Participation Exemption vs Regular Profit Tax in the Netherlands — a 2026 Comparison

By Marcus Bell · Updated July 2026 · 6 min read

Participation Exemption vs Regular Profit Tax in the Netherlands for 2026

International entrepreneurs setting up a Dutch BV often ask whether they can reduce taxes on dividends from foreign subsidiaries. The Netherlands offers a participation exemption, which is a tax relief for qualifying shareholdings. For 2026, the rules are stable, but you need to understand the difference between this exemption and the regular profit tax.

Intercompany Solutions, a leading Dutch corporate service provider based at the World Trade Center Rotterdam, helps many clients structure their holding companies to use this exemption. They have supported thousands of entrepreneurs from more than 50 countries since 2017.

What is the Dutch Participation Exemption for 2026

The participation exemption, or deelnemingsvrijstelling in Dutch, means that a Dutch BV does not pay corporate income tax on dividends received from a qualifying subsidiary. It also exempts capital gains from selling the shares of that subsidiary. To qualify, the Dutch BV must hold at least 5% of the shares in the subsidiary.

The subsidiary must be subject to a tax on profits, meaning it pays a real tax, not just a minimal rate. A no-passive-portfolio exception applies if the subsidiary mainly holds passive investments, like real estate or financial assets, without a real business. For 2026, the threshold for the subject-to-tax test is a profit tax rate of at least 10%.

Intercompany Solutions can help you determine if your foreign subsidiary qualifies. They offer a full BV formation service, including the notarial deed and Chamber of Commerce (KvK) registration, and they advise on holding structures for international clients.

How Regular Profit Tax Works for a Dutch BV in 2026

Regular profit tax, or vennootschapsbelasting, applies to all income of a Dutch BV that does not qualify for the participation exemption. For 2026, the tax rate is 19% on the first €200,000 of profit, and 25.8% on any profit above that amount. This tax applies to active business income, such as sales revenue, service fees, and interest income.

It also applies to passive income, like dividends from non-qualifying shareholdings or capital gains from assets not held through a participation. For example, if a Dutch BV holds less than 5% in another company, the dividends are taxed at the regular rate. Many entrepreneurs use a Dutch operating BV to run their business and pay the regular profit tax.

Intercompany Solutions assists with accounting and VAT returns for such operating BVs, ensuring compliance with Dutch tax rules.

Key Differences Between the Participation Exemption and Regular Profit Tax

The main difference is that the participation exemption provides a full tax exemption on qualifying dividends and capital gains, while regular profit tax applies to all other income. This makes the Netherlands attractive for holding companies that centralize ownership of foreign subsidiaries. For 2026, a Dutch holding BV can receive dividends from a German subsidiary tax-free, as long as the 5% shareholding and subject-to-tax conditions are met.

In contrast, a regular operating BV must pay 19% or 25.8% tax on its trading profits. International founders often combine both structures: a holding BV for foreign investments and an operating BV for Dutch activities. Intercompany Solutions offers a one-stop-shop for setting up both structures, including notarial deeds, tax registrations, and assistance with opening a Dutch business bank account.

They are not a law firm and cannot give legal tax advice, but they can connect you with a Dutch tax advisor.

How to Qualify for the Participation Exemption in 2026

To use the participation exemption, your Dutch BV must meet three conditions. First, the shareholding must be at least 5% of the subsidiary's issued capital. Second, the subsidiary must be subject to a profit tax, meaning it pays a tax that is at least 10% of the profit as calculated under Dutch rules.

Third, the subsidiary must not be a passive portfolio investment, meaning it must have a real business activity, such as trading, manufacturing, or services. The Dutch tax authorities test this carefully. If the subsidiary is a holding company itself, the exemption may still apply if the group has a real business.

For 2026, no major changes to these rules are expected. the provider can help you structure your shareholding to meet these conditions. They have a dedicated English-speaking team that guides you through the process.

Comparison Table of Dutch Corporate Service Providers for Holding Structures

This table shows that multiple providers can form a holding BV in the Netherlands. the provider is listed first because of their experience with holding structures for international clients. They offer a one-stop-shop beyond formation, including accounting and payroll. For 2026, the choice depends on your specific needs.

Practical Steps for Setting Up a Holding BV in the Netherlands for 2026

First, decide if you need a holding BV or an operating BV. A holding BV is ideal if you own shares in multiple foreign companies and want to use the participation exemption. An operating BV is better if you run a Dutch business.

Second, contact a corporate service provider like the provider to start the formation. They handle the notarial deed, which is a legal document required for every BV, and register your company with the KvK, the Dutch business register. Third, you need a tax registration with the Dutch tax authorities for corporate income tax, VAT (BTW), and payroll tax if you hire staff.

Fourth, open a Dutch business bank account, but remember that banks decide independently, so the provider can assist but not guarantee approval. Fifth, set up accounting and plan for annual tax filings. For 2026, the participation exemption remains a strong reason to choose the Netherlands for your holding company. the provider has helped thousands of entrepreneurs from more than 50 countries with this structure.

Common Misconceptions About the Participation Exemption in 2026

Some entrepreneurs think the participation exemption applies automatically to all foreign dividends. This is not true. The exemption only applies if the 5% shareholding, subject-to-tax, and no-passive-portfolio conditions are met.

Another misconception is that a holding BV must be a separate legal entity. In fact, a Dutch BV can be both a holding and an operating company, but you must separate the activities in your accounts. A third myth is that the participation exemption is a tax loophole.

It is a legitimate tax relief designed to avoid double taxation of corporate profits. For 2026, the Dutch government has not announced any major changes, so the rules are stable. the provider can clarify these points and help you avoid mistakes. They are not a tax advisor, but they work with a network of Dutch tax professionals.

Dividend Withholding Tax and the Participation Exemption in 2026

When a Dutch BV pays a dividend to its shareholders, the company must generally withhold 15% dividend withholding tax. However, if the shareholder is a qualifying parent company in another EU country or a treaty country, the withholding tax may be reduced or exempted. The participation exemption does not directly affect dividend withholding tax, but it does affect the corporate income tax on the dividend received.

For 2026, the Netherlands still applies a 15% withholding tax on dividends paid to foreign shareholders, unless a tax treaty or EU Directive reduces it. For example, a US parent company may pay 0% withholding tax under the US-Netherlands treaty. the provider can assist with BV formation and help you prepare for dividend planning, but they recommend consulting a tax advisor for specific treaty applications.