Tax Alert - Update regarding the Dutch lucrative interest scheme, measures tackling dividend stripping and fragmenting of real estate companies

The past two weeks, the Dutch Ministry of Finance published various letters to the House of Representatives on (i) the Dutch lucrative interest scheme (lucratief belang regeling), (ii) measures tackling dividend stripping and (iii) the fragmenting of real estate companies in view of the limitation of interest deduction. These letters provide insights on potential policy proposals on the aforementioned topics that may also be relevant to international businesses. This Tax Alert outlines the key aspects of these letters. 

1. Measures with respect to the Dutch lucrative interest scheme

On 1 July 2025, the Dutch State Secretary of Finance published a letter addressing the alternatives to the current Dutch lucrative interest scheme in response to a motion of 4 April 2024 submitted by a member of the House of Representatives. A public debate has been going on in the Netherlands for quite some time on the tax treatment of remuneration structures that are particular common in the private equity sector. Fund managers in the private equity sector generally receive financial instruments as part of their remuneration structure to achieve high returns (so called ''carried interest''). Under current legislation, such financial instruments are taxed as ordinary income in Box 1, but taxpayers may opt for taxation in Box 2 under specific conditions. The latter would be the case if the lucrative interest, among others, is held indirectly via a substantial shareholding (i.e. an interest of at least 5% of the shares (or a class of shares) in an entity holding the lucrative interest). 

We also refer to our earlier Stibbe Tax Alerts of 20 April 2023 (regarding a Dutch Supreme Court ruling on lucrative interest), 21 September 2023 (on Budget Day 2023) and 22 April 2025 (an amendment to the Dutch lucrative interest scheme) for a detailed explanation of the different requirements of the lucrative interest scheme.

The Dutch Ministry of Finance has conducted research to determine whether an alternative set-up of the Dutch lucrative interest scheme would be preferred. The following two alternatives were subject to public consultation:

1. Taxation of income and capital gains from lucrative interests in Box 1 through either income from employment or income from other activities (resultaat uit overige werkzaamheden); or
2. Taxation in Box 2 remains possible, but the income and capital gains from lucrative interests would be subject to a specific (higher) personal income tax rate. 

Eight responses were received from professional organizations including the Dutch association of tax advisors (NOB) and the Dutch Private Equity Association (NVP). The feedback included:

• The need for practical, less complex legislation.
• A concern about maintaining balanced taxation across participation schemes.
• Recognition of the mixed nature of lucrative interests (labor-capital).
• The preference for maintaining competitiveness with neighboring countries.
• Support for Box 2 or Box 3 taxation rather than Box 1 taxation. 

The letter of the Dutch State Secretary of Finance of 1 July 2025, states that the public consultation did not demonstrate a direct necessity for changing the current scheme and that it would, in the end, be a political decision to change the current scheme. At this stage, the Dutch State Secretary of Finance is of the opinion that the Dutch lucrative interest scheme should not be changed. However, during a debate on 3 July 2025, the House of Representatives adopted a new motion stating that the Dutch lucrative interest scheme should be amended as such that income derived by private equity managers will be subject to a higher personal income tax rate. This amendment should be part of the 2026 Tax Plan (Belastingplan 2026), meaning that a concrete proposal may be expected on 16 September 2025.

2. Measures tackling dividend stripping

Measures to partially tackle dividend stripping have already been taken in 2024 (e.g. by shifting the burden of proof to demonstrate 'beneficial ownership' to the taxpayer instead of the tax inspector; see our Stibbe Tax Alert of 21 September 2023). In the meantime, the Dutch government conducted research into three potential additional measures that can be taken to further tackle dividend stripping:

1. The net return approach;
2. Specific measures targeting pension funds; and
3. Clarification of the Dutch dividend withholding tax exemption to prevent dividend stripping within group structures.

In order to qualify for relief from dividend withholding tax under the net return approach, it must be demonstrated that the dividend has generated a sufficient return. The specific measures targeting pension funds would involve excluding an exemption or refund of dividend withholding tax to a pension fund if a dividend is attributable to a business activity. The measure under (iii) aims to clarify the concept of ‘series of transactions’ in order to avoid any doubt as to its scope as currently the components of a dividend stripping transaction are still being split up. 

The Dutch government plans to develop a consultation document including the abovementioned measures. This consultation document will also include a measure (comparable to measures in Germany and Austria) that stipulates that the person entitled to a dividend should bear the economic risk relating to the underlying shares for at least 45 days around the registration date in order to be eligible for a reduction for dividend withholding tax purposes. More specifically, the measures in Germany and Austria prescribe that the legal owner of the shares must bear at least 70% of the risk in the event of any loss in value of the shares and it only applies in case of dividends of more than EUR 20,000 per year. 

The Dutch State Secretary aims to publish the document for internet consultation in autumn 2025 after which it will be decided whether concrete legislative proposals will be submitted. 

3. Fragmenting of real estate companies in view of the limitation of interest deduction

The 2025 Tax Plan (Belastingplan 2025) included the so-called anti-fragmentation measure to tackle the fragmenting of private limited companies owning real estate to maximise interest deduction. This proposed anti-fragmentation measure has been restrained by amendment following discussions in parliament on the 2025 Tax Plan. However, on 12 November 2024 a motion was adopted as a result of which an assessment is being made of the anti-abuse measures implemented by other EU countries to combat tax structures that abuse the generic interest deduction restriction / earnings stripping rule (which may also include fragmentation by real estate companies). On 26 June 2025, the House of Representatives was informed on the outcome of this assessment. The findings include:

• Fragmentation is not unique to the Netherlands, e.g. Germany faces similar issues while the implementation of the earnings stripping rule in Germany is more lenient.
• Group-based approaches seem to work, e.g. Belgium successfully prevents fragmentation through group-level application of the threshold.
• Limiting the threshold based on related party financing seems to work.
• Low thresholds reduce incentives.
• Stricter rules for related party debt could effectively serve as anti-fragmentation measures. 

The Dutch State Secretary announced in his letter that it plans to further assess three potential measures:

1. Introduction of a group concept for threshold application;
2. A measure limiting thresholds based on related party financing; and
3. Stricter specific interest deduction limitation rules for related party debt. 

The House of Representatives will be informed on the outcome of this assessment by the end of this year.

4. Conclusion

The topics described above may potentially have an impact on international businesses in the Netherlands. Measures on the Dutch lucrative interest scheme are expected to be published in the 2026 Tax Plan. It remains to be seen if, when and in what form measures on tackling dividend stripping and fragmenting of real estate companies may be included in concrete legislative proposals.