NETHERLANDS Law and Practice Contributed by: Michael Molenaars, Jeroen Smits, Reinout de Boer and Rogier van der Struijk, Stibbe
3.4 Taxation of Individuals on Shares in Closely Held Corporations Typically, individuals can conduct business activities in person or as a substantial shareholder of a legal entity (eg, a BV). In the case of business activities that are carried out in person (either alone or as a participant in a tax-transparent partnership), the net result of the enterprise is taxed with Dutch personal income taxation at a top rate of 49.50% in 2026, to the extent that the amount of taxable profits exceeds EUR78,426. Note, however, that a base exemption of 12.70% (2026) applies, which lowers the effective tax rate. Any gain on the transfer of the enterprise (eg, the transfer of the assets, liabilities and goodwill) is also taxable at the same rates as regular profits. Where business activities are carried out via a BV, the shares of which are owned by substantial share - holders, the business income is subject to corporate income taxation. To the extent that the profit after tax is distributed to a substantial shareholder in the Neth - erlands, personal income tax is due at a rate of 24.5% on amounts up to EUR68,843 and 31% on amounts exceeding this threshold. A capital gain realised by a substantial shareholder will also be taxed at these rates in 2026. 3.5 Taxation of Individuals on Shares in Public Corporations Dividend income that is not considered part of busi - ness income and is received by individuals who do not qualify as substantial shareholders (essentially share - holders who are not entrepreneurs and who hold less than 5% of the shares in the relevant companies) is not taxed as such. In 2021, the Dutch Supreme Court ruled that the Dutch income tax levy on savings and investments in 2017 and 2018, under specific circumstances, violated the European Convention on Human Rights and the First Protocol thereto. In response to this, the Dutch gov - ernment amended the Dutch regime for income from savings and investments for the years 2023 up to and including 2026. Under this amended regime, the income from portfolio investments (including portfolio dividends) is deemed to be 6% of the fair market value of the underlying shares (and other investments held by the taxpayer) minus 2.7% (preliminary percentage,
substantial shareholders almost equal the personal income tax rate for individuals. Broad Balance Between Taxation of Incorporated and Non-Incorporated Business Income Under the current substantial shareholding regime (which roughly applies to individuals holding an inter - est in a company of at least 5% of the share capi - tal), dividend income (as well as capital gains) is subject to personal income tax at a rate of 24.5% up to EUR68,843 and 31% on amounts exceeding this threshold (2026). The corporate income taxation on the underlying profit currently amounts to 19% for the first EUR200,000 and 25.8% beyond that. This is a combined effective tax rate of approximately 48.80% (2026). The top personal income tax rate amounts to 49.50% in 2026 (applied to a taxable income exceeding EUR78,426 per annum). Due to the application of several exemptions for individuals earning non-incor - porated business income, the effective tax rate is sub - stantially lower. 3.3 Restrictions on Retention of Earnings by Closely Held Corporations It is mandatory for substantial shareholders of a BV to earn a minimum salary from the BV, to avoid all earnings remaining undistributed and due to which the substantial shareholder may unintendedly benefit from social security benefits. In principle, the mandatory minimum salary amounts to the highest of (i) the sal - ary of the most comparable job, (ii) the highest salary earned by an employee of that company or a related entity, and (iii) EUR58,000 (2026). If it can be demonstrated that the highest amount exceeds the salary of the most comparable job, the minimum salary is set to the salary of the most com - parable job. On 1 January 2023, new legislation was introduced to prevent entities from granting excessive loan amounts (in 2026, EUR500,000 or more) to individual share - holders.
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