The completion of annual financial statements is a mandatory requirement for every Dutch legal entity. As the year comes to an end, so does the fiscal year for many businesses. With all the data and information gathered throughout the year, it’s time to prepare the annual financial statements. Thanks to our monthly financial check-ins with clients, we typically have annual financial statements ready for our clients in January. These financial reports are crucial, as they provide insight into how business owners have concluded their fiscal year. But when should you file these annual financial statements? Let’s delve into the details.
Even though our clients have real-time access to financial data, creating annual financial statements remains a vital part of our services. These statements serve as official documents for various entities, including the tax authorities, Chamber of Commerce (Kamer van Koophandel or KVK), and banks when seeking financing or considering corporate vehicles such as a leased company car.
Components of your annual Financial Statements
Official annual financial statements primarily showcase a company’s performance, with a strong focus on its financial aspects. The content of these statements depends on the size of your company. The KVK classifies companies into four categories based on three criteria: total assets, net revenue, and the average number of employees. These categories are micro, small, medium-sized, and large businesses. Regardless of the category, annual financial statements for all businesses must include a balance sheet with explanatory notes and the profit and loss statement for the respective year.
For medium-sized and large companies, additional elements include a management report from the company’s board and, crucially, an auditor’s report on the annual financial statements. This auditor’s report is mandatory if your company meets two of the following three criteria for two consecutive years:
- An annual revenue exceeding €12 million
- A balance sheet total exceeding €6 million
- More than fifty full-time equivalent employees
If your company does not meet these criteria, you have the option to prepare the annual financial statements yourself or through an accountant. Be aware that the annual financial statements must be retained for seven years for tax purposes and must meet the tax authority’s legal requirements, making it advisable for an accountant to handle this task.
Practical clients automatically receive annual financial statements because our firm continuously monitors clients’ finances and provides feedback throughout the year.
Who Must File Annual Financial Statements?
Determining which business owners are required to file their annual financial statements with the KVK can be a source of confusion. In this blog, we will clarify which entrepreneurs are obligated to file their annual financial statements, as this requirement is governed by the law and regulations specified in Title 9 of the Dutch Civil Code 2.
The following legal entities are obliged to file their annual financial statements:
- Private limited company (Besloten Vennootschap or BV)
- Public limited company (Naamloze Vennootschap or NV)
- Cooperative (Coöperatie)
- Mutual insurance company (Onderlinge Waarborgmaatschappij)
- Banks
- General partnership (Vennootschap onder Firma or VOF) and Limited partnership (Commanditaire Vennootschap or CV) where all managing partners are foreign capital partners
- Formal foreign company
- Associations and foundations with a business operation that generates a minimum annual turnover of €4.4 million for two consecutive fiscal years
- Foreign legal entities with branches in the Netherlands that are also required to publish annual financial statements in their home country. They must file annual financial statements that correspond to those in their home country
- Companies falling under the Act on Formal Foreign Companies. They must file two sets of annual financial statements: one according to Dutch regulations and one according to their home country’s regulations
Many “smaller” entrepreneurs and natural persons, such as sole proprietors (Eenmanszaak) and self-employed professionals (ZZP), are exempt from the requirement to file annual financial statements.
For legal entities like BVs, filing annual financial statements is mandatory under Dutch law. One of the primary reasons is to ensure financial transparency for everyone interested in the company, including stakeholders and potential investors.
Additional Information on Annual Financial Statements
The content of annual financial statements varies based on the type and size of the business. Each legal entity required to file annual financial statements must include, at a minimum, a balance sheet and explanatory notes. Medium-sized and large legal entities must also include an income statement. Smaller legal entities have a more simplified requirement, typically only needing to indicate the number of employees and details about how the balance sheet was prepared.
Larger legal entities must provide more comprehensive information, such as executive remuneration, in the explanatory notes. Additionally, they are required to include a management report and an auditor’s report.
Fiscal Financial Statements vs. Commercial Financial Statements
Besides commercial financial statements, there are fiscal financial statements, which add an extra layer of complexity. Fiscal financial statements are solely for tax authorities and aim to calculate a company’s taxable profit. To minimize taxable profit, business owners often include items like depreciation and investments in their fiscal financial statements. However, these are not reflected in the “normal” or commercial financial statements, which focus on providing a business perspective without considering tax benefits. Commercial financial statements are commonly used for (re)financing or selling a business.
When an accountant provides a fiscal financial statement along with a regular financial statement, the key difference between the two is often the presence of “hidden reserves.” These reserves can include unrealized increases in the value of company property, machinery, or inventory. For example, if a company’s balance sheet shows an asset worth €400,000 (after depreciation) with an actual market value of €1,000,000, the hidden reserve amounts to €600,000. This additional value will be subject to taxation upon sale.
How to File Annual Financial Statements
Entrepreneurs have several options for filing their annual financial statements, depending on factors such as business size. For micro and small businesses, there are three ways to submit annual financial statements:
- Online via the self-filing service on the KVK website: This option allows you to independently file your annual financial statements online.
- Through your financial intermediary or accountant: Preparing and/or filing annual financial statements can be delegated to your accountant or financial intermediary, who can file them using Standard Business Reporting (SBR).
- Using your accounting software (via SBR): Most accounting software programs support the digital submission of annual financial statements via SBR. To use this method, you’ll need both the software and a PKIoverheid services certificate to file your annual financial statements through Digipoort.
Many entrepreneurs mistakenly believe that the Chamber of Commerce conducts a secondary review of the filed annual financial statements. However, this is not the case. After filing, the Chamber of Commerce does not verify the content of the submitted annual financial statements. Entrepreneurs
Conclusion
Curious about how entrepreneurs can maximize the discussed topics? Read more in our blogs and discover the keys to up-to-date insights and solid financial management, where our office does more than just accounting. Whether it’s tax benefits, payroll administration, or optimizing your accounting, we have the insights you need. Contact our specialists today for a personal advisory session. Discover how we can help you optimize your financial strategies and achieve relationship insight so you can steer based on facts rather than assumptions.
