A substantial interest: this is what you need to know

You have a substantial interest (ab) if you—either alone or together with a tax partner—hold at least 5% of the issued share capital of a BV. Or options on those shares, or profit rights. The interest falls under Box 2 of the income tax with a two-tier system: 24.5% on the first €67,000 of dividend/sales profit in 2024, and 31% on the excess. Important: borrowing from your own BV exceeding €700,000 (privately) is a tax-disguised dividend distribution. Below: rates, dividend tax offset, pitfalls, and when Karim's director's salary and Box 2 intersect.

The short answer

• Definition: ≥ 5% shares, options, or profit rights in a BV (together with a tax partner).
• 2024 rate: 24.5% on the first €67,000, 31% above that.
• What is taxed: dividends from a private limited company and capital gains on shares (upon sale).
• Set-off: 15% dividend tax already withheld at distribution — set-off against Box 2.
• Excessive borrowing: borrowing > €700,000 from one's own BV = fictitious dividend distribution.

What is a substantial interest?

A director-major shareholder with a BV almost always has a substantial interest — usually 100% of their own operating company or holding company. The 5% criterion applies to the issued capital, together with the tax partner. Also applicable to:

• Stock options (warrants).
• Profit rights without voting rights.
• Conversion rights (e.g. from a convertible loan).
• Employee share participation plans above the threshold.

The interest is valued annually for the income tax return (Box 2 section).

Box 2 rates (2024-2025)

Since 2024: two-tier system (previously a flat rate):

• First €67,000 Box 2 income (2024) / €67,804 (2025): 24.5%.
• Above that: 31% (2024) / 31% (2025).

Intended to spare directors/major shareholders with small payouts and to impose additional tax on larger payouts.

Paying out dividends — how does it work from a tax perspective?

Upon dividend distribution:

1. A private limited company withholds 15% dividend tax (Art. 1 Dividend Tax Act).
2. The BV remits this to the Tax and Customs Administration.
3. Director-major shareholder receives dividend minus 15%.
4. In the income tax return: dividends included in Box 2 income.
5. Box 2 about dividend: 24.5% or 31%.
6. The 15% already withheld is set off against the Box 2 due.

Result: with €100,000 dividend in 2024 → 15% withheld = €15,000. Box 2: 24.5% on €67,000 = €16,415 + 31% on €33,000 = €10,230. Total Box 2 = €26,645. Additional payment after settlement €11,645.

Capital gains from selling shares

Are you selling your shares? Capital gain (= selling price minus acquisition price) falls under Box 2 — same rates 24.5%/31%.

Example: shares purchased for € 18,000 (incorporation), sold for € 1,000,000 = capital gain € 982,000. Box 2: € 67,000 × 24.5% + € 915,000 × 31% = € 16,415 + € 283,650 = € 300,065 payable.

For business transfers within the family: Business Succession Scheme (BOR) — subject to conditions, exemption from Box 2 and inheritance tax. Separate topic.

Excessive borrowing from one's own private limited company

Since 2023: borrowing by a director-major shareholder from their own private limited company exceeding €700,000 in their private capacity (unchanged from 2024) is classified as a fictitious dividend distribution — directly taxed under Box 2.

Exception: home ownership debt does not count as a loan. In practice: a director/major shareholder who finances a mortgage via their own BV remains outside this rule (provided it is formally structured correctly).

Read more about borrowing from your own BV.

Customary salary and dividend

A director-major shareholder working for his private limited company must receive a customary salary (Art. 12a Income Tax Act) — usually a minimum of €56,000 (2024) or a comparable market rate. The remainder may be distributed as a dividend.

Practical optimization: customary salary = Box 1 (up to 49.5%), dividend = Box 2 (24.5-31%). For higher incomes, it is often more advantageous to set the customary salary to the minimum and treat the remainder as dividends.

Honest recommendation

The two-tier system in Box 2 changes the optimal dividend strategy every year. Plan ahead with your tax advisor: a combination of customary salary (Box 1) and dividends (Box 2), timing of distributions, and caution when borrowing from your own BV exceeding €700,000. A well-structured holding company makes it easier — dividends flow tax-free to the holding company via the participation exemption and can be strategically distributed to the private individual.

For other topics: which taxes does a BV pay, borrowing from one's own BV , and participation exemption.

Frequently Asked Questions