Excessive borrowing from a foreign subsidiary: does the loan count?

TGS Innovised — De Voorwaarts

Updated: 30 September 2026

More and more director-major shareholders (DGAs) of a Dutch private limited company (BV) also own a company abroad through their holding company. Do you, as a DGA, borrow money privately from such a foreign subsidiary? Then you may assume that the Dutch Excessive Borrowing from Own Company Act (Wet excessief lenen) does not apply. That is a misconception: in the case of excessive borrowing from a foreign subsidiary, the debt also counts towards the € 500,000 threshold. A cross-border loan also brings its own risks, such as exchange rates, foreign rules and possible double taxation. This article sets out the consequences.

Does a loan from a foreign subsidiary count? Short answer: yes

The Excessive Borrowing Act (Article 4.14a of the Dutch Income Tax Act 2001, in Dutch) looks at your debts to all companies in which you hold a substantial interest (as a rule, at least 5% of the shares). The law makes no distinction between Dutch and foreign companies. Three points are important:

• Indirect interests also count. A substantial interest can be held directly or indirectly, for example through a holding company (Article 4.6 of the Dutch Income Tax Act 2001). Do you own 100% of your holding company, and does the holding company own 100% of a foreign subsidiary? Then you also hold a substantial interest in that subsidiary.
• Everything is added together. Debts to your Dutch holding company, your operating company and your foreign subsidiary are combined, together with the debts of your tax partner.
• Indirect debts also count. The law refers to debts that exist “legally or in fact, directly or indirectly”. A loan through an intermediary, or a bank loan that is only granted thanks to security provided by the company, may therefore also count.

Worked example: excessive borrowing with a foreign subsidiary (fictitious figures)

A DGA lives in the Netherlands and owns 100% of the shares in his Dutch holding company. The holding company has a Dutch operating company and a foreign subsidiary. The DGA has a current account with the holding company and has borrowed money from the foreign subsidiary for a private investment.

If the entire benefit is allocated to the DGA and he has no other box 2 income (income from a substantial interest), he pays approximately € 42,000 in box 2 tax (24.5% on € 68,843 and 31% on the remainder). Had he borrowed only from the holding company, he would have stayed below the threshold. It is the foreign loan that takes him over it.

Government proposal: excessive borrowing limit to € 100,000

At the end of September 2026, the Dutch government announced plans to lower the threshold by € 80,000 per year from 2027, to € 100,000 on 31 December 2031. The higher box 2 rate would temporarily drop from 31% to 29.2% for the years 2027 to 2030. In our view, the reduction is likely to go ahead.

This weighs even more heavily for foreign loans. Repaying or restructuring such a loan takes more time, for example because foreign approvals, withholding tax or a dividend route through the holding company are involved (see below). If you borrow € 300,000 from a foreign subsidiary today, you are below the current threshold. If the proposal goes ahead, that debt, together with other debts, may exceed the threshold as early as 31 December 2028 (threshold € 340,000). On 31 December 2029 (threshold € 260,000), the debt exceeds the threshold even on its own.

What should you watch out for with a foreign subsidiary?

1. Currency risk

Do you borrow in another currency, for example pounds sterling, Swiss francs or US dollars? For the test, the debt counts in euros on 31 December. If the exchange rate of that currency rises, your debt in euros rises too, even if you have not borrowed anything extra. A debt that stays below the threshold one year may therefore exceed it the next. Keep a margin below the threshold, or borrow in euros.

2. Visibility of the accounts

The accounts of a foreign subsidiary are often kept by a local bookkeeper, so current account balances with the DGA do not always stand out. In addition, the subsidiary sometimes has a different financial year. For the Excessive Borrowing Act, only the balance on 31 December counts. Make sure you actively request the position on that date.

3. Foreign company law

Not every country allows a company to simply lend money to its (ultimate) shareholder or director. Capital protection rules may apply, or shareholder approval may be required. A loan that is not legally valid locally can lead to liability.

4. Foreign tax

The foreign tax authority assesses the loan under its own rules:

• Arm’s length interest. An interest-free loan or an interest rate that is too low may be treated abroad as a hidden profit distribution, possibly resulting in withholding tax.
• Additional charges. Some countries have their own charge on loans to shareholders. In the United Kingdom, for example, a close company (a company controlled by a small number of shareholders) pays an additional tax on loans to shareholders that are not repaid in time (35.75% since 6 April 2026).
• Interest income. The interest you pay is taxed abroad in the hands of the subsidiary. For you as a DGA, that interest is as a rule not deductible in the Netherlands, unless the loan is an owner-occupied home loan.

5. Risk of double taxation

The Netherlands taxes the amount above the threshold as a deemed dividend, even though you have not actually received anything. The foreign country usually treats the loan simply as a loan. If the foreign country treats the loan (partly) as a dividend, it may levy withholding tax. Whether the Netherlands will then credit that foreign tax is uncertain, because the deemed benefit is not a real dividend distribution. Double taxation may therefore arise. Have this checked against the tax treaty for each country in advance.

6. Repayment through a dividend takes two steps

Do you want to repay the loan out of the foreign subsidiary’s profits? That cannot be done directly, because you are not a shareholder of the subsidiary. The subsidiary distributes a dividend to the holding company (often exempt under the participation exemption, in Dutch, but sometimes subject to foreign withholding tax), and the holding company then distributes to you (box 2). Plan this in good time.

7. Moving the loan does not solve anything

Moving a debt from the Dutch BV to the foreign subsidiary, or vice versa, does not change the total. Nor does it matter whether the loan is on arm’s length terms: in July 2026 (in Dutch), the District Court of The Hague ruled that an arm’s length loan counts just as much as one that is not.

Owner-occupied home loan exemption with a foreign subsidiary

A loan from a foreign company for your own home can also remain outside the scope of the tax. The same conditions apply:

• The debt is an owner-occupied home loan (mortgage interest deductible in box 1); and
• The company that lends the money holds a mortgage right on the property.

The mortgage right must therefore be granted in favour of the foreign subsidiary. Transitional rules apply to debts that already existed on 31 December 2022: no mortgage right is required for those. Also consider the foreign side: under its own rules, the subsidiary must lend on arm’s length terms and be able to take security.

Excessive borrowing if you live abroad yourself

This article assumes a DGA who lives in the Netherlands. If you live abroad and hold a substantial interest in a Dutch company, whether the Netherlands may levy tax depends on the tax treaty. When the law was introduced, the Dutch State Secretary for Finance indicated that under the existing tax treaties the tax often cannot actually be collected. For residents of Belgium, the Dutch Tax Administration takes the view that the treaty does not allow the Netherlands to levy tax (knowledge group position of 28 May 2025, in Dutch). If a protective assessment (conserverende aanslag) was imposed when you emigrated, however, an excessive debt can lead to (part of) that assessment being collected. The position on Belgium does not automatically apply to other countries.

Checklist: borrowing from a foreign subsidiary

For how the rules work in general, see also our article “Excessive borrowing from your own BV”.

Our tip

Treat a loan from a foreign subsidiary as an international matter, not as a simple current account. Involve both your Dutch adviser and your adviser abroad before you draw the money. Putting things right afterwards is more expensive and more difficult in an international situation than in a purely Dutch one.

Frequently asked questions about excessive borrowing from a foreign subsidiary

Advice on borrowing from a foreign subsidiary?

Would you like to know what the Dutch excessive borrowing rules mean for your loan from a foreign company? Contact our specialists in business tax services. We will map your position and calculate the possible routes for you.