The Netherlands, with its robust economy, favorable business environment, and strategic location in the heart of Europe, has long been a preferred choice for multinational corporations.
A key part of this appeal is the Netherlands’ tax framework, which offers a number of advantages for businesses, particularly those engaged in international operations. In this article, we’ll delve into the ways the Netherlands is used in various tax strategies and provide detailed examples of its implementation.
Last updated: March 2026. The Dutch tax landscape is evolving rapidly due to EU directives and global minimum tax initiatives. Consult a qualified tax advisor before making any decisions based on this article.
The Dutch Tax Environment
Before we dive into the strategies, let’s first understand the tax environment in the Netherlands. The Dutch tax system provides several advantages for businesses, including:
- Corporate Tax: The corporate tax rate in the Netherlands is 19% for profits up to EUR 200,000, and 25.8% for profits exceeding that amount. These rates have been stable since 2023 and are not expected to change in the near term.
- Tax Treaties: The Netherlands has an extensive network of double taxation treaties with more than 100 countries. These treaties help prevent businesses from being taxed on the same income in multiple countries, making cross-border operations more tax-efficient.
- Participation Exemption: The Netherlands provides a participation exemption that makes dividends and capital gains from qualifying subsidiaries tax-exempt. To qualify, the parent must generally hold at least 5% of the subsidiary’s shares.
- Innovation Box: The Dutch Innovation Box regime provides an effective 9% corporate tax rate on profits derived from innovative activities, such as patented technology or software development.
- Fiscal Unity: The fiscal unity regime allows a parent company and its qualifying Dutch subsidiaries to be treated as a single entity for corporate tax purposes, providing tax consolidation benefits.
Important Recent Developments
Several major changes have reshaped the Dutch tax landscape in recent years:
Pillar Two Global Minimum Tax (15%)
The Netherlands has implemented the OECD’s Pillar Two rules through its Minimum Tax Act 2024. This ensures a global minimum effective tax rate of 15% for multinational groups with consolidated revenues of at least EUR 750 million. The Dutch implementation includes:
- A Qualified Domestic Minimum Top-up Tax (QDMTT) and Income Inclusion Rule (IIR) effective from 2024
- An Undertaxed Profits Rule (UTPR) effective from 2025
This is particularly relevant for holding company structures: companies that used the Dutch participation exemption to achieve effective rates below 15% may now face top-up taxes under Pillar Two. The interaction between the participation exemption and Pillar Two creates complex planning considerations that require careful analysis.
Box 3 Wealth Tax Reform
The Dutch Box 3 system (which taxes savings and investments held by individuals) has been in turmoil since the Supreme Court ruled in December 2021 that taxing people on fictitious deemed returns violates the European Convention on Human Rights. Key developments:
- Current system (2025-2026): The government uses a temporary “savings variant” where different asset classes are assigned different deemed return rates. For 2026, the deemed return on investments and other assets is set at 7.78%. Taxpayers can claim a refund based on actual returns if they provide supporting evidence. The tax-free capital threshold for 2026 has been set at EUR 59,357.
- New system from 2028: In February 2026, the Dutch House of Representatives passed the Actual Return in Box 3 Act (Wet werkelijk rendement box 3), which will tax actual investment returns at a flat rate of 36%. This replaces the tax-free capital threshold with a tax-free annual return of EUR 1,800, and allows unlimited loss carry-forward (for losses exceeding EUR 500). The law is currently before the Senate and is expected to take effect on January 1, 2028.
30% Ruling Changes for Expats
The 30% ruling, which allows qualifying foreign employees to receive up to 30% of their salary tax-free, has been significantly tightened:
- Salary cap: Since 2024, the tax-free reimbursement is capped at 30% of the “Balkenende norm” (approximately EUR 73,800 for 2025 based on the EUR 246,000 standard).
- Rate reduction: Starting in 2027, the benefit will drop to 27% for employees who first applied the ruling in 2024 or later.
- Salary thresholds (2025): The minimum salary requirement is EUR 46,107-47,655 for employees under 30 and EUR 61,522 for those aged 30 and over (exact amounts depend on the applicable year).
- Grandfathering: Expats already under the ruling before January 1, 2024 retain their original terms.
Dutch REIT (FBI) Regime Changes
As of January 1, 2025, Dutch Fiscal Investment Institutions (FBIs) are no longer allowed to directly invest in Dutch real estate. An entity holding Dutch real estate assets no longer qualifies for FBI status and becomes subject to corporate income tax at the regular rate (19%/25.8%) instead of the previous 0% rate. Additionally, eligible FBIs may no longer have a loan-to-value ratio exceeding 20% (previously 60%).
Using the Netherlands in Global Tax Strategies
The following are ways in which companies incorporate the Netherlands into their global tax strategies, with detailed examples for each.
1. Using Dutch Holding Companies to Minimize Withholding Taxes
One of the primary reasons multinational corporations set up holding companies in the Netherlands is to reduce withholding taxes on dividends, interest, and royalties. The extensive network of tax treaties in the Netherlands, coupled with the EU Parent-Subsidiary Directive and EU Interest and Royalties Directive, can often result in reduced or even eliminated withholding taxes.
Example: Let’s assume a U.S.-based corporation has a subsidiary in India. The Indian subsidiary makes a profit and wants to distribute dividends to the U.S. parent company. However, India’s withholding tax on dividends is 20%. To mitigate this, the U.S. corporation sets up a Dutch holding company. The dividends are first paid to the Dutch holding company, where, due to the tax treaty between India and the Netherlands, the withholding tax is reduced to 5%. The dividends are then distributed to the U.S. parent company without further withholding tax due to the tax treaty between the U.S. and the Netherlands.
Important note: Dutch substance requirements must be met for the holding company to benefit from treaty protection. These include having at least 50% of directors resident in the Netherlands, maintaining books and holding board decisions in the Netherlands, and having an appropriate level of qualified employees and office space. Since January 2020, substance requirements no longer function as safe-harbor rules but determine where the burden of proof lies between the taxpayer and the tax authorities.
2. Exploiting the Participation Exemption for Tax-Free Profits
Dutch tax law provides a participation exemption, which means that dividends received from qualifying subsidiaries and capital gains from the sale of these subsidiaries are not subject to corporate tax in the Netherlands. This exemption makes the Netherlands an attractive jurisdiction for holding companies.
Example: A multinational corporation based in the Netherlands owns 100% of the shares in a Brazilian subsidiary. When the Brazilian subsidiary makes a profit and distributes it as dividends to the Dutch parent company, these dividends are not subject to corporate tax in the Netherlands due to the participation exemption.
Pillar Two consideration: For multinational groups with revenues above EUR 750 million, the participation exemption alone may no longer guarantee low effective tax rates. Under Pillar Two, if the effective tax rate in a jurisdiction falls below 15%, top-up taxes may apply. The interaction between the Dutch participation exemption and Pillar Two’s calculation of qualifying income requires careful analysis.
3. Utilizing the Innovation Box for Reduced Taxes on R&D Profits
The Dutch Innovation Box provides an effective 9% corporate tax rate on profits derived from innovative activities. This can result in significant tax savings for companies engaged in research and development.
Example: A tech company based in the Netherlands develops a patented technology. The income generated from this technology is eligible for the Innovation Box regime, meaning the income is taxed at an effective rate of 9% instead of the standard corporate tax rate of 25.8%.
4. Leveraging Fiscal Unity to Offset Profits and Losses
The fiscal unity regime in the Netherlands allows a parent company and its qualifying Dutch subsidiaries to be treated as a single entity for corporate tax purposes. This can be particularly beneficial when a company has multiple Dutch entities with varying financial performance.
Example: A Dutch parent company owns two Dutch subsidiaries, one of which makes a profit of EUR 500,000, and the other incurs a loss of EUR 200,000 in a given year. Through the fiscal unity regime, the parent company can offset the profit of one subsidiary with the loss of the other, resulting in a taxable income of EUR 300,000 for that year. This tax consolidation benefit allows businesses to effectively manage their tax liability across multiple entities.
5. Structuring Financing Operations Through a Dutch Financing Company
Dutch tax law and its extensive treaty network also make the Netherlands an attractive location for multinational groups to set up their intra-group financing companies. The use of a Dutch finance company can often result in a tax-efficient way of financing group operations.
Example: A US-based parent company sets up a Dutch finance company to borrow funds from lenders and then on-lend those funds to group companies located in various countries. The interest expense paid by the Dutch finance company to the lenders can often be offset against the interest income received from the group companies, resulting in minimal net taxable income in the Netherlands. Furthermore, the Dutch tax treaty network and EU Directives can often reduce or eliminate withholding taxes on interest payments to the Dutch finance company.
Important note: The Anti-Tax Avoidance Directive (ATAD) has introduced significant limitations on interest deductibility. The Netherlands limits the deduction of net borrowing costs to the greater of 20% of EBITDA or EUR 1 million. This has reduced the effectiveness of some financing structures.
6. Employing the Dutch CV-BV Structure for U.S. Companies
The Dutch CV-BV structure is a commonly used structure by U.S. multinational companies to reduce their overall tax liability. The structure involves a Dutch cooperative (Cooperatieve Vereniging or CV) and a Dutch BV. In this structure, the CV acts as a holding company for the Dutch BV, which typically operates the business.
Example: A U.S. parent company establishes a Dutch CV and contributes assets or business to a wholly-owned Dutch BV in exchange for shares. The Dutch BV pays dividends to the CV, and due to the participation exemption, these dividends are not subject to Dutch corporate tax. When the CV distributes dividends to the U.S. parent, they are typically not subject to Dutch withholding tax due to the U.S.-Dutch tax treaty. On the U.S. side, the dividends received from the CV are often treated as eligible for the dividends received deduction, resulting in low or no U.S. tax.
This structure has been under scrutiny from both U.S. and Dutch tax authorities and has been impacted by changes in tax laws, including U.S. tax reform, EU anti-abuse laws, and the introduction of Dutch conditional withholding tax on dividends to low-tax jurisdictions (effective since 2024). Therefore, the feasibility and benefits of this structure would need to be carefully evaluated based on the latest tax laws.
7. Utilizing Dutch Real Estate Investment Trusts (REITs)
Important update: The Dutch REIT (FBI) regime has undergone major changes. As of January 1, 2025, FBIs may no longer directly invest in Dutch real estate. Entities that hold Dutch real estate no longer qualify for FBI status and become subject to regular corporate income tax rates (19%/25.8%).
For FBIs that invest exclusively in non-Dutch real estate or other qualifying assets, the regime still applies: qualifying income is exempt from corporate tax, but 100% of taxable profits must be distributed to investors. These distributions are subject to 15% Dutch dividend withholding tax, which can be reduced under tax treaties or EU directives.
Example: An international group of investors establishes a Dutch REIT to invest in real estate across Europe (excluding the Netherlands). The income generated from these real estate investments is not subject to Dutch corporate tax. The REIT is required to distribute at least 100% of its taxable profits to its investors. These distributions are subject to 15% Dutch dividend withholding tax, but the rate can be reduced under Dutch tax treaties or eliminated under EU directives in certain circumstances.
Should You Incorporate in the Netherlands?
As we’ve seen, there are many interesting strategies companies can use in the Netherlands. I’d say that most of them are worth exploring only if you’re dealing with a fairly large company. For small startups and small businesses, there are more straightforward options like Malta, Cyprus and Estonia.
However, the Dutch tax landscape has changed significantly in recent years, and the era of aggressive tax planning through the Netherlands is coming to an end. Key factors to consider:
- Pillar Two: The global minimum tax of 15% means that low effective tax rates achieved through Dutch structures may now trigger top-up taxes for large multinationals (revenues above EUR 750 million).
- Substance requirements: The Netherlands requires genuine economic substance (resident directors, local employees, office space, decision-making in the Netherlands) for entities to benefit from treaty protection and the participation exemption.
- Anti-abuse measures: The EU’s Anti-Tax Avoidance Directives (ATAD I and II), interest deductibility limitations, Controlled Foreign Company (CFC) rules, and conditional withholding taxes have all reduced the scope for aggressive tax planning.
- Country-by-country reporting: The OECD’s BEPS project brings more transparency to these tax strategies, increasing the need for substantial business activity to support any tax structure.
In conclusion, the Dutch tax environment still offers genuine strategic advantages for multinational businesses — particularly the participation exemption, Innovation Box, and fiscal unity regime. However, these advantages work best when combined with real economic substance and legitimate business purposes. Regular consultation with tax advisors and a robust compliance framework are essential components of any Dutch tax strategy.
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