What is the difference between tax and commercial annual accounts?

Short answer

The commercial annual accounts follow Title 9 Book 2 DCC; taxable profit follows tax rules. Temporary valuation differences can give rise to deferred tax.

Basis: art. 2:396(6) DCC

Who are the commercial annual accounts intended for?

The commercial annual accounts are intended for shareholders, financiers and the Business Register. The tax computation serves the corporate income tax return and follows its own rules, for example on depreciation periods and the reinvestment reserve.

The commercial annual accounts of a BV follow the applicable civil-law reporting framework and serve, among others, shareholders and other users of the annual accounts. The corporate income tax return, by contrast, calculates the taxable profit under tax rules. A machine may stand at a different value commercially than for tax, for example because of deviating depreciation or a tax reserve. Therefore keep a reconciliation between the two values per balance sheet item. A commercial profit of €100,000 and a taxable profit of €85,000 need not be an administrative difference when the €15,000 is an explainable difference in rules.

Why can tax values be different?

Where valuations differ, you investigate whether there is a temporary difference that can lead to a deferred tax item. Not every difference automatically leads to deferred tax; permanent differences and recognition requirements call for separate assessment.

A temporary difference can give rise to a deferred tax item in the commercial annual accounts, depending on the chosen framework and the applicable exceptions. That is not a second payment on the balance sheet date, but a recognition of expected future tax consequences. A permanent difference, such as an item that is definitively non-deductible, works differently. Therefore do not automatically deduct a deferred tax receivable for every difference between commercial and taxable profit. Substantiate which item will reverse later, at what rate and under what conditions an asset may be recognised. Keep the reconciliation between return and annual accounts verifiable.

When may a small BV choose tax-based policies?

Under art. 2:396(6) DCC, small entities can use all applicable tax-based policies for valuation and result in the commercial annual accounts. State that choice in the notes; filing only the tax return is not sufficient.

Art. 2:396(6) DCC offers small entities, under conditions, the possibility of applying tax-based valuation policies in the commercial annual accounts. That choice is not the same as using only the tax return as the annual accounts. The annual accounts must still follow the civil-law presentation, notes and publication rules. State the choice in the accounting policies and apply it consistently. Suppose the tax book value of an asset is €45,000 and the commercial calculation would otherwise come to €50,000: record why the chosen policy determines the amount presented. Also compare the previous financial year when switching.

Make a reconciliation between the two profit concepts

Start with the commercial result before tax and put tax adjustments next to it per subject. For example: commercial profit €100,000, a non-deductible item of €5,000 and a temporary difference in depreciation of €10,000 can together lead to a different taxable profit. Which direction the adjustment goes depends on the specific entries. Record per difference whether it reverses later or remains definitive. That distinction is needed to assess a possible deferred tax item. A single closing difference without a breakdown is insufficient to link the return with the annual accounts.

When using tax-based policies in the commercial annual accounts, check that the BV really falls under the small regime and that all applicable tax-based policies are chosen consistently. Put the choice in the notes, with an explanation of the effects on equity and result when a change of policy takes place. Keep the size class calculation and the tax reconciliation with the financial year. The publication version at the KVK remains subject to the civil-law publication rules, even when the amounts are determined under tax-based valuation policies. A tax return has its own purpose, format and deadline.

Sources

• Belastingdienst: corporate income tax
• KVK: annual accounts per class

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