You might expect to see a rapid increase in sales when you first launch your firm in the Netherlands. If that’s the case, you should consider the audit requirements in the Netherlands.
Only medium and large companies are required by law to have their annual report audited by independent, qualified and registered Dutch auditors. The auditor is to be appointed by the general shareholders meeting or, in the event of default, by the supervisory or managing board.
The goal of auditing financial statements is to provide assurance about their dependability so that management, shareholders, banks, investors, creditors, grant providers, and others can use them to make decisions. An auditor’s report, which he creates after reviewing an annual statement, includes his assessment. For the financial accounts of medium-sized and large businesses, including publicly traded firms, as well as for the financial statements of different government bodies like municipalities, this statement is required. These statutory audits are subject to additional requirements and are not open to all accountants.
The exact audit requirements in the Netherlands vary depending on the size of the company. A company is classified as either micro, small, medium or large based on the following criteria:
- The value of the balance sheet assets
- The net turnover
- The number of employees
The table below provides a summary of the criteria for these classifications. Subsidiaries and group firms that are eligible for consolidation should also be listed together with their asset value, net revenue and the number of employees. At least two of the three requirements must be met over the course of two consecutive years in order to qualify for the medium or large categories.
| Criterion | Micro | Small | Medium | Large |
| 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 |
Consolidation requirements in the Netherlands
In general, parent companies should consolidate their financial statements to incorporate the financial data of their controlled subsidiaries and other group entities.
According to Dutch law, a controlled subsidiary is a legal entity that has the right to exercise directly or indirectly more than 50 per cent of the voting power at the shareholders’ meeting or to appoint or dismiss more than 50 per cent of the managing and supervisory directors. The notion of a subsidiary also encompasses a partnership in which the corporation is a full participant. A group company is a legal entity or partnership, which is part of a group of companies. No matter how many shares are held, the (managerial) control over the entities is what determines if a company is consolidated.
It is not necessary to include the financial information of a subsidiary or group company 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 not be performed if the group company or subsidiary that is being consolidated:
- fulfils the conditions to be considered a small corporation for Dutch Statutory purposes (see the criteria set under filing requirements)
- is not quoted on a stock exchange
Consolidation may also not be used if:
- at least one-tenth of the company’s members or holders of at least one-tenth of its issued capital has not notified the company in writing of an objection to not consolidating within six months of the end of the financial year.
- the financial information that the company should consolidate is already included in the parent company’s financial statements.
- these consolidated financial statements and annual reports were prepared in accordance with the requirements of the 7th European Directive.
- insofar as they have not been translated into Dutch, the consolidated financial statements, the auditor’s opinion and the annual report have been prepared or translated into French, German or English and are all in the same language.
- the documents or translations mentioned in the preceding sentence have been submitted to the trade register offices where the company is registered within six months of each balance sheet date or within one month of a publication date that is permitted to be later than six months. Alternatively, a notice directing to the offices of the trade register where the documents are available has been filed.
The following points must be included in the auditors’ report:
- 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 report from the management boards complies with legal requirements; and
- whether adequate additional information has been provided.
The auditor is responsible for reporting to the management and supervisory boards. The competent body should have considered the auditors’ report before determining or approving the financial statements.
Parties may choose a voluntary audit if the audit is not mandatory.
If you need assistance in organising and/or collecting your audit requirements for your Netherlands company, please reach out to our Launch Crew.
