Participation exemption and Teslin: a tax advantage when investing through a BV

This text provides a simplified explanation of the participation exemption. Tax treatment may vary depending on individual circumstances. No rights can be derived from this information. Please discuss your tax situation with a tax advisor.

An increasing number of entrepreneurs and high-net-worth individuals are considering whether investing through a BV (Dutch private limited company) better suits their wealth-building strategy. Developments around Box 3 taxation are creating uncertainty about the future tax burden. Against that backdrop, the participation exemption can offer a significant advantage.

What is the participation exemption?

The participation exemption prevents income that has already been taxed at the level of a subsidiary from being taxed again at the level of the parent company. If your BV holds an interest of at least 5% in a company, or holds an interest in a cooperative, dividend distributions and realised capital gains from that interest are, in principle, exempt from corporate income tax.

As a result, proceeds can remain within your BV and stay available for reinvestment or further value growth.

How does this work at Teslin?

Teslin's participation funds, Teslin Participaties and Gerlin Participaties, invest with stakes of more than 5% in companies. As a result, dividends and realised capital gains can, under certain conditions, qualify for the participation exemption.

If you invest through your BV in one of these two participation funds, you can therefore benefit from the same tax treatment. Dividend distributions and capital gains can then remain within your BV without additional corporate income tax.

Why can this be attractive?

The advantage of the participation exemption lies mainly in the effect of tax-free reinvestment. When dividend returns are not taxed with corporate income tax along the way, more capital remains available for further wealth growth. In addition, realised capital gains on the sale of the participation are not taxed.

A simplified calculation example illustrates this effect. With a starting capital of €1 million, an investment horizon of 15 years and an average return of 10% per year, of which 3% is dividend yield, and a sale of the interest after 15 years, the capital within a BV with participation exemption grows to approximately €4.2 million. In a situation where the dividend yield is taxed annually with corporate income tax, and the interest is sold after 15 years, the same capital grows to approximately €3.2 million.

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This example is for illustrative purposes only. Actual returns may differ, and Teslin does not guarantee any return.

The Teslin approach

We invest actively and with engagement in European small- and mid-cap companies. Our analysts conduct their own fundamental analyses and build concentrated portfolios of companies we understand well.

The participation funds Teslin Participaties and Gerlin Participaties aim to take stakes of at least 5%. This gives us influence over strategy and governance and enables us to actively monitor companies, contribute critical thinking, and intervene where necessary.

Our approach is based on patient capital. We focus on sustainable long-term value creation and co-invest in our own funds. As a result, our interests are aligned with those of our investors.

Who is this relevant for?

The participation exemption is particularly relevant if you invest through a BV and are looking for a tax-efficient way to build wealth.

Whether investing through a BV is attractive in your situation depends on your personal circumstances, investment objectives and tax position. We therefore recommend discussing your situation with a tax advisor before making an investment decision.