How it works
Profit is taxed once, in the company that earns it. That company can pay the profit as dividend to a parent company that owns at least 5% of its shares. The parent receives the dividend free of corporate tax. The same applies when the parent sells the shares at a gain. This rule is the participation exemption.
The exemption applies to shareholdings in Dutch and foreign companies. Extra conditions apply to shareholdings that are mainly passive investments in low-tax countries. For an operating subsidiary anywhere in the world, the exemption normally applies.
The exemption applies in both directions in a group. A German parent with a Dutch subsidiary receives the Dutch profit free of Dutch corporate tax at its level. Within the EU, the Dutch dividend withholding tax is 0% under the parent-subsidiary rules. A Dutch holding with subsidiaries in five countries receives all their profit in one company.
The same applies to costs and losses on the shareholding. As a rule, a loss on the sale of a shareholding is also outside the taxable profit. The liquidation loss rule is the exception.
Example
A Dutch holding owns 100% of an operating BV. The operating BV makes €300,000 profit, pays €63,800 corporate tax and pays €236,200 as dividend to the holding. The holding receives the full €236,200 and pays 0% corporate tax on it. In 2030 the holding sells the operating BV for €2 million. The gain on the sale is exempt too.
The figures
Every rate for 2026 is listed in Netherlands tax rates 2026, and the figures for 2027 are in Netherlands tax rates 2027.
Questions people ask
Does the exemption also apply to a foreign subsidiary?
Yes, when the subsidiary has an active business or is taxed at a reasonable rate. A subsidiary that mainly owns passive investments in a low-tax country is outside the exemption.
Does the owner pay tax at some point?
Yes, when the holding pays money to the owner privately. A Dutch resident then pays box 2 tax on the dividend. An owner abroad pays tax under the rules of the country where they live. Until then, the holding can reinvest the full profit.
Holdwise, Hoofddorp. We keep this definition in line with our Dutch and German glossaries, and the figures are those for the tax year 2026. Updated 30 September 2026.
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