Applying the 403 regime
When your group of companies is headed by a holding company incorporated in one of the EU member states, our law allows the NL subsidiary company to refrain from the standard financial reporting requirements. The exemption applies to a mandatory audit obligation as well. This may be advantageous to your group, as it simplifies reporting structures and reduces administrative requirements.
Here are the key demands and circumstances for applying this exemption:
1. Consolidated Financial Statements
The holding company is based in one of the EU member states, and prepares consolidated financial statements that include the financial results of the NL company. The consolidated financial statements need to comply with the European Union's regulations, such as the GAAP of an EU member state or IFRS as accepted by the EU.
The holding company cannot be incorporated in the United Kingdom – since Brexit it is not possible to apply the 403 regime when the consolidating company is based in the United Kingdom.
2. Holding Company liability
The holding company needs to issue a written declaration accepting joint and several liability for the debts resulting from the legal acts of the group company. This written declaration needs to be filed to the Dutch Chamber of Commerce and applies until the declaration is withdrawn taking into account the demands that apply to the withdrawal.
When applying demands 1. and 2. correctly – the NL company does not need to file the annual financial statements, however, it is still necessary for the NL company to prepare its annual financial statements that meet certain minimum standards – and have them adopted – to keep internally.
3. Shareholder consent
The direct shareholder or shareholders of the NL company are required to annually declare their consent on the NL company not applying the financial reporting requirements as prescribed by Dutch law. This consent declaration is to be filed with the Dutch Chamber of Commerce, before or at the time of the approval of the consolidated financial statements.
Before deciding to apply the so-called 403 regime, the recommendation applies to consider and assess the risks concerning the joint and several liability statements, as this creates liability for all possible trade debts of the NL company concerning its undertaking.
Another option – exemption from consolidating subsidiaries
Another possibility under Dutch law perhaps when your company decides against applying the 403 regime is the 408 regime. This regime can only apply when (1) your NL company is consolidating the financial results of subsidiary company/ies, and (2) the holding company consolidates the financial results of the NL company in its annual financial statements. Applying this 408 regime, the NL company can limit its obligatory filing to its separate financial statements (instead of filing the consolidated financial statements). When applying the 408 regime, it is necessary to timely file the holding company’s consolidated accounts with the Dutch Chamber of Commerce. Important differences, when applying the 408 regime, the holding company does not have to be incorporated in an EU member state, as long as the annual statements are governed by a comparable set of rules and regulations to the EU rules and regulations, or IFRS.
Want to know more about group exemption for your NL company?
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The Grant Thornton Netherlands team for Corporate Housekeeping will issue, as of the year 2025, a series of articles addressing important issues concerning the organisation and governance of your Company.
