Shareholder loans must be real loans at an arm's length rate, documented before the money moves. Interest is deductible within the earnings stripping limits: 24.5% of EBITDA or EUR 1 million in the Netherlands, 30% or EUR 3 million in Luxembourg. A Dutch owner who owes his companies more than EUR 500,000 on 31 December 2026 pays box 2 on the excess; the cabinet proposes to cut the limit to EUR 100,000 by 2031. Neither country withholds tax on ordinary interest, except the Dutch 25.8% on payments to low-tax affiliates.
A loan is the most flexible tool, and the most scrutinised
Money moves between an owner and his company in two ways: as equity, through capital and dividends, or as debt, through loans and interest. Debt is flexible. It can be repaid without a formal capital reduction, interest is usually deductible for the borrower, and the lender has a claim, not a share. That is exactly why the tax authorities in the Netherlands and Luxembourg look at shareholder loans more closely than at almost anything else in a small group.
Four questions decide the treatment. Is it really a loan, or equity in disguise? Is the interest at arm's length? Does an interest limitation rule cap the deduction? And, when the company lends to its owner, is it a loan or a dividend paid without the tax? The Netherlands adds a rule of its own: since 2023, an owner who owes more than EUR 500,000 to his own companies pays box 2 tax on the excess. The cabinet now proposes to lower that threshold step by step to EUR 100,000 by 2031.
Article 8b Vpb
Article 56 and 56bis LIR in Luxembourg.
EUR 500,000
Dutch threshold on 31 December 2026.
EUR 420,000
In 2027, falling to EUR 100,000 in 2031.
Usually 0%
Dutch 25.8% only to low-tax affiliates.
When a loan is a loan
Calling something a loan does not make it one. In both countries the tax treatment follows the substance. A loan has a fixed or determinable term, a repayment obligation, interest that does not depend on profit, and a lender who expects to be repaid. When those features are missing, the tax authorities can treat the money as capital, and the interest as a dividend.
| Issue | Netherlands | Luxembourg |
|---|---|---|
| Legal test | Civil law form is followed, with exceptions developed by the Supreme Court: sham loans, profit-participating loans that function as equity, and loans where repayment was never expected | Substance over form; the tax authorities look at the economic reality and the terms |
| Hybrid loans | Interest on loans that are equity in substance is not deductible and can be treated as a dividend | Interest on profit-participating loans can be recharacterised as a dividend and subject to 15% withholding |
| Thin capitalisation | No fixed ratio; the earnings stripping rule and specific rules apply instead | Administrative practice of 85:15 debt to equity for the financing of participations |
| Loans that will not be repaid | A non-business loan: a write-down is not deductible for the lender | Write-down can be challenged; a waiver may be a hidden capital contribution |
In the Netherlands the tension is usually about losses. A parent that lends to a struggling subsidiary on terms no bank would accept, and later writes the loan down, can find that the write-down is not deductible because the loan was not businesslike. In Luxembourg it is often about the debt-to-equity ratio of a SOPARFI that holds participations. Practice expects about 15% equity behind a participation financed with shareholder debt, and interest on the excess can be treated as a hidden distribution.
A Luxembourg SOPARFI buys a Dutch operating company for EUR 5 million: EUR 250,000 of share capital and EUR 4.75 million lent by the owner at 6%. Equity is 5% of the investment. To follow the 85:15 practice, at least EUR 750,000 should be equity. Interest on the EUR 500,000 above the ratio, EUR 30,000 a year, is at risk of being treated as a hidden dividend, with 15% withholding tax and no deduction.
Law and practice: Netherlands: Supreme Court case law on sham loans, participating loans and non-business loans (onzakelijke leningen); Corporate Income Tax Act 1969 (Wet Vpb), Article 10, paragraph 1, letter d (interest on hybrid loans) and Article 10b (long-term loans without fixed terms). Luxembourg: LIR Article 164, paragraph 3 (hidden profit distributions), Article 97 (profit-sharing interest as investment income), and the economic approach of the Tax Adaptation Law (Steueranpassungsgesetz).
Arm's length interest and informal capital
Between related parties the interest rate must be what independent parties would agree. In the Netherlands Article 8b of the Corporate Income Tax Act sets the rule; in Luxembourg Article 56 and, since 2017, Article 56bis of the Income Tax Law, which follows the OECD Transfer Pricing Guidelines. The result is the same: if the rate is too high, the excess is not deductible for the borrower; if too low, the authorities can impute a higher rate for the lender.
A benchmark for a shareholder loan does not need to be a fifty-page report. For a small company it is usually enough to document the borrower's credit quality, the term and the security, and to compare with bank quotes or published bond yields for a similar risk. What matters is that the analysis exists at the time the loan is granted, not after a tax audit begins.
Informal capital is the opposite case: a parent lends interest-free, or below market, to a subsidiary. For years both countries let the subsidiary deduct a deemed interest charge even though nothing was paid. That has been closed where it creates a mismatch. Since 2022 the Netherlands only allows a downward adjustment if the other country taxes a corresponding upward adjustment. Luxembourg reached a similar result through the anti-hybrid rules and tighter practice. Interest-free loans from owners are now mostly a non-event: no interest income, no deduction.
| Documentation | Netherlands | Luxembourg |
|---|---|---|
| Written loan agreement | Expected for every related-party loan | Expected; essential for the financing circular |
| Rate support | Benchmark or quotes kept on file | Transfer pricing study for intra-group financing companies |
| Master file and local file | Groups with turnover of EUR 50 million or more | Substantiation on request; detailed analysis for financing companies |
| Advance certainty | Advance pricing agreement possible, with substance requirements | Advance pricing agreement possible |
Luxembourg has a specific regime for companies whose business is intra-group financing: borrowing from one group company and lending to another. The circular of 27 December 2016, in force since 2017, requires real substance in Luxembourg, decision-makers with the right skills, and enough equity to bear the risks the company controls. A simplification remains for pure on-lending companies, which may report a 2% after-tax return on the financed assets instead of a full study.
Law and practice: Netherlands: Wet Vpb, Article 8b (arm's length principle) and Articles 8ba to 8bc (mismatches, since 2022); Transfer Pricing Decree of 2022. Luxembourg: LIR Article 56 and Article 56bis; Circular L.I.R. no. 56/1 – 56bis/1 of 27 December 2016 on intra-group financing transactions.
Interest limitation and hybrids
Even an arm's length interest charge can hit a cap. Both countries apply the EU earnings stripping rule, but with different numbers. On top of that, the Netherlands keeps an older rule aimed at interest on group debt used for specific transactions.
| Rule | Netherlands | Luxembourg |
|---|---|---|
| Earnings stripping | Net interest deductible up to the higher of 24.5% of tax EBITDA and EUR 1 million; excess carried forward | Net interest deductible up to the higher of 30% of tax EBITDA and EUR 3 million; carry-forward of excess interest and unused capacity |
| Group debt for tainted transactions | Article 10a: no deduction for related-party debt used for dividends, capital repayments, contributions or acquisitions of group companies, unless business reasons or a 15% tax at the lender | No equivalent; general rules and the hybrid rules apply |
| Hybrid mismatches (ATAD2) | Articles 12aa to 12ag Vpb, since 2020 | Article 168bis LIR, since 2020; reverse hybrids since 2022 |
For most owner-managed companies, the earnings stripping rule never bites: interest of a few tens of thousands of euros a year is far below the EUR 1 million and EUR 3 million thresholds. It matters for holding companies with acquisition debt and for real estate. Article 10a is more often relevant for a Dutch B.V. that borrows from its shareholder to pay a dividend or buy a group company. Our separate note covers the calculation in detail.
The hybrid rules rarely touch a simple loan between an owner and his company. They matter when the same payment is treated differently in two countries: interest in one, a dividend in the other, or when an entity is transparent in one country and opaque in the other, such as a US LLC that lends to a Dutch B.V.
Law and practice: Council Directive (EU) 2016/1164 (ATAD), Article 4, and Directive (EU) 2017/952 (ATAD2). Netherlands: Wet Vpb, Article 15b (earnings stripping, 24.5% since 2025), Article 10a, Articles 12aa to 12ag. Luxembourg: LIR Article 168bis. The European Commission's 2026 tax omnibus proposal would harmonise at 30% and EUR 3 million; it is a proposal.
Loans between the owner and the company
The most common shareholder loans are not intra-group financing at all. They are loans between a director-shareholder and his own company, in one direction or the other. The tax treatment differs sharply between the two countries.
| Direction | Netherlands | Luxembourg |
|---|---|---|
| Owner lends to company: interest for the company | Deductible if at arm's length | Deductible if at arm's length |
| Owner lends to company: interest for the owner | Box 1 income under the rules for assets made available, at up to 49.50%; receivable excluded from box 3 | Investment income at progressive rates of up to 45.78%; no withholding |
| Company lends to owner: interest for the company | Taxable at 19% / 25.8% | Taxable at 23.87% (22.80% planned for 2027) |
| Company lends to owner: interest for the owner | Not deductible, except a qualifying home loan in box 1; debt reduces box 3 above the debt threshold | Generally not deductible, except limited allowances for a home loan |
| Limit on the owner's debt | Box 2 tax on debt above EUR 500,000 on 31 December 2026; proposed lower path from 2027 | No fixed limit; hidden distribution if repayment is not realistic or the rate is below market |
The Dutch excessive borrowing rule (Wet excessief lenen bij eigen vennootschap) counts every debt of the owner and his fiscal partner to every company in which he holds a substantial interest of 5% or more, measured on 31 December. Debts and receivables are not netted. Home loans are excluded if they meet the mortgage interest rules and the company has a mortgage right. The excess above EUR 500,000 is taxed in box 2 at 24.5% and 31%. The debt itself stays in place, and a later repayment creates negative box 2 income that can be offset.
The cabinet's proposal of 29 September 2026 would lower the threshold to EUR 420,000 at the end of 2027 and by EUR 80,000 a year to EUR 100,000 at the end of 2031. It comes with a temporary top box 2 rate of 29.2% for 2027 to 2030, meant to encourage owners to pay dividends and repay their debts. Amounts already taxed raise the threshold, so a constant debt is taxed only on the new excess each year.
| Measuring date | Threshold | Status |
|---|---|---|
| 31 December 2026 | EUR 500,000 | Enacted |
| 31 December 2027 | EUR 420,000 | Proposed |
| 31 December 2028 | EUR 340,000 | Proposed |
| 31 December 2029 | EUR 260,000 | Proposed |
| 31 December 2030 | EUR 180,000 | Proposed |
| 31 December 2031 | EUR 100,000 | Proposed |
A Dutch director-shareholder owes his B.V. EUR 650,000 on a current account, without a home loan. On 31 December 2026, EUR 150,000 is above the threshold and taxed in box 2: about EUR 42,000. If the proposal passes and the debt stays the same, another EUR 80,000 is taxed at the end of 2027, about EUR 20,100 at the proposed rates, and the same each year to 2031. Repaying with a dividend in 2027 at 29.2% stops the clock.
Luxembourg has no comparable threshold. Its tools are older and more flexible: the hidden profit distribution and the hidden capital contribution. A loan from a company to its shareholder is accepted if it is documented, carries a market rate and is repaid as agreed. A current account that only grows, with interest accrued but never paid, is the classic case in which the tax authorities treat the balance, or the interest foregone, as a distribution, with 15% withholding tax on top.
A Dutch owner lends EUR 400,000 to his B.V. at 6%. The B.V. deducts EUR 24,000 of interest and saves EUR 4,560 of corporate tax at 19%. The owner pays up to EUR 11,880 in box 1. Net cost: EUR 7,320. If the B.V. had kept the profit and paid it out as a dividend, corporate tax and box 2 would have cost about EUR 9,320. The loan is cheaper even at the top box 1 rate, and the principal comes back tax-free.
Law and practice: Netherlands: Income Tax Act 2001, Article 3.92 (assets made available to one's own company), Chapter 4 (substantial interest) as amended by the Act on excessive borrowing from one's own company, in force since 1 January 2023 with a first measuring date on 31 December 2023; cabinet proposal of 29 September 2026 on the threshold path and box 2 rates. Luxembourg: LIR Article 164, paragraph 3, and Article 97.
Withholding tax on interest and what to keep on file
Neither country taxes ordinary interest at source. The Netherlands has no general withholding tax on interest. Since 2021 it levies a conditional withholding tax on interest and royalties paid to affiliated companies in low-tax jurisdictions, with a statutory rate below 9%, or in countries on the EU list of non-cooperative jurisdictions, and in abusive structures. The rate equals the top corporate tax rate: 25.8% in 2026. The 2026 list includes the UAE, Bahrain, Russia, the Cayman Islands and the British Virgin Islands, among others.
Luxembourg has no withholding tax on arm's length interest paid to non-residents. The exceptions are interest on profit-sharing instruments, which is treated as a dividend and subject to 15%, and a 20% final tax on certain savings interest paid by Luxembourg paying agents to resident individuals. A loan from an owner in Dubai to his Luxembourg company carries no Luxembourg withholding. The same loan to a Dutch B.V. from his Dubai company would.
- Written agreement. Amount, term, interest, repayment schedule, security, governing law; signed before the money moves.
- Rate support. A benchmark, bank quotes or a short memo on the credit quality of the borrower.
- Board decision. Minutes approving the loan in the lending and the borrowing company.
- Payments that follow the paper. Interest paid or accrued, repayments on schedule; a loan that is never serviced invites recharacterisation.
- Year-end check. For Dutch owners, the total debt to your companies on 31 December against the threshold.
- Withholding check. For payments abroad, the residence and tax rate of the lender and the low-tax list.
Law and practice: Netherlands: Withholding Tax Act 2021 (Wet bronbelasting 2021) and the Regulation on low-tax and non-cooperative jurisdictions for 2026. Luxembourg: LIR Article 146 and following; Law of 23 December 2005 on the 20% withholding tax on savings interest for resident individuals.
Shareholder loan check
Simplified: one owner without a fiscal partner, no other box 2 income, interest income taxed at the top personal rate, company profit in the first Dutch bracket. The result updates with each answer.
Shareholder loan check
Enter the loan, the interest rate and who lends to whom. You see the yearly interest, how it is taxed on both sides, and, for a Dutch B.V. lending to its owner, whether the excessive borrowing rule bites now and under the proposed lower thresholds.
A written agreement before the money moves.
Too high or too low both cost tax.
Dutch owner's debt limit at the end of 2026.
EUR 100,000 by 2031, if the proposal passes.
Shareholder loans in the Netherlands and Luxembourg: frequent questions
How much can I borrow from my own B.V. without extra tax?
In 2026, up to EUR 500,000 in total, measured on 31 December 2026, for you and your fiscal partner together, across all companies in which you hold a substantial interest. Qualifying home loans secured by a mortgage right are excluded. Above that, the excess is taxed in box 2 as if it were a dividend. Below it, the Belastingdienst can still treat a loan as a disguised dividend if repayment is not realistic.
Will the threshold go down?
The cabinet proposed on 29 September 2026 to lower it in five steps of EUR 80,000: EUR 420,000 at the end of 2027 and EUR 100,000 at the end of 2031. It is a proposal and needs approval by both chambers. Amounts already taxed under the rule raise your threshold, so the same debt is not taxed twice.
What interest rate should a shareholder loan carry?
An arm's length rate: what independent parties would agree for a loan with the same term, security and borrower credit quality. For a small owner-managed company that is usually well above the bank's base rate. Support the rate with a short benchmark or bank quotes, and put it in a written agreement.
Is interest I receive from my own B.V. taxed in box 3?
No. A loan from a substantial shareholder to his own B.V. falls under the rules for making assets available (terbeschikkingstelling). The interest is box 1 income at progressive rates of up to 49.50% in 2026, and the receivable is excluded from box 3.
Does Luxembourg withhold tax on interest paid to me abroad?
Not on ordinary arm's length interest. Luxembourg has no withholding tax on interest, except on profit-sharing interest, which is treated like a dividend, and a 20% tax on certain savings interest paid by Luxembourg paying agents to resident individuals.
Should I repay my current account with a dividend before the end of 2026?
Only if the debt is above, or close to, EUR 500,000. A dividend in December 2026 is taxed at up to 31%; under the proposal, the same dividend in 2027 is taxed at up to 29.2%. Where the debt stays under the threshold on 31 December 2026, waiting until 2027 to declare the dividend and set it off against the current account is usually cheaper, if the proposal passes.
Can my Luxembourg company lend to me interest-free?
It can, but the foregone interest is a hidden profit distribution. The company adds it back to its taxable profit, and the hidden dividend is subject to 15% withholding tax. A written agreement at a market rate, with a repayment schedule that is actually followed, avoids both.