Setting up a Holding Company in Netherlands

Dutch Holding
Advantages and Tax Benefits

Forming a Dutch holding company is a popular strategy for international tax planning, asset protection, and corporate structuring. The Netherlands is known for its stable legal system, attractive tax treaties, and favorable holding regime.

What Is a Dutch Holding Company?

A holding company in the Netherlands is typically a Besloten Vennootschap (BV) — a private limited liability company — whose main purpose is to own shares in other companies.

A Dutch holding company primarily holds shares or ownership stakes in other companies, rather than engaging in commercial or operational business activities itself. Here’s a breakdown of what it does and why it’s used:

Main Functions of a Dutch Holding Company

Owns Subsidiaries

Acts as the parent company in a group structure.
Holds shares in operating companies (OpCos), often in different countries.

Receives Dividends and Capital Gains

Collects profits (dividends) from its subsidiaries.
Benefits from the Dutch participation exemption, which often makes these earnings tax-free.

Centralizes Management and Control

Can streamline decision-making, governance, and strategy across multiple entities.

Facilitates Group Financing

Can provide or coordinate funding within the group.
May issue loans or receive interest income (subject to certain tax rules).

Protects Assets

Helps shield valuable assets (e.g., intellectual property, cash, investments) from operational liabilities.
Useful in succession planning and estate structuring.

Improves Tax Efficiency

Reduces tax leakage through use of treaties and exemptions.
Can serve as an intermediary between foreign subsidiaries and shareholders in tax-advantaged ways.

Common Uses in Practice

Multinational Structures

Holding companies own subsidiaries across multiple countries.

Startups and Investors

Used to separate IP or shares from daily operations.

Private Equity

Owns multiple portfolio companies under one parent.

Family Businesses

Used for estate planning and wealth structuring.

Full Advantages of a Dutch Holding Company

A Dutch holding company offers a wide range of legal, tax, financial, and operational advantages that make the Netherlands one of the most attractive jurisdictions for setting up a holding structure. Below is a comprehensive list of the benefits such a company can provide:

Tax Benefits

Participation Exemption

100% exemption from Dutch corporate income tax on:

– Dividends received from qualifying subsidiaries
– Capital gains from the sale of those subsidiaries

Applies when:
– The subsidiary is not a passive investment (less than 50% passive assets)
– Holding at least 5% of shares
– Meets substance requirements

No Withholding Tax on Inbound Dividends

The Netherlands does not levy withholding tax on dividends received from most foreign jurisdictions.

Reduced Withholding Tax on Outbound Dividends

Standard Dutch dividend withholding tax: 15%
Reduced or 0% via double tax treaties or the EU Parent-Subsidiary Directive

No Capital Gains Tax on Qualifying Share Sales

When selling subsidiaries, gains can be tax-free if participation exemption applies.

No Capital Duty

No tax on capital contributions or increases in share capital.

Dutch Participation Exemption

The participation exemption is one of the core tax benefits of using a Dutch holding company, and it’s what makes the Netherlands such a popular jurisdiction for multinational corporate structures.

The participation exemption means that a Dutch company does not pay corporate income tax on:

• Dividends received from qualifying subsidiaries
• Capital gains from the sale of those subsidiaries

This prevents double taxation — where profits are taxed at the subsidiary level and then again when distributed to the holding company. To benefit from the exemption, the Dutch holding company must meet all of the following conditions:

Ownership Threshold

The Dutch company must own at least 5% of the shares in the subsidiary (called a “qualifying participation”).

Active Business Requirement

At least one of the following three “tests” must be met:

• Motivated Test (business motive)
  The participation serves a business purpose, not just tax planning.
• Asset Test
  The subsidiary’s assets are not more than 50% “passive” (like portfolio investments).
• Subject-to-Tax Test

The subsidiary is taxed at a reasonable corporate tax rate (generally at least 10–12.5%) and is not in a tax haven. If the subsidiary fails all of these tests (i.e., it’s a low-taxed passive investment entity), the participation exemption does not apply — but a credit or deduction may still be available.

Tax Exemption – Example

A Dutch holding company owns 100% of a German subsidiary. The German sub pays €1 million in dividends to the Dutch parent.

• The Dutch company receives the dividend tax-free (no Dutch corporate tax due).
• If the German sub is taxed at normal German rates and is actively trading, the participation exemption applies.
• Additionally, under the Netherlands–Germany tax treaty, the withholding tax on dividends is reduced or eliminated.

Incomes Not Covered:

• Portfolio investments (subsidiaries held only for investment and not involved in active business)
• Interest income and royalties (not eligible for this exemption — taxed separately)
• Subsidiaries in certain blacklisted jurisdictions unless exceptions apply

Global Advantages

Tax Treaty Network

Over 100 tax treaties with reduced withholding taxes.
Strong treaties with the U.S., EU, and emerging markets.
Minimizes double taxation for international business groups.

Legal and Asset Protection

Isolates high-risk operations from valuable assets (e.g., intellectual property, cash, or real estate).
Limits liability – Only capital in the company is at risk.
Supports effective Estate Planning and Succession.

Operational and Structural Efficiency

Central point for:

• Group management
• Dividends
• Financing (intra-group loans)
• Strategic control
• Simplifies M&A, joint ventures, and corporate restructuring.

Flexible Corporate Structure

Dutch B.V. (private limited) is easy to maintain:

• No minimum capital requirement (just €0.01)
• 100% foreign ownership allowed
• Only one director and one shareholder needed (can be the same person)
• Shareholders can be individuals or companies

Access to EU Market

A Dutch holding gives you a European presence.
Can benefit from:

• EU Parent-Subsidiary Directive (no tax on intra-EU dividends)
• EU Merger Directive and freedom of establishment
• Free movement of capital, goods, and services

Business-Friendly Legal Environment

Transparent and efficient legal system
Predictable corporate law and dispute resolution
English is widely used in legal and financial contexts

Compliance & Reporting Simplicity

Small holding B.V.s may qualify for:

• Exemptions from audit (if under certain size limits)
• Simplified annual reporting obligations

TBA services

We have 2 decades of experience in the incorporation and management of asset holding companies, whether it be for owning property, or for other reasons such as holding an investment portfolio.

We do not simply incorporate Dutch Holding companies – we always take a client’s needs and personal circumstances into consideration before deciding upon which jurisdiction of incorporation will be best and most suitable.

Owning your assets through a company can reduce or eliminate the inheritance tax, capital gains tax and income tax, and afford confidentiality (seen as a major benefit for those clients residing in high-risk countries). Asset holding companies can also circumvent the need for the granting of probate, an often time-consuming and expensive process, and play a vital role for long term family financial planning.

We are happy to examine possibilities with you for as long as it takes, in order to find the best solution for you and your family.

Please do not hesitate to contact us for more information on how we might be able to benefit you in the ownership of your assets.