The Netherlands’ Budget Day 2025

In this Tax Alert, we will discuss the key proposals of the 2026 Tax Package that are relevant to (inter)national businesses and which, unless stated otherwise and subject to adoption by Parliament, will enter into force on 1 January 2026. Due to the upcoming Dutch general elections on 29 October 2025, the 2026 Tax Package will be handled both by the current House of Representatives (Tweede Kamer) as well as the incoming House of Representatives. In view thereof, the caretaker State Secretary for Finance has explicitly requested the House of Representatives to exercise appropriate restraint and care when submitting and voting on amendments to the 2026 Tax Package. In addition to the 2026 Tax Package, we will also discuss certain other legislative changes that are already adopted as part of the 2025 Tax Package and which will enter into force on 1 January 2026. Finally, we will conclude with certain notable developments that have been announced but which are not (yet) part of the 2026 Tax Package. 

1. Amendments to the Dutch lucrative interest regime 

Under the Dutch lucrative interest scheme (lucratief belang regeling), any income and gains derived by an individual from a lucrative interest (e.g. qualifying carried interest arrangements and leveraged management equity plans) are in principle taxed as ordinary income in Box 1 at progressive rates up to 49.5% (maximum rate for 2025). However, a taxpayer may opt to structure a lucrative interest as a so-called ‘indirectly held lucrative interest’ (middellijk lucratief belang) in which case any income and gains therefrom are subject to Box 2 taxation at rates up to 31% (a step-up rate of 24.5% applies to the first bracket of taxable Box 2 income, which in 2025 is €67,804), provided that certain conditions are met. As expected, the 2026 Tax Plan however contains a proposal to amend the Dutch lucrative interest scheme such that income and gains derived from an indirectly held lucrative interest are effectively taxed at higher tax rates due to the application of a certain multiplier. Consequently, as of 1 January 2026 the effective tax rate for income and gains derived from an indirectly held lucrative interest up to €68.843 (being the proposed first bracket of taxable Box 2 income in 2026) would be increased from 24.5% to 28.45%, whereas the effective rate applicable to the excess would be increased from 31% to 36%. As a result, the effective topline rate for income and gains from an indirectly held lucrative interest would effectively align with the tax rate applicable to income from savings and investments in Box 3.

This proposal addresses the motion adopted by the House of Representatives on 3 July 2025 stating that the Dutch lucrative interest scheme should be amended as part of the 2026 Tax Package so that benefits derived by private equity managers are subject to a higher personal income tax rate, on which we reported in our Tax Alert of 7 July 2025. However, the proposal is not limited to lucrative interests held by private equity managers but generally applies to holders of indirectly held lucrative interests (including e.g. holders of leveraged management equity/incentive plans outside of the private equity industry). The proposed increase of the effective tax rates would according to the explanatory notes to the proposal not be considered a relevant change in law and consequently tax rulings issued by the Dutch tax authorities in respect of existing arrangements should remain valid. For further background on relevant preceding developments regarding the Dutch lucrative interest scheme reference is made to our Tax Alerts of 7 July 2025, 22 April 2025 and 17 February 2025.

In addition, it is proposed to introduce a specific repair measure in the Dutch lucrative interest regime aimed at preventing taxpayers from opting for Box 2 taxation with the purpose to create and offset (tax book) losses against income and gains from an indirectly held lucrative interest taxed in Box 2 in a previous year, effectively eliminating the earlier Box 2 taxation. 

2. Minimum tax (Pillar 2)

As of 1 January 2024, the Minimum Tax Act (Wet minimumbelasting 2024) entered into force, implementing Pillar 2 in Dutch domestic law (see also our Tax Alerts of 8 June 2023 and 16 January 2023 for further background hereon). The 2026 Tax Package contains two proposals regarding the Minimum Tax Act. 

Second amendment of the Minimum Tax Act 

Since the publication of the first set of OECD model rules on Pillar 2, the OECD Inclusive Framework (IF) has published additional administrative guidance regarding Pillar 2 in February 2023, July 2023, December 2023, June 2024 and January 2025. As the OECD cannot issue binding legislation, most elements of this guidance have been incorporated into Dutch domestic law through a first amendment to the Dutch Minimum Tax Act (on which we reported in our Tax Alert of 19 September 2024), so as to ensure consistent international application across participating jurisdictions. 

The 2026 Tax Package contains a proposed second amendment to the Minimum Tax Act aimed at further aligning it with the (evolving) administrative guidance published by the IF and at incorporating certain technical adjustments therein. As such, the proposal legally anchors the remaining elements of the administrative guidance published in 2023 and 2024 as well as the guidance published in 2025, including an enhanced definition for flow-through and hybrid entities, provisions for determining qualifying income or loss for non-consolidated group entities with different reporting years, alternative book value measures where the carrying amounts of assets or liabilities differ from financial statements, restrictions on certain deferred tax assets from government arrangements before the transition year, and refinements to the temporary qualifying country-by-country reporting safe harbour rule. In addition, under the proposal joint ventures would be explicitly regarded as group entities for purposes of the Minimum Tax Act. 

To prevent mismatches with other jurisdictions, the Dutch caretaker government proposes to give most amendments retroactive effect to 31 December 2023. However, certain proposed amendments entailing more substantial changes to the Minimum Tax Act, such as provisions concerning the calculation of qualifying net income or loss, will only enter into force on 31 December 2025.

Implementation of EU Directive on Administrative Cooperation (DAC9)

The Dutch caretaker government further proposes to implement EU Directive 2025/872, commonly known as DAC9, into the International Assistance with Levying of Taxes Act (Wet op de internationale bijstandsverlening bij de heffing van belastingen). DAC9 establishes a framework for central filing and automatic exchange of information of Pillar 2 tax (filing) information between EU member states. Currently, multinational groups subject to Pillar 2 are required to a file Top-Up Tax Information Return (TIRR) in all EU member states where group entities are located, creating substantial administrative burdens. DAC9 aims to address this issue by establishing a multilateral qualified agreement between EU member states allowing multinational groups to file their TIRRs in a single EU member state rather than in all EU member states in which they operate. The EU member state that receives the Pillar 2 filing will then distribute relevant portions of the information to other EU member states using a ‘dissemination approach’, ensuring each jurisdiction receives only information relevant to potential top-up tax obligations within their respective jurisdiction. This mechanism aims to significantly reduce administrative burdens for multinational groups while ensuring that all relevant tax authorities receive the necessary information in order to assess the groups’ Pillar 2 obligations. 

The proposal aligns with DAC9 and imposes two specific obligations on Pillar 2 filing entities: (i) using prescribed forms for information returns, and (ii) determining which portions must be exchanged with which EU member states in accordance with the dissemination approach. These requirements are expected to create minimal additional administrative burden, as the underlying filing obligation already exists under the Minimum Tax Act. The proposed mechanism aligns with the OECD model rules as well as the standardised GloBE Information Return format agreed by the Inclusive Framework on BEPS.

3. Transitory regime for tax transparent investment funds

As of 1 January 2025, the definition of a fund for joint account (fonds voor gemene rekening or FGR) as laid down in Dutch tax law has been revised as part of the broader amendment of the Dutch entity classification rules, whereby in particular the so-called ‘consent requirement’ has been abolished from the FGR definition (see our Tax Alert of 17 June 2025 for further background hereon). However, it became apparent that the revised FGR definition gives rise to certain practical issues, most notably that investment funds, particularly taking the form of a Dutch limited partnership (commanditaire vennootschap) or a non-Dutch entity or partnership comparable thereto, that were treated as tax transparent for Dutch tax purposes up to 1 January 2025 potentially became subject to Dutch corporate income tax as from 1 January 2025 onwards due to inadvertently satisfying the conditions stipulated by the new definition of an opaque FGR. 

In view of these practical issues, the Dutch caretaker government is currently investigating potential further amendments to the FGR definition, which are essentially aimed at reducing the number of entities and partnerships that are considered to be (comparable to) an opaque FGR. These potential amendments may take effect as of 1 January 2027 at the earliest. Consequently, it may be that entities and partnerships that were treated as tax transparent up to 1 January 2025 pursuant to the previous FGR definition and which potentially regain tax transparency as of 1 January 2027 (at the earliest) once the amended FGR definition applies, may temporarily be considered opaque for Dutch tax purposes during the interim period, which situation is considered undesirable by the Dutch caretaker government. Therefore, it is proposed to introduce a transitory regime allowing entities and partnerships to elect to not to be treated as (comparable to) an opaque FGR with retroactive effect as from 1 January 2025 until the transitory regime expires, if the following conditions are met: 

• the entity or partnership meets the new FGR definition applicable as of 1 January 2025 such that absent the application of this transitory regime it would be subject to Dutch corporate income tax as (comparable to) an opaque FGR as from 1 January 2025 onwards;
• at the moment immediately prior to 1 January 2025, the entity or partnership was treated as transparent for Dutch tax purposes on the basis that its assets, liabilities, income and expenses were attributed to its participants for Dutch tax purposes; and
• the entity’s or partnerships’ participants consent to the application of the transitory regime by 28 February 2026 at the latest (no specific format has been prescribed for such consent). 

In practice, entities and partnerships meeting the above conditions can opt for the transitory regime by not registering as opaque FGR with the Dutch tax authorities and not filing a Dutch corporate income tax return for the year 2025. The proposed transitory regime operates alongside existing transitory measures allowing entities and partnerships to restructure to a ‘redemption fund’ prior to 1 January 2026 subject to certain conditions being met (on which we reported in our Tax Alert of 25 April 2025) and is intended to expire on 1 January 2028, albeit that this term may be brought forward to 1 January 2027 if the FGR definition is amended earlier. If the FGR definition is not amended by 1 January 2028, entities and partnerships applying the proposed transitory regime will nevertheless become subject to Dutch corporate income tax if they meet the FGR definition applicable at that time. This optional mechanism aims to minimise additional administrative burdens and implementation costs while providing certainty for participants while the Dutch (caretaker) government completes its investigation with respect to the FGR definition. 

4. Entry into force of previously adopted legislation

The following notable proposals have been adopted previously by Parliament as part of the 2025 Tax Package or otherwise and which will enter into force as of 1 January 2026: 

• As part of the broader reforms to the Dutch expat tax regime, the current transitory regime allowing taxpayers already benefiting from the 30% ruling to opt for partial non-resident tax liability will expire at the end of 2026.
• The VAT revision period for certain services related to real estate will come into effect on 1 January 2026. This introduces a five-year VAT revision period for valuable investment services related to real estate where costs exceed €30,000, covering services such as renovation, extension, repair and maintenance of immovable property. For further background we refer to our Tax Alert of 19 September 2024.
• The Dutch real estate transfer tax (RETT) rate for the acquisition of residential properties will be reduced from 10.4% to 8% as of 1 January 2026. This reduction applies to investor acquisitions. Purchases by individuals acquiring residential property as their main residence, continue to be eligible for the lower 2% RETT rate or the 'starters exemption'. For further background we refer to our Tax Alert of 19 September 2024.

5. Other notable developments not (yet) addressed in the 2026 Tax Package 

Liquidation loss regime

Under the Dutch liquidation loss regime (liquidatieverliesregeling), certain liquidation losses realised on a participation (i.e. the difference between the amount invested by the taxpayer for the participation and the liquidation distribution) can be deducted for Dutch corporate income tax purposes, provided that certain conditions are met. A liquidation loss is however not deductible if the taxpayer itself or certain of its affiliates have a right to claim compensation in respect of losses of the liquidated subsidiary that remained uncompensated. In a ruling of 21 March 2025, the Dutch Supreme Court ruled that the use of the Irish group relief regime prior to the liquidation of a company does not qualify as a right to claim compensation for losses and as such does not prevent the recognition of a liquidation loss for purposes of the liquidation loss regime. Further to this ruling, the State Secretary for Finance announced in a letter to Parliament that this ruling would have a significant budgetary impact with a one-off shortfall of approximately €840 million and an ongoing structural shortfall of €65 million per year.

While the State Secretary for Finance indicated that he would seek to amend the liquidation loss regime in response to this ruling of the Dutch Supreme Court to counter this budgetary impact, the 2026 Tax Package only identifies budgetary coverage therefor through a proposed increase of certain social security contributions and through amendments to the tax treatment of hedging instruments relating to foreign-exchange results on qualifying subsidiaries as of 1 January 2027. In respect of the latter it is indicated that this measure will first be part of a public consultation and that the feasibility thereof will be further considered after the consultation, but it is not yet clear when this consultation will be launched. Taking into account the foregoing, the 2026 Tax Package does not (yet) contain specific amendments to the liquidation loss regime itself. 

Employee participation in startups and scaleups

In April 2025, the Dutch government announced that it envisages to introduce a more beneficial tax regime for stock options granted to employees of certain qualifying start-ups and scale-ups. Currently, the taxable amount in respect of stock options is determined based on the difference between the fair market value of the shares at the time these become ‘tradeable’ (or, if taxation at exercise is chosen, the fair market value of the shares at exercise) and the purchase price or exercise price paid by the employee, which is taxed as ordinary income against progressive Dutch personal income tax rates, ranging up to 49.5% (maximum rate for 2025 and 2026). 

The new beneficial tax regime for qualifying stock options would provide for a lower effective tax rate (equal to 65% of the regular personal income tax rates, which range up to 49.5% (maximum rate for 2025 and 2026)) with respect to the taxable amount as well as a deferral of taxation to the moment the shares acquired upon the exercise of the stock options, are sold. It is envisaged that this new regime will apply as of 1 January 2027, however, the 2026 Tax Plan does not (yet) provide for a legislative proposal for this regime as first a public consultation will be launched in Q1 2026. The 2026 Tax Package does, however, note that there may be an overlap between the amended Dutch lucrative interest scheme described in paragraph 1 above and the new beneficial tax regime for stock options. It is further noted that in view of the motion referred to in paragraph 1, it may be considered to disapply this beneficial regime in respect of  employee participations that qualify as a lucrative interest. This will be further investigated. 

Measures aimed at tackling dividend stripping

As we reported in our Tax Alert of 7 July 2025, the Dutch tax authorities have intensified their enforcement efforts against dividend stripping practices since late 2023, resulting in settlement agreements totalling €362 million in tax and penalties, with ongoing litigation concerning an additional €241 million in five judicial procedures. Since 1 January 2024, several measures to strengthen the enforcement efforts  against dividend stripping have entered into force, including adjustments to the burden of proof, the codification of the record date for dividend entitlement, and a clarification of the definition of "series of transactions". In a letter dated 27 June 2025, the State Secretary for Finance announced that the Dutch government is further exploring various measures through public consultation planned for autumn 2025, such as a net return test that would deny tax relief where the net return falls below a specified threshold due to hedging arrangement, specific rules for pension funds to prevent commercial abuse, clearer group structure provisions to address dividend stripping across multiple entities and an adoption of the German-Austrian model requiring 70% economic risk exposure for at least 45 days around the record date with a €20,000 annual dividend threshold. After the public consultation, a decision will be made as to whether and what specific measures will be implemented.

Flow-through entities

In connection with the 2025 Spring Memorandum (Voorjaarsnota 2025), the Dutch government indicated its intention to make significant changes to the regime for flow-through entities as laid own in the Dutch Corporate Income Tax Act (Wet op de vennootschapsbelasting 1969). Currently, interest and royalties paid within corporate groups in respect of related loans and licenses are excluded from the Dutch corporate income tax base of a company if such company does not incur real risks in relation to those loans. However, if the safe harbour equity test is satisfied – requiring equity capital of at least 1% of outstanding loans or €2 million – the entity is deemed to incur real risks and the flow-through treatment does not apply, which allows for withholding tax credits. Concerns about continued abuse of flow-through structures led to suggestions for abolishing the safe harbour equity test and implementing a more flexible, circumstances-based approach. The 2026 Tax Package does, however, not (yet) contain any such measure, leaving the future of these proposed changes uncertain. 

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

As we reported in our Tax Alert of 7 July 2025, on 26 June 2025 the State Secretary for Finance announced plans to further assess three potential measures aimed at tackling so-called ‘fragmenting’ of private limited companies owning real estate to maximise interest deduction. The 2026 Tax Package does not (yet) provide for any measures in this respect, but the findings and recommendations of the aforementioned assessment regarding the three potential measures are expected to be published by the end of this year.