Participation Exemption in the Netherlands (Deelnemingsvrijstelling): Conditions, the 5% Test and Examples (2026)

Under the participation exemption, your BV usually pays no corporate income tax on dividends and capital gains from a shareholding of at least 5% in another company; losses on that shareholding are not deductible either. The rule is in article 13 of the Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969, in Dutch) and stops profit that has already been taxed at a subsidiary from being taxed again at the parent.

This article explains what the exemption covers, when you have a participation, when a portfolio participation is taxed after all, and how it works for a holding company with an operating company. The rules apply to 2026. In Dutch, the exemption is called the deelnemingsvrijstelling.

At a Glance

• Exempt: dividends and capital gains; losses and the costs of buying and selling are not deductible.
• The 5% test: at least 5% of the nominal paid-up capital.
• Automatic: you don’t apply for it; your BV applies the exemption in its tax return.
• Portfolio participation: exempt only if the subsidiary is taxed at a reasonable rate or less than half of its assets are low-taxed free portfolio investments.
• Liquidation loss: deductible under conditions; above €5 million only with control over a subsidiary in the EU or EEA.
• Holding company: dividends and capital gains from the operating BV are tax-free in the holding; box 2 tax follows only when the holding pays out to you.

What the Participation Exemption Covers

Under article 13(1), profit excludes “the benefits from a participation, as well as the costs of acquiring or disposing of that participation” (see also the Belastingdienst, in Dutch):

• Exempt: dividends received and the gain on a sale. For a foreign participation, the currency result is part of the result on the participation.
• Not deductible: losses on the participation, such as a loss on a sale, and the costs of buying and selling it, such as advisers’ fees for the purchase or sale.
• Deductible: other costs, such as interest on a loan that finances the participation, within the general limits on interest deduction.
• Not exempt: payments that the subsidiary can deduct, in law or in fact, directly or indirectly, from a profit tax, such as interest on a hybrid loan (paragraph 17).
• Currency hedging: the result on a loan or other transaction (such as a currency forward) that hedges the currency risk on a foreign participation falls under the exemption only with an advance decision from the Belastingdienst (paragraph 7). The 2027 Tax Plan bill (Belastingplan 2027), still before parliament, would limit this from 2027 to the unexpected currency result.

Rates and filing are explained in our article on corporate income tax in 2026.

Exception: The Liquidation Loss

If a subsidiary is dissolved and its liquidation has been completed, your BV may deduct the liquidation loss (article 13d, in Dutch): what it paid for the participation minus the liquidation distributions. Exempt benefits from the participation, such as dividends, from the year in which the subsidiary (almost) entirely ceased its business, the five years before and the years after always count as distributions; so do those from the sixth to the tenth year before, if the subsidiary made a loss in that year (article 13d(6)). The conditions:

• €5 million: since 2021, the part of a loss above €5,000,000 is deductible only if your BV, alone or together with another subsidiary it controls, could determine the activities of the dissolved subsidiary, and that subsidiary was established in the Netherlands, the EU or the EEA (or a designated association country), both without interruption in the five years before the liquidation was completed, with a few exceptions.
• On time: the liquidation is completed no later than in the third calendar year after the year in which the business was (almost) entirely ceased or, if earlier, the decision to cease it, unless you show that the delay is not aimed at avoiding or deferring tax.
• No continuation: if your BV or a related entity continues the business, article 13e applies. Also, none of them, nor whoever continues the business, may receive any other relief for the subsidiary’s unused losses.

How a BV is dissolved and liquidated is explained in our guide to closing a Dutch BV.

The 5% Test: When Do You Have a Participation?

Your BV has a participation if, among other things, it (article 13(2) and (3)):

• holds at least 5% of the nominal paid-up capital of a company with shares, including a company abroad. What counts is the paid-up capital, not the value;
• holds at least 5% of the participation rights in a mutual fund (fonds voor gemene rekening);
• is a member of a cooperative, whatever the size of the membership;
• holds at least 5% of the voting rights in a company in an EU member state, if the tax treaty with that country reduces the tax on dividends based on voting rights.

There are also three extensions (source: Belastingdienst, in Dutch):

• Drag-along rule (meesleepregeling): profit-sharing certificates of, and a hybrid loan to, your participation count as part of the participation.
• Pull-along rule (meetrekregeling): a shareholding below 5% counts if the company is related to your BV, or if a related entity has a participation in it. Related means, among other things, a shareholding of at least one third (article 10a(4)).
• Three more years: if a shareholding that you held as a participation for more than a year falls below 5%, the exemption continues for three more years (paragraph 16).

Other shareholdings below 5% are taxed normally. If a shareholding moves from taxed to exempt or the other way round, you value it at market value and form a compartmentalisation reserve (compartimenteringsreserve), so that the change in value from a taxed period stays taxed and that from an exempt period stays exempt.

Portfolio Participations: When the Exemption Does Not Apply

Even at 5% or more, a portfolio participation that does not qualify is taxed (article 13(9) to (15); Belastingdienst, in Dutch):

Step	Question	If yes	If no
1. Portfolio participation?	Does your BV hold the shareholding for a return that fits normal asset management? Always a portfolio investment: the subsidiary’s assets (with its own participations) consist largely of shareholdings below 5%, or its function is largely to finance your BV or related entities.	Go to step 2	Exemption
2. Subject-to-tax test	Is the subsidiary subject to a profit tax that results in a reasonable levy by Dutch standards? Normally, 10% on profit calculated under Dutch rules counts as reasonable.	Exemption	Go to step 3
3. Asset test	Do the subsidiary’s assets, directly and indirectly, usually consist of less than half low-taxed free portfolio investments?	Exemption	Participation credit

A subsidiary whose business extends your own is not a portfolio investment. If your holding performs a substantial management or financial function for the group, the shareholding may also not be an investment. Free portfolio investments include surplus cash and assets used for passive group financing; real estate usually does not count. Steps 2 and 3 apply only to portfolio participations: for other participations, it does not in principle matter how much tax the subsidiary pays.

The Participation Credit

For a portfolio participation that does not qualify, the participation credit (deelnemingsverrekening, in Dutch) applies (articles 13aa and 23c):

• you add the benefits multiplied by 100/95 to the profit and get 5% of that amount as a tax reduction, up to the corporate income tax proportionally attributable to those benefits; any remainder carries over to the next year;
• for dividends from a subsidiary in the EU or EEA covered by the Parent-Subsidiary Directive, you can ask to credit the profit tax actually paid;
• if the subsidiary is exempt from profit tax, or the tax does not lead to an actual levy, there is no credit;
• a net negative result on these participations, also multiplied by 100/95, is deductible for only 5/25.8 of that amount, about 19%.

How It Works in Practice

Your BV applies the exemption in its corporate income tax return. Keep a record of which shareholding you have, since when and why, and for a foreign subsidiary also how it is taxed and what it owns.

Dividend withholding tax. If the participation exemption or the participation credit applies at your BV to the dividend of a Dutch subsidiary, and the participation belongs to your Dutch business, the subsidiary withholds no dividend withholding tax (article 4 of the Dividend Tax Act 1965). If the whole distribution is exempt, the subsidiary does not file a dividend tax return, unless the Belastingdienst invites it to.

Example 1: A Holding Company With an Operating Company

Your personal holding BV owns 100% of the shares in your operating BV. The operating BV pays corporate income tax on its own profit as usual: in 2026, 19% up to €200,000 and 25.8% above that.

• Dividend: a €100,000 dividend to the holding is exempt, with no dividend withholding tax. Even if the shareholding counted as an investment, it would stay exempt, because the operating BV is subject to Dutch corporate income tax.
• Sale: a €1.5 million gain on the sale of the operating BV is exempt; the advisers’ fees for the sale are not deductible.
• You as director-shareholder: only when the holding pays out to you does it withhold 15% dividend withholding tax, and if you live in the Netherlands you pay box 2 tax: 24.5% up to €68,843 and 31% above that, minus that dividend tax (KVK, tax rates 2026, in Dutch). If you live abroad, the tax on that dividend also depends on your country of residence and its tax treaty with the Netherlands.

See also tax planning with a Dutch holding company.

Example 2: A 3% Shareholding

Your BV holds 3% of another Dutch BV that is not related to it (for example, no one holds a third or more of both companies), and no related entity has a participation in it. A €10,000 dividend is then taxed at 19% or 25.8%; your BV credits the 15% dividend withholding tax against its corporate income tax. A gain on a sale is taxed, and a loss on a sale is deductible. If you later buy more and reach 5% or more, you form a compartmentalisation reserve at that moment.

Example 3: A Low-Taxed Investment Subsidiary

As an investment, your BV holds 100% of a foreign company that mainly invests surplus cash and pays 5% profit tax. That is less than the 10% that normally counts as reasonable, and more than half of its assets are low-taxed free portfolio investments: no exemption.

• If it pays a €95,000 dividend, your BV adds €100,000 to its profit and gets a reduction of at most €5,000.
• If its assets consist (almost) only of low-taxed free portfolio investments, you value the shareholding at market value every year (article 13a, at 25% or more). The CFC rule of article 13ab may also apply.

Participation Exemption or Fiscal Unity?

Both prevent double taxation within a group, but they work differently (Belastingdienst, fiscal unity, in Dutch):

	Participation exemption	Fiscal unity
Minimum shareholding	5% of the nominal paid-up capital	95% of the shares, voting rights, profit and capital
Application	No	Yes, at the request of the parent and the subsidiary
Subsidiary’s loss	Cannot be offset, except a liquidation loss	Offset against the profit of the other companies
Foreign subsidiary	Can be a participation	No; only companies established in the Netherlands, or a foreign company for its Dutch permanent establishment

How NetherBridge Partners Helps

We check whether your shareholding is a participation and how dividends, capital gains and losses are treated, assess whether a fiscal unity makes sense, and process the outcome in the tax return of your BV or holding. See our corporate income tax advice, our tax return support and, for foreign subsidiaries, our international tax advice, or contact us.

The rules in this article were checked in November 2026 in the Corporate Income Tax Act 1969 and the Dividend Tax Act 1965 (wetten.overheid.nl), with the Belastingdienst and KVK, and in the 2027 Tax Plan bill.

Frequently Asked Questions