s-Hertogenbosch, The Netherlands

Investment vehicles under the Dutch participation exemption

By Carijn van Helvoirt-Franssen and Roel Jansen, EJP Accountants & Adviseurs

If a Dutch company holds at least 5% of the paid-up capital on shares in another company (subsidiary), in general, the participation exemption applies. However, if the subsidiary is considered an investment vehicle, there might be some obstacles in the way. We will elaborate on that on a high level basis below.

Main rule

The Dutch participation exemption provides a full Dutch corporate income tax exemption on the benefits of a subsidiary, such as dividends and capital gains, in cases where the Dutch company holds at least 5% of the paid-up capital of a subsidiary.

Investment vehicle

When a Dutch company owns a subsidiary as an investment, instead as a part of its active company, the Dutch participation exemption in principle does not apply. Dutch tax law does not give an unambiguous definition of an investment vehicle. However, legislation and case law provide a framework to determine whether a subsidiary should be considered an investment vehicle or not.

This exception in the Dutch participation is an anti-abuse provision – by this exception, the Dutch government aims to prevent mobile capital from being rendered low-taxed, and thereafter from receiving tax exempt in the Netherlands. Taking that as the main consideration for this exception, the Dutch government added an escape for so-called “qualifying investment vehicles”. Therefore, the participation exemption can be applied on investment vehicles, under certain conditions.

To qualify, the subsidiary needs to meet one of the following requirements:

  1. The subsidiary pays at least 10% corporate income tax (statutory and effective tax rate); or
  2. The assets of the vehicle qualify (this is an extensive provision; therefore we will not elaborate on that in this article).

Conclusion

The Dutch participation exemption appears straightforward at first glance, but it is quite laborious in execution. Therefore, it is recommended that you engage a Dutch tax advisor if this issue comes up.


Carijn van Helvoirt-Franssen

Carijn van Helvoirt-Franssen

GGI member firm
EJP Accountants & Adviseurs
Auditing & Accounting, Corporate Finance, Tax
‘s-Hertogenbosch, The Netherlands
T: +31 6 53 89 33 60
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W: ejp.nl

EJP Accountants & Adviseurs are auditors, advisers, and challengers. Their 40 auditors and international tax lawyers have a wide range of expertise. Their main fields of expertise are Dutch corporate and personal income tax, international taxation, Dutch royalty, interest and dividend withholding tax, estate planning, and wage tax. They have an AFM license to perform audits for the larger midsize companies.

Carijn van Helvoirt-Franssen holds a Masters in Fiscal Economics from Tilburg University and has been part of the EJP team since 2020. As an allround tax specialist, she focuses on providing tax advice to companies and their directors and major shareholders.
Roel Jansen

Roel Jansen

GGI member firm
EJP Accountants & Adviseurs
Auditing & Accounting, Corporate Finance, Tax
‘s-Hertogenbosch, The Netherlands
T: +31 73 850 74 37
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W: ejp.nl

Roel Jansen completed a Master’s degree in Fiscal Economics at Tilburg University in 2021 and has been part of the EJP team since 2019. As an all-round tax specialist, he mainly focuses on international tax and inheritance and gift tax.


Published: M & A Newsletter, No. 02 Spring 2022 l Photo: Tobias Arhelger - stock.adobe.com

 

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