Participation exemption

Are you familiar with the participation exemption and the tax benefits it can provide? The tax advisers from Mazars can advise you about the possibilities for your company.

What is participation exemption?

Participation exemption is one of the major provisions in Dutch corporation tax. Participation exemption prevents profits of a subsidiary being taxed again at the parent company. The exemption provides great tax benefits and planning opportunities, for example in the case of a sale of a business or business unit, as well as in starting and maintaining a foreign branch.

Application for participation exemption

Dividends distributed by a qualifying participation remain outside corporation tax under participation exemption. This also applies to disposal gains realised on the sale of shares in a qualifying holding. The downside is that losses on shares in a qualifying holding, except for liquidation losses, are not deductible. In contrast, costs associated with owning qualifying holdings are deductible, with the exception of buying and selling investments and certain interest costs relating to the financing of investments (such as excessive interest charges).


To qualify as 'participation' a number of cumulative conditions must be met:

  • The parent company shall be at least a 5% shareholder in the nominal paid-up capital of a company with capital divided into shares such as limited company, joint-stock company or any comparable foreign legal entity.
  • Membership in a cooperative also qualifies as a participation in certain situations, and provides a solution for an excessively low percentage holding.
  • The shares may not be held as an investment, but must be used for group activities or be held for a specific strategic objective. There is an exception to this. Shares held for investment purposes are classified as a qualifying holding if the body in which the shares are held does not qualify as a so-called "low-taxed investment participation".

Would you like to learn more?

Would you like to know more about the tax benefits or would you like to review your business structure? Then talk to Eric Klein Hesseling (partner) by e-mail: or by phone: +31 88 277 23 84. He will be happy to assist you.