International Structures

GILTI and Your Dutch BV: How US Owners Are Taxed on Retained Profit

Updated: 14 August 2026 United States GILTI BV

The rule that surprises Americans with a Dutch company: profit left inside the private limited company (BV (besloten vennootschap, the Dutch private limited company)) can appear on the US return before a single euro is distributed. That rule is global intangible low-taxed income (GILTI), and its effect on a Dutch structure depends almost entirely on the corporate rate the BV pays and on one election.

What GILTI does

GILTI was built to stop profit accumulating untaxed in low-rate jurisdictions. It works by including most of the current-year income of a controlled foreign corporation (CFC) in the US shareholder’s return, regardless of payout. A wholly owned Dutch BV is a CFC, so its profit falls inside the mechanism from the first year.

The calculation starts from the BV’s tested income and subtracts a return on tangible assets — 10% of qualified business asset investment, the depreciable tangible property the company owns. What remains is the GILTI inclusion. A service business, a consultancy or a software company holds few tangible assets, so nearly all of its profit becomes tested income. This is why GILTI hits knowledge businesses harder than manufacturers.

Why the Dutch rate matters so much

GILTI carries relief for foreign tax already paid, and the relief scales with the rate. The Netherlands charges 19% corporate income tax on the first €200,000 of profit and 25.8% above — comfortably inside the range where the foreign tax credit absorbs most or all of the US exposure. Dutch companies therefore sit in a very different position from companies in zero-tax jurisdictions, which is precisely the outcome the rule was designed to produce.

The relief reaches the shareholder in different ways depending on how the shares are held. A US corporation owning the BV claims a deduction against the inclusion together with a credit for a portion of the foreign tax. An individual owning the shares directly starts outside both routes — which is where the election comes in.

The section 962 election

An individual US shareholder may elect under section 962 to be taxed on the inclusion as though a domestic corporation stood in their place. The effect: the corporate rate applies to the inclusion rather than the individual rate, the deduction becomes available, and the credit for Dutch corporate tax comes into reach. For an owner of a profitable Dutch BV, the difference between electing and staying with the default is often the difference between a meaningful US bill and close to nothing.

The election is made year by year with the return, and it carries a consequence to plan for: when the profit is later distributed as an actual dividend, the amount above the tax already paid under the election is taxed again at the shareholder level. The election therefore shifts timing as well as amount, and it rewards owners who know roughly when they intend to distribute.

The choices that shape the outcome

Three levers change the GILTI picture on a Dutch structure, and all three are ordinary business decisions rather than schemes.

Salary level. The customary salary a director-shareholder draws (€58,000 in 2026) is a deductible expense in the BV, so it lowers tested income before GILTI is measured — while raising employment income taxed under different rules with its own reliefs. The two systems pull against each other, and the balance point is worth calculating rather than guessing: the DGA salary rules set out the Dutch side.

Distribution timing. Profit taxed under a section 962 election and then distributed meets a second layer, so the sequence of salary, dividend and retention deserves a plan across years rather than a decision each December.

Structure. A holding company above the operating BV changes what sits where, brings the participation exemption into play on a later sale, and adds a second information return. For an American building toward an exit, that trade is often worth making early: see the Dutch holding structure.

Where GILTI fits in the year

The inclusion is computed from the same figures that feed Form 5471, which is why the two are prepared together, and it appears in the return alongside the foreign tax credit claim. The complete annual set for a US owner — both countries, every form — sits in the annual filing picture.

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Frequently Asked Questions

Does GILTI apply if my Dutch BV distributes all its profit each year? +

The inclusion is measured on current-year income regardless of distribution, so paying everything out changes the shareholder-level position rather than removing the GILTI calculation. What full distribution does change is the interaction with the section 962 election, since profit already distributed avoids the second layer that the election otherwise creates later.

Is the Netherlands a low-taxed jurisdiction for GILTI purposes? +

At 19% on the first €200,000 and 25.8% above, the Dutch rate sits in the range where the foreign tax credit absorbs most of the exposure for shareholders able to claim it. The label matters less than the arithmetic, and the arithmetic generally favours a Dutch company.

Should I always make the section 962 election? +

It usually improves the immediate result for an individual holding BV shares directly, and it moves tax to the moment of distribution instead. The right answer depends on the profit level, the salary drawn and when distributions are planned, so it is calculated each year with the return rather than fixed once.

Does GILTI reach a BV that only holds investments? +

Passive income follows a separate route: subpart F income is included directly, and tested income for GILTI excludes what subpart F already captures. A holding company with investment income is therefore analysed under both sets of rules together.

What if my BV makes a loss? +

A tested loss reduces the aggregate inclusion across a shareholder's controlled foreign corporations for the year, and the treatment of losses across years follows its own rules. The information return remains due either way.

Sources Belastingdienst · KVK · wetten.overheid.nl Last updated: 14 August 2026