NETHERLANDS Law and Practice Contributed by: Nathalie Idsinga and Mignon de Wilde, Arcagna
schemes. These contributions are calculated based on earnings and are collected either through wage tax withholdings or via the annual income tax return, depending on how the income is received. Social security contributions are capped at EUR10,628 per year (2025). Box 1 Income from current and previous employment, busi - ness activities, certain “other activities, specific annu - ity payments, and deemed income from the principal residence” is taxed at progressive rates in Box 1, up to a maximum of 49.5%. The wage tax that is with - held on salary by the employer can be offset against personal income tax on employment income. Income from business activities also includes capi - tal gains (or losses) on business assets. Income from other activities includes “business-like” income such as income from freelance work as well as certain income arising from transactions with a corporation in which the taxpayer is a substantial shareholder, such as interest on loans provided to the corpora - tion and rental income from properties leased to the corporation. The principal residence is taxed in Box 1. Personal income tax is levied on a notional rental value (the eigenwoningforfait , a percentage of the property’s value for tax purposes); capital gains on the princi - pal residence are tax-exempt. If certain conditions are met, interest paid on a loan for the acquisition, improvement or maintenance of the principal resi - dence may be deducted for up to 30 years (“mortgage interest relief” or hypotheekrenteaftrek ). The deduction of mortgage interest in the highest income tax bracket is limited to a rate of 37.48% (2025). Box 2 In Box 2, income and gains related to a substantial shareholding are subject to tax. A substantial inter - est generally exists if a taxpayer holds at least 5% of the shares in a company. Depending on the cir - cumstances, this may also include options on shares, profit rights or economic ownership. Income from a substantial interest comprises both dividends and capital gains. The applicable tax rate is 24.5% on the first EUR67,804 of income or gains, and 31% on any
excess (2025). Dividends paid by a Dutch resident company are subject to a 15% dividend withholding tax, which can be credited against the Dutch personal income tax liability. For Dutch personal income tax (and dividend with - holding tax) purposes, dividends and capital gains also include certain deemed dividends and deemed capital gains. For example, a shareholder with a sub - stantial interest in a low-taxed corporation (taxed at less than 10%) is subject to Box 2 personal income tax on a deemed annual “dividend” (5.88% of the substantial interest’s fair market value in 2025). This deemed dividend is reduced by any actual dividends received during the year. Examples of deemed capital gains include the repurchase of shares by a company, the liquidation of the company, and the inheritance or donation of a substantial interest. In addition, a deemed benefit from a substantial inter - est is recognised if and to the extent that shareholder loans from a company in which a substantial interest is held exceed EUR500,000 (2025). For the EUR500,000 threshold, loans taken up by the shareholder’s fiscal partner and certain close relatives are attributed to the shareholder. Under certain conditions, loans used for the acquisition, improvement or maintenance of a principal residence are excluded. If a substantial shareholder emigrates from the Neth - erlands, exit tax is due with respect to any substan - tial shareholdings held at the time of emigration. The Dutch tax authorities issue a protective assessment ( conserverende aanslag ) for up to 31% (2025) per - sonal income tax on the deemed realised capital gain. An interest-free extension for tax payment is granted automatically for emigration within the EU/EEA, or upon request for emigration outside the EU/EEA (in which case security must be provided). The exten - sion for tax payment is withdrawn, and the protec - tive assessment is (partially) collected if, among other things, the emigrated substantial shareholder receives a dividend or realises a capital gain. The extension is also withdrawn upon the emigrated taxpayer’s death. Heirs may only request a further extension if the substantial shareholding represents active busi - ness assets.
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