Undistributed profit (onverdeelde winst)
Undistributed profit (onverdeelde winst) is the result for which no definitive appropriation has yet been recognised at the reporting date.
What does undistributed profit mean?
Undistributed profit (onverdeelde winst) is the result for which no definitive appropriation has yet been recognised at the reporting date.
A proposal by the board to pay a dividend does not automatically change the legal status. Decision-making after the balance sheet date and the basis for recognition determine the presentation.
How does it work?
Under equity, the last item is undistributed profit, with separate mention of the result after tax for the financial year, insofar as its appropriation has not been recognised in the balance sheet (art. 2:373(1)(g) DCC). The balance sheet may be prepared before or after appropriation of result; at the top it states which variant has been chosen (art. 2:362(2) DCC). After appropriation of result, the profit has already been divided over reserves and dividend payable.
In a BV the general meeting is competent to appropriate the profit determined by the adoption of the annual accounts; the articles of association may give that competence to another body (art. 2:216(1) DCC).
Example
A BV closes 2025 with € 25.000 profit after tax; other reserves were € 40.000. Balance sheet before appropriation of result on 31 December 2025: other reserves € 40.000, undistributed profit € 25.000. On 15 May 2026 the general meeting adopts the annual accounts and resolves to pay € 10.000 dividend and reserve € 15.000. After the distribution test, the board approves the dividend (art. 2:216(2) DCC). The BV then books in 2026: debit Undistributed profit € 25.000, credit Other reserves € 15.000, credit Dividend payable € 10.000. Nothing changes on the balance sheet of 31 December 2025.
In the annual accounts
Equity on the balance sheet, with the proposal in the notes where applicable.
Difference from other reserves
Undistributed profit is profit on which a decision is still to be taken. Other reserves are profits from earlier years that it has been decided to keep in the company. The difference is therefore a decision, not a difference in money or in distributability: both count towards the room for art. 2:216(1) DCC.
Common mistakes
- Showing a proposed dividend as a debt paid
- Treating undistributed result as free cash
What to watch for
- Keep the choice of a balance sheet before or after appropriation of result the same every year.
- A loss is on the same line, as a negative amount.
- Medium-sized and large entities state the appropriation or proposal in the notes (art. 2:380c DCC). This requirement does not apply to a small BV or NV (art. 2:396(7) DCC); but the statement of the retained part of the result does (paragraph 3). A foundation or association under Title 9 states the appropriation even if it is small (art. 2:383a DCC). Micro entities show one amount of equity.
Legal basis and source
art. 2:373 DCC
Frequently asked questions
Is undistributed profit the same as money in the bank?
No. It is an equity item and only says that profit was made over the year. That profit may be tied up in inventory, receivables or a machine.
Do I have to distribute the profit every year?
No. The resolution on appropriation may be that everything is reserved; the profit then goes to other reserves.
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Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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