The participation exemption is the fiscal backbone of every holding structure. Dividend and sale gains from subsidiaries arrive in the holding fully exempt from corporate tax.
Short answer
The participation exemption is the rule that makes Dutch holding structures work: when your holding owns at least 5% of another company, dividends and sale profits from that company arrive at the holding completely free of corporate tax. Sell your operating company for a million? The million lands in your holding untaxed, ready to reinvest. Tax only follows when you pay it out to yourself privately. This exemption also works across borders, which is why international groups route ownership through the Netherlands.
What the participation exemption is
A holding BV (besloten vennootschap, the Dutch private limited company) that owns at least 5% of another BV receives the profits from that company free of corporate tax. The law calls this the participation exemption (deelnemingsvrijstelling, article 13 of the Corporate Tax Act). It covers dividends and it covers the gain when the shares are sold.
The conditions
- The holding owns at least 5% of the subsidiary’s shares.
- The subsidiary runs a genuine business, or is taxed at a reasonable level. Passive, low-taxed investment vehicles fall outside the exemption.
What the exemption covers
- Dividends from subsidiary to holding: exempt.
- Sale gains on the subsidiary’s shares: exempt.
- Currency results on the participation: exempt.
Worked example
The operating company earns €200,000 profit. After 19% corporate tax, €162,000 remains. It distributes €100,000 to the holding — received fully exempt. Later the holding pays €68,843 to you privately: 24.5% box 2 is €16,867, leaving €51,976 in hand. The remaining €31,157 stays in the holding, ready for reinvestment.
The exemption is link two of the chain: before it sits the 2026 corporate tax rate in the operating BV, after it the timing of distributing dividend in 2026 to private. Last verified: 11 August 2026.
Two steps further
Further along the same line: Your Dutch Holding and a Foreign Subsidiary and Holding via Stichting (STAK).
Frequently Asked Questions
Does the participation exemption apply to a foreign subsidiary? +
Yes, with additional conditions: the subsidiary must be sufficiently taxed abroad (the subject-to-tax test) or run a genuine business.
Can a sole trader benefit from the participation exemption? +
The exemption is exclusive to corporate-tax entities such as BVs and NVs; income-tax entrepreneurs fall outside it.
Does the exemption also apply when selling the operating BV? +
Yes — the full sale gain lands tax-free in the holding. That is exactly why you incorporate the holding well before a sale: the value growth then falls under the exemption.
From what stake does the exemption apply? +
From 5% of the nominal paid-up capital. At or above 5%, dividend and sale gains flow to the holding free of corporate tax; below it, other rules apply.
