How it works
Profit is taxed once, in the company that earns it. When that company pays the profit as dividend to a parent company that owns at least 5% of its shares, the parent receives it free of corporate tax. The same applies when the parent sells the shares with a gain. That is the participation exemption.
The exemption applies to shareholdings in Dutch and foreign companies alike, with conditions for holdings that are mainly passive investments in low-tax countries. For an operating subsidiary anywhere in the world the exemption normally applies.
The exemption works 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; the Dutch dividend withholding tax is 0% within the EU under the parent-subsidiary rules. A Dutch holding with subsidiaries in five countries collects all their profit in one place.
Costs and losses that belong to the shareholding follow the same logic: a loss on the sale of a participation is, as a rule, outside the taxable profit too. 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 is exempt too.
The figures
All 2026 figures: Netherlands tax rates 2026 · the 2027 figures: Netherlands tax rates 2027.
Questions people ask
Does the exemption also apply to a foreign subsidiary?
Yes, when the subsidiary is an active business or is taxed at a reasonable rate. A shareholding that mainly holds passive investments in a low-tax country falls outside it.
Does the owner pay tax at some point?
Yes, when money leaves the holding to the owner privately: box 2 on dividend for a Dutch resident, or the rules of the country where the owner lives. Until then the profit compounds inside the holding.
Holdwise, Hoofddorp. Definition and explanation maintained with the Dutch and German glossaries; figures from the central rates source, year 2026. Updated 16 September 2026.
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