if applicable)

4. Other information required by law
    

If the general meeting has not adopted the financial statements, the management board must still file the prepared financial statements within two months after the due date for adoption, accompanied by a statement indicating that the financial statements have not yet been adopted (Article 2:394.2 BW).
 

Penalties for Non-Compliance
 

Failure to comply with the filing requirements can result in penalties under the Economic Offenses Act (Wet economische delicten). The management board members may be held personally liable for any damages suffered by third parties as a result of non-compliance with the filing requirements (Article 2:248 BW).
 

To ensure compliance with Dutch accounting regulations, non-resident entities should be aware of the annual reporting deadlines and filing requirements, and seek professional advice when necessary.
 

Audit Thresholds for Dutch Companies

According to Article 2:396 of the Dutch Civil Code (Burgerlijk Wetboek, BW), the audit requirements for companies in the Netherlands are determined by their size category. The size criteria are based on three factors: the value of the balance sheet assets, net turnover, and the number of employees. If a company meets at least two out of the three criteria for a specific category in two consecutive years (or the first year for newly formed companies), that category applies.

The table below summarizes the size criteria for each category:

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No chartered accountant or audit required for SME business in the Netherlands
 

Under Dutch law, only medium-sized and large companies are legally required to have their financial statements audited by an independent, qualified, and registered Dutch auditor.

Micro and small-sized entities are exempt from this requirement, and un-audited financial statements suffice for these smaller companies.
 

The auditor, appointed by the general shareholders' meeting or, in case of default, by the supervisory or managing board, must provide an auditor's report that includes an assessment of whether the financial statements provide information in accordance with the accounting principles generally accepted in the Netherlands and accurately represent the company's financial position and results for the year.
 

Non-resident entities operating in the Netherlands should be aware of these audit thresholds and requirements to ensure compliance with Dutch regulations. Consulting with legal and accounting professionals can help determine the appropriate course of action based on the company's size and specific circumstances.

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