Income from substantial shareholdings (Box II)

Income derived from substantial shareholding needs to be declared in an individual’s Dutch personal income tax return (Box II). However, this is not always the case for expats!

Dividends, other profit distributions, interest and capital gains in connection with a substantial shareholding are subject to a flat tax rate of 25%. A substantial shareholding exists if the tax payer owns, alone or together with his or her spouse (partner), directly or indirectly, at least 5% of the issued share capital, or at least 5% of a particular class of shares, in a Dutch resident or foreign company. In family companies, a substantial interest may also exist if the tax payer has a smaller holding, providing that his lineal ascendant or descendant owns a substantial shareholding in the same company.

Capital losses and costs, such as interest relating to a substantial shareholding are deductible, in the first instance, from income of another source in the same box. Moreover, 25% of any excess is creditable against the tax due on the tax payer’s income falling under Box I.

As explained in earlier columns, an expatriate has the right to choose whether he or she would like to be treated as foreign tax payer in the Netherlands (for Box II and Box III). If he or she chooses for such a treatment, the tax on income derived from substantial shareholdings is limited to shareholdings in Dutch companies. That means that in such a case, substantial shareholdings in foreign companies do not have to be declared in Dutch personal income tax returns.

If you would like to receive more information in this matter, please do not hesitate to contact me (+31 (0)70 338 08 08) or Alexander.knijnenburg@bdo.nl).

Kind regards,
Alexander