What is left of a dividend on its way to the parent

Caveat: A participation held as a portfolio investment is exempt only if the subsidiary passes the subject-to-tax test or the asset test; otherwise a credit replaces the exemption.

Between two EU member states the Parent–Subsidiary Directive often removes withholding entirely where its conditions are met. This page does not apply it, so the withholding shown can be higher than the one actually charged.

The Netherlands exempts in full the benefits from a participation — dividends and gains on disposal alike — when a company subject to Dutch corporate income tax holds at least 5% of the nominal paid-up capital of the subsidiary; there is no minimum holding period. The 5% threshold is necessary but not sufficient: a participation held as a portfolio investment keeps the exemption only if it passes a subject-to-tax or asset test, and otherwise receives a credit instead.

• The 5% is measured against nominal paid-up capital, including shares without profit or voting rights; 5% of the voting rights suffices only for a company in an EU member state whose tax treaty with the Netherlands reduces dividend tax by reference to voting rights.
• A participation held as a portfolio investment loses the exemption unless it qualifies; it is always treated as such where the subsidiary's assets consist largely of holdings below 5% or its function consists largely of financing the group.
• It qualifies if the subsidiary is either subject to a profit tax that is realistic by Dutch standards (the law names no rate; the tax authority normally treats 10% as realistic, and a subjective exemption fails) or holds direct and indirect assets of which, as a rule, less than half are low-taxed free portfolio investments.
• If such a participation fails both tests, the exemption is replaced by a credit (deelnemingsverrekening, art. 13aa) rather than full taxation: the benefit is grossed up by 100/95 and taxed, with a credit for the lower of 5% of the grossed-up benefit and the Dutch tax attributable to it, and for dividends covered by the Parent-Subsidiary Directive the tax actually paid can replace the flat 5%.
• The exemption does not apply to the extent that the payment is deductible, legally or in fact, directly or indirectly, for profit tax at the payer (art. 13(17)); this wording comes from the bill implementing the 2015 Parent-Subsidiary Directive amendments as introduced and has not been checked against the enacted text.
• The exemption works in both directions: costs of acquiring or disposing of the participation are not deductible, and losses on it are not deductible either.