Current account (rekening-courant)
A current account (rekening-courant) is a running account in which two parties net their mutual receivables and payables into one balance, for example a BV (private limited company) and its DGA (director-major shareholder), group companies among themselves, or a business and its bank. The balance appears as a receivable or a liability on the balance sheet.
What does current account (rekening-courant) mean?
A current account (rekening-courant) is a running account in which two parties net their mutual receivables and payables into one balance, for example a BV (private limited company) and its DGA (director-major shareholder), group companies among themselves, or a business and its bank. The balance appears as a receivable or a liability on the balance sheet.
A current account combines mutual money movements into a running balance. The contract terms, interest and repayability matter for the valuation. A balance with the DGA is not automatically equity.
How does it work?
The arrangement is regulated in art. 6:140 DCC: receivables and payables entered between two parties in one account are netted continuously, so that at any moment only the balance is owed. Whoever keeps the account closes it every year and notifies the other party of the balance (paragraph 2).
In the annual accounts the balance is a receivable or a liability. With group companies it falls under receivables from or payables to group companies (art. 2:370(1) and 2:375(1) DCC); a drawn bank overdraft falls under amounts owed to banks. Advances to shareholders are stated separately, loans to directors in the notes (art. 2:383(2) DCC).
Example
An operating BV and its holding company book mutual payments through a current account. Opening position: the holding owes € 4,000. This year the operating BV pays € 8,000 of insurance premium for the holding, charges the holding € 15,000 in management fees and transfers € 10,000 to it. Balance from the operating BV’s side: 4,000 + 8,000 − 15,000 + 10,000 = € 7,000 receivable. At 4% interest on an average balance of € 5,500, € 220 is added. The operating BV shows € 7,220 as a receivable from a group company; the holding shows the same amount as a liability.
In the annual accounts
Receivable or liability on the balance sheet; related-party note where required.
Difference from a loan
A loan has a principal, a term and a repayment schedule; a current account fluctuates with the payments. The Dutch Tax Administration (Belastingdienst) draws the line for the DGA as follows: small amounts that are advanced briefly run through the current account. An amount that stays outstanding for years without repayment is a loan, even if it is booked in the current account.
Common mistakes
- Booking a private withdrawal as a business expense
- Letting the balance grow for years without terms
What to watch for
- Agree the balance at the balance sheet date in writing with the counterparty.
- Offsetting a receivable from one party against a payable to another party is not allowed (art. 2:363(2) DCC).
- A micro entity includes the balance in the total of current assets or liabilities. A small entity does not need to split the receivable by type (art. 2:396(3) DCC), but it does state loans to directors: art. 2:396(5) DCC exempts only paragraph 1 of art. 2:383.
Legal basis and sources
art. 2:370 and 2:375 DCC
Frequently asked questions
Must interest be charged on a current account?
Between related parties the interest must be at arm’s length. For the DGA the Dutch Tax Administration (Belastingdienst) names one exception: if the balance stays below € 17,500 all year, interest may be omitted.
Is a current account current or non-current on the balance sheet?
Usually current, because the balance is immediately payable. If part of it stays outstanding for more than a year by agreement, you state that amount.
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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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