Tax on income generated by substantial shareholding (Income tax box 2)
If a resident of the Netherlands has a “substantial shareholding” (“aanmerkelijk belang”) with respect to an eligible foreign or Dutch corporation, then the income generated by this shareholding needs to be declared in Box No. 2 of the tax return form for personal income.
In case a taxpayer holds directly or indirectly a substantial share of a corporation, then any income obtained from loans or asset provisions to the corporation is taxable and needs to be reported as derived from other labour in Box No. 1 of the tax return form for personal income.
What is a substantial shareholding?
Taxpayers are considered as substantial shareholders if they own, indirectly or directly, alone or with their fiscal partners:
- a minimum of 5% of the company’s total share capital (except repurchased shares that will be cancelled);
- have the rights to acquisition of ≥ 5% of the shares mentioned above;
- profit shares (or “winstbewijzen” in Dutch) giving entitlement to ≥ 5% of the annual profit or ≥ 5% of any liquidation proceeds;
- a minimum of 5% of the rights to a vote in a Cooperative (or “Coöperatie” in Dutch) or an Association on a Cooperative Basis (“coöperatieve vereniging”).
The criteria listed above are valid both for legal and economic ownership in its various forms.
The rules for substantial shareholdings apply to options to acquire profit shares / shares in the same manner as to underlying profit shares / shares.
The principles of taxation of substantial shareholdings are basically the same for Mutual Funds (FGRs), Cooperations and Associations on a Cooperative Basis: all these entities are treated as corporations.
In case one corporation owns shares of different classes, the 5% criterion is valid for each class separately. Share classes are determined by special rules.
In case a taxpayer is classified as an indirect or direct substantial shareholder, other owned profit shares / shares issued by the subsidiary also belong to the substantial shareholding and therefore are subject to the same rules.
Substantial shareholders’ taxable income
The substantial shareholders’ taxable income is formed by the regular profits generated by the shareholding (e.g. dividends) minus allocable expenditures and by the capital gains obtained through transfers of shares included in the shareholding. Personal allowances can be deducted from this income.
If certain conditions are fulfilled, the income received from inherited substantial shareholdings can be subtracted from the price of acquisition of the shareholding for a period of two years.
Can we help you?
Our qualified tax advisors can provide consultancy on your tax position. They can also prepare and file your yearly income tax report and handle other issues related to tax compliance in your name. If you need further information or assistance, please, contact us.