Companies with significant international operations often keep their commercial books in a currency other than the euro, typically US dollars or British pounds. For Dutch corporate income tax (CIT) purposes, however, the starting point is different: the euro is the default reporting currency. This mismatch can create administrative friction and artificial exchange results that do not reflect a company's actual economic position. 

To address this, Dutch tax law offers the so-called functional currency regime (regeling functionele valuta), allowing eligible companies to file their corporate tax return in a foreign currency instead of euros. Below is an overview of how the regime works, what has changed for 2026, and how a company can apply. 

The Basic Framework: Euro as the Default 

Under Dutch tax law, a corporate taxpayer's CIT return must, as a rule, be filed in euros. This applies regardless of which currency a company uses in its commercial accounts. For a Dutch entity that is part of an international group reporting in dollars or another foreign currency, this means maintaining a separate euro-based fiscal administration alongside its commercial bookkeeping and absorbing currency translation results that may not correspond to any cash impact actually felt by the business. 

The tax year generally follows the calendar year, although companies may adopt a different financial year. Regardless of the financial year chosen, the euro requirement for the CIT return remains the baseline unless a company successfully applies for the functional currency regime. 

Why the Euro Still Matters Under the Regime 

It is worth noting upfront that opting for a functional currency does not remove the euro from the equation entirely. Whatever currency is approved, the actual corporate tax due must always be settled in euros. The taxable amount, calculated in the functional currency, is converted into euros once a year using the average exchange rate published by the European Central Bank (ECB) for that financial year. In other words, the functional currency simplifies bookkeeping and reporting, but final payment obligations remain euro-denominated. 

The Functional Currency Ruling Explained 

To use a currency other than the euro for tax purposes, a company needs a formal ruling from the tax inspector: the beschikking Regeling functionele valuta. The regime exists to reduce administrative burden for businesses that are genuinely international in character, and to prevent the recognition of currency results that do not reflect real economic gains or losses. 

Several conditions apply: 

Once the ruling is granted, the company is no longer permitted to file in euros; use of the functional currency becomes mandatory, not optional, for the duration of the approval period. 

Deadlines and Compliance for 2026 

Timing is critical. The request for a functional currency ruling must be submitted to the tax inspector before the start of the financial year for which the regime is meant to apply; submitting it partway through a financial year, or after the fact, will not secure approval for that year. If granted, the regime generally takes effect from the start of the following book year. 

Once approved, the regime must be applied for a minimum of ten years. This long minimum term is deliberate: it prevents companies from switching currencies opportunistically to capture short-term tax advantages from exchange rate movements. Only after this ten-year period can a company request to revert to euro reporting or switch to a different functional currency. 

Outside of the currency question, the standard CIT compliance calendar still applies in full. Returns are generally due five months after the end of the financial year, with extensions available on request, and the usual provisional and final assessment process (including statutory interest on amounts due) continues to apply regardless of currency. Note that Dutch tax interest percentages are reviewed periodically and have recently been subject to adjustment following court rulings, so current rates should always be confirmed with the Belastingdienst or a tax advisor. 

Exemptions and Simplifications Within the Regime 

Dutch policy guidance includes a few practical simplifications for companies already operating under the functional currency regime: 

These simplifications reduce the administrative complexity that the regime is designed to avoid in the first place, and they apply automatically once the underlying functional currency ruling is in place. 

How to Apply 

The application process follows a few clear steps: 

For internationally oriented businesses operating in the Netherlands, the functional currency regime can meaningfully simplify tax reporting and remove artificial currency noise from the taxable result. The trade-off is a long-term commitment and a formal application process that must be timed correctly relative to the financial year. Companies considering this step should weigh the administrative benefits against the ten-year lock-in before submitting a request. 

Have questions or need assistance with your foreign functional currency application? Contact us!