Corporate income tax exemption: am I eligible?

Not every BV or legal entity is subject to corporate income tax. The Corporate Income Tax Act provides for a number of subjective and objective exemptions — for foundations, associations, investment institutions, and specific activities. These do not apply to most SME BVs, but those who structure their organization smartly or house activities in a foundation can benefit. Below: who is and who is not exempt, how to perform the assessment, and when it is best to call a tax advisor.

The short answer

• Corporate income tax liability: standard for private limited companies (BV), public limited companies (NV), and foreign companies with substantial activity in the Netherlands.
• Subjective exemption: certain legal entities are not taxed in any case (government, some foundations).
• Objective exemption: certain income or activities not taxed (participation exemption, innovation box).
• Foundations/associations: subject to corporate income tax only when “conducting business”.
• Threshold for small foundations: €15,000 profit or €75,000 cumulatively over 5 years.

Who is liable for corporate income tax?

Subject to corporate income tax (Art. 2 Corporate Income Tax Act):

• BV, NV, cooperative, and mutual insurance company — always.
• Foundation and association — only if they operate a business.
• Foreign companies with a permanent establishment in the Netherlands.
• Certain funds and dedicated assets.

Not subject to corporate income tax:

• Sole proprietorship and general partnership — are subject to income tax.
• Private individuals — subject to income tax.
• Foundations and associations without a business — no corporate income tax.

Exemption for foundations and associations

A foundation or association is subject to corporate income tax as soon as it “conducts a business” (Art. 4 Corporate Income Tax Act). Criteria:

• Sustainable: not a one-off.
• Organization of labor and capital.
• Participation in economic activity.
• Profit motive (allowed, also aimed at a charitable cause).

Example: a sports club that only has membership fees and canteen income = not a business. But the same club that professionally organizes team events = possibly a business → liable for corporate income tax on that activity.

Exemption threshold for small activities

Even if a foundation engages in business: no corporate income tax assessment if the profit remains below a threshold (Art. 6 Corporate Income Tax Act):

• Annual profit < €15,000, OR
• Cumulative profit over 5 years < €75,000.

Above that threshold: standard corporate income tax. Below: exempt — no return needs to be filed, provided the Tax and Customs Administration has been informed. Handy for small sports clubs, professional associations, and local foundations.

Objective exemptions

Certain income is exempt regardless of who receives it:

• Participation exemption (Art. 13): dividends and capital gains between BVs. See participation exemption.
• Innovation Box (Art. 12b): innovative profit at 9%. See Innovation Box.
• Forestry scheme: for commercially managed forestry operations.
• Sports exemption: amateur sports under conditions.
• Education exemption: for institutions that provide qualifying education.

Pension funds and investment institutions

Specific institutions have their own regimes:

• Pension funds: subjectively exempt under conditions.
• Fiscal investment institution: 0% corporate income tax rate provided that virtually all profits are distributed.
• VBI (exempt investment institution): exempt under conditions, alternative to private holding companies.

How do I qualify?

Steps:

1. Determine legal form — BV always subject to corporate income tax; foundation only if a business is undertaken.
2. Analyze activities — passive leasing or investments? Or active business?
3. Test threshold amounts — profit under €15,000 / cumulative €75,000?
4. Check specific exemptions — education, sports, charitable causes.
5. Request a preliminary consultation with the Tax and Customs Administration if necessary.

Honest recommendation

For a BV, full corporate income tax exemption is virtually impossible—although significant optimization is possible through objective exemptions (participation exemption, innovation box). For foundations and associations, however, this is relevant: careful assessment of “conducting business” and threshold amounts prevents unnecessary corporate income tax liability. In case of doubt—especially for charities or cultural institutions—a tax specialist with non-profit experience can relieve you of a great deal of administrative burden.

For other topics: which taxes does a BV pay, corporate income tax return and participation exemption.

Frequently Asked Questions