Annual accounts for a Dutch holding BV: participations, dividends and exemptions

Many Turkish investors structure their Dutch business as two companies: a holding BV that owns the shares and an operating BV that trades. The structure separates risk from accumulated profit and makes a later sale or a second activity easier. It also doubles the paperwork, and one question comes up every year: what exactly goes into the annual accounts of the holding, and how do they differ from those of the operating company?

This article explains what is specific to a holding’s annual accounts, when a group must consolidate, what changes when the shareholder of the holding is a company in Türkiye, and which documents keep the structure clean year after year.

Each BV files its own annual accounts

A holding and an operating company are two legal entities, and Dutch law looks at each one separately. Both prepare a jaarrekening, both have it adopted by their shareholders and both file with the KVK, within the same statutory periods. The holding usually falls into the micro or small size class, so its filing is a short balance sheet with limited notes and without an audit. The general rules, the yearly cycle and the deadlines are the same as for any BV; we described them in Annual accounts for a Dutch BV.

The difference is not the procedure but the content. A holding has few transactions, yet the ones it has are the kind that need explanation: a participation, intercompany balances, dividends and sometimes a management fee.

The participation on the balance sheet

The shares the holding owns in the operating BV are shown as a financial fixed asset called a participation (deelneming). Two valuation methods exist. Under the net asset value method the participation is carried at the holding’s share of the subsidiary’s equity, so the holding’s balance sheet rises and falls with the results of the operating company and the holding’s profit and loss account shows its share of that result. Under the cost method the participation stays at the amount originally paid, and income is recognised only when a dividend is received.

Which method applies depends on the degree of influence the holding has and on the accounting policy chosen; for a holding that controls its subsidiary, net asset value is the usual choice. The policy must be applied consistently from year to year and explained in the notes, because a reader of the accounts should be able to see how the figure was arrived at. Changing the method later is possible but requires explanation and a restatement of the comparative figures.

Intercompany balances, dividends and the management fee

Money moves between the two companies more often than founders expect: the holding pays a bill for the subsidiary, the subsidiary transfers surplus cash upward, a loan is granted for an investment. Every such movement ends up in an intercompany current account (rekening-courant) or a loan, and both companies must show the same balance at year end, mirrored. Loans between group companies should rest on a written agreement with a businesslike interest rate; without one, the tax authority may treat the arrangement differently from what was intended.

Dividends from the operating BV are the holding’s main income. In the commercial accounts they appear as income from participations. In the corporate income tax return they are normally covered by the participation exemption, which means that profit that has already been taxed at the operating company is not taxed again at the holding. The exemption has conditions, and each dividend needs a shareholder resolution and the balance-sheet and distribution tests that apply to every BV; we explained the mechanics in Transferring profit from a Dutch BV to Türkiye.

Many structures also run a management fee: the holding employs the director and invoices the operating company for management services. The fee is income for the holding, a cost for the subsidiary, and it must be at a businesslike level and documented in a management agreement. This is also where the DGA salary question sits. When the director is employed by the holding, the customary salary rule applies there; see What is the DGA salary?. The salary, the fee and the dividend policy are best decided together, because each affects the others.

Consolidation and size class

A parent company is in principle required to include its subsidiaries in consolidated accounts, so that the group is shown as one economic unit. Dutch law exempts small groups from this duty when the group as a whole stays below the size criteria for balance sheet total, net turnover and number of employees. Most holding structures set up by Turkish founders are well within those limits, so in practice the holding and the operating BV each file their own accounts and no group accounts are prepared.

The size class of the holding itself is assessed on its own figures, which are usually small, so the micro or small format applies. As a more advanced option, a group that does consolidate can use a so-called 403 declaration, under which the parent accepts liability for the subsidiary and the subsidiary is relieved of publishing its own full accounts; this suits larger groups and is rarely worth it for a two-company structure.

When the shareholder is a company in Türkiye

A frequent variation: the Dutch holding is itself owned by a Turkish company or by a founder living in Türkiye. The holding’s annual accounts do not change in form, but three points deserve attention.

First, dividends paid by the Dutch holding to Türkiye fall under the Türkiye–Netherlands tax treaty, which determines how much Dutch withholding tax applies and how the dividend is treated in Türkiye; see the double taxation treaty. Second, the treaty benefits and the Dutch tax position of the holding depend on substance: where decisions are taken, who signs, where the records are kept. A holding that exists only on paper invites questions from both tax authorities. Third, the group relationship with the Turkish parent must be visible in the notes and supported by agreements, especially where the parent provides services, loans or other financial support.

Whether a holding should be placed in the Netherlands or in Türkiye, and in what order, is a structuring decision taken before formation; we compared the options in BV or holding?.

The yearly routine for a holding

A holding may have ten transactions a year, but each one should be documented as if it were a hundred. The routine we run for our clients:

• A board resolution for every dividend, loan and management fee, dated before the money moves.
• Written intercompany agreements: management agreement, loan agreement, current account agreement with interest terms.
• A reconciliation of the intercompany balances between the two companies at year end, so both sets of accounts show the same figures.
• The subsidiary’s adopted accounts before the holding’s accounts are finalised, because the participation value depends on them.
• The holding’s corporate income tax return, with the participation exemption applied, filed from the same records.

Done in this order, the holding’s accounts take little time and the structure holds up when a bank, a buyer or a tax inspector looks at it.

Common mistakes

The errors we see most often: the subsidiary’s accounts are adopted after the holding’s, so the participation value is wrong; dividends are paid without a resolution or without the required tests; intercompany balances differ between the two companies; the management fee is invoiced irregularly or not at all, which undermines the DGA salary set-up; and the holding’s own filing is simply forgotten because “nothing happened”. Each of these is easy to avoid with a fixed year-end checklist.

Conclusion

A holding BV files its own annual accounts every year, with a small number of items that need care: the participation, the intercompany balances, the dividends and the management fee. Small groups do not consolidate, and a Turkish parent adds treaty and substance considerations rather than extra forms. Under our tax and compliance service we prepare both sets of accounts and the tax returns from one bookkeeping, and if the structure is still being designed, our formation and structuring service covers the choice between a single BV and a holding. A free 15-minute intro call is the easiest way to start.