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The decision on the participation exemption has been updated

Published on: 30 maart 2020
Type of publication Insight
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On 9 March 2020, the State Secretary of Finance updated the decree on the application of the participation exemption (hereinafter: the decree).

The participation exemption

The participation exemption means that benefits from a taxpayer's participation are exempt from corporate income tax. Participations are, in short, shareholdings in other companies representing 5% or more of the capital. An exception to the participation exemption is the liquidation loss scheme. If, in the event of liquidation, the proceeds from the participation are less than what has been invested in that participation, the difference is deductible from the tax base.

The decree on the participation exemption

In general

The decree provides further clarification of the application of the participation exemption, such as for different types of shares, option rights, currency results on participations, foreign (low taxed) participations and the liquidation loss scheme. The decree will be regularly updated as a result of, among other things, legislative changes or case law.


The two most important amendments compared to the previous decree of 13 February 2019 are explained below.

1. Liquidation loss settlement: moment of affiliation

A liquidation loss is not deductible from profits if the business of the liquidated participation is continued by an affiliated entity (freely translated: a group company of the taxpayer). On the basis of the previous decree, according to the State Secretary, that affiliation had to be evaluated at the time when the group company continued the business and not at the time of liquidation of the participation. Now that the Supreme Court has ruled in 2019 that the evaluation of the affiliation has to be done at the time of the liquidation of the participation, this paragraph has been deleted in the new resolution.

If, for example, in year 1 the participation transfers its business to a group company, that group company is sold to a third party in year 2 and the participation is liquidated in year 3, a liquidation loss can be claimed if the other conditions of the liquidation loss scheme are met.

2. Ending participation

Under certain conditions, the participation exemption may continue to apply for a further period of three years, even if the participation has ceased to exist. The State Secretary has now clarified that this relaxation will apply if, for whatever reason, the 5% condition is no longer being met at any given time.


The application of the participation exemption can be very complex in some situations. If you have any questions about the application of the participation exemption, please do not hesitate to contact us.

This content was published more than six months ago. Because legislation and regulation is constantly evolving, we recommend that you contact your Baker Tilly consultant to find out whether this information is still current and has consequences (or offers opportunities) for your situation. Your consultant will be happy to discuss the latest state of affairs with you.