Norwegian groups building a European structure through the Netherlands usually treat the two participation exemptions as the same instrument in two languages. The fritaksmetode and the deelnemingsvrijstelling both take dividends and share gains out of the corporate base, both have anti-abuse limits, and both are described in the same paragraph of most advisory memoranda.
They are not the same instrument. Norway asks where the subsidiary is and how it is taxed there. The Netherlands asks how large the holding is and whether it is held as an investment. A structure designed to satisfy one can fail the other, and the cost of the failure in Norway is corporate tax at 22 per cent on the whole gain.
What Norway exempts, and who is entitled to it
Section 2-38 of the skatteloven, last amended by the act of 22 December 2025 with effect from the 2026 income year, opens with a list of qualifying subjects. It covers companies of the kinds listed in section 2-2, first paragraph, letters a to d, and equivalent companies incorporated abroad but resident in Norway, securities funds, intermunicipal companies, wholly state owned companies, associations, foundations, municipalities and county municipalities, bankruptcy and administration estates of covered debtors, and companies resident abroad corresponding to any of these.
The second paragraph sets out what is covered, and it does not simply mirror the first. Gains and losses on the realization or withdrawal of an ownership interest are covered where the interest is in a company within letters a to c of the first paragraph, or an equivalent company resident abroad, together with lawfully distributed dividends on such an interest within section 10-11, second paragraph read with the third. The paragraph then adds interests in partnerships within section 10-40, first paragraph, and financial instruments with interests of the first kind as the underlying object.
Two features stand out at once. The exemption covers gains and dividends under the same provision, so there is no separate regime for exits. And the entitled subject includes a foreign company corresponding to a Norwegian one, which matters where a Dutch BV holds Norwegian shares through a Norwegian branch.
Inside the European Economic Area, there is no threshold
This is the difference that catches people. For a Norwegian company holding shares in another Norwegian company, or in a company resident elsewhere in the European Economic Area, section 2-38 imposes no minimum shareholding and no minimum holding period. A one per cent stake bought last week and sold this week clears both of those tests. What it still has to clear are the carve outs in the third paragraph that turn on neither size nor time, including the low tax country rule in letter a, housing companies under letter g, and dividends under letter h to the extent the distributing company is given a deduction for the distribution.
The third paragraph, letters b and d, imposes conditions only for holdings outside the Area. A gain on an interest in a company resident outside the Area falls outside the exemption unless the taxpayer has, continuously for the two years up to the point of realization, owned at least ten per cent of the capital and held at least ten per cent of the votes exercisable at the general meeting. For dividends, letter d requires the same ten and ten over a continuous two year period covering the moment of receipt. Letter c does the same work in reverse for losses, and its test is built differently: a loss on such an interest stays deductible where the taxpayer and related parties together have not at any time in the two years up to the loss held ten per cent or more of the capital or ten per cent or more of the votes. The fourth paragraph defines those related parties, and sets the significant interest that brings a person inside the definition at ten per cent of the capital or of the votes.
Compare that with the Netherlands, where the ordinary route into a participation under article 13, paragraph 2 of the Wet op de vennootschapsbelasting 1969 is five per cent of the nominal paid up capital. The threshold is real, but it is not the whole of the definition: the same paragraph reaches membership of a cooperative without any percentage at all, paragraph 3 adds a voting rights route for companies resident in a Member State whose treaty with the Netherlands reduces dividend taxation by reference to votes, and paragraph 5 pulls in a holding below the threshold where the body is connected with the taxpayer or where a connected body already holds a participation. Norway is the more generous inside the Area and the stricter outside it. A two or three per cent stake in a European company is exempt for a Norwegian holder, while a Dutch holder does not reach the exemption on it through the ordinary threshold and has to arrive by one of the other routes.
The carve out that does the real work
Letter a of the third paragraph is where Norway does its policing. Income and losses on an interest in a company resident in a low tax country outside the Area are excluded outright. Income on an interest in a company resident in a low tax country inside the Area is excluded where the company, on conditions corresponding to section 10-64, letter b, is not genuinely established and does not carry on genuine economic activity in a state within the Area, and the letter closes by adding financial instruments with such interests as the underlying object.
Section 10-63 defines a low tax country as one where the ordinary income tax on the company’s total profit amounts to less than two thirds of the tax it would have borne had it been resident in Norway. That is a comparative test against the Norwegian charge, not a fixed rate, so it moves when either rate moves.
Section 10-64, letter b, supplies the establishment test: the taxpayer must document that the company is genuinely established in a state within the Area and carries on genuine economic activity there, and Norway must be able to obtain information from the state of establishment under a tax treaty or other international agreement. Where no such agreement exists, the letter supplies its own alternative, and the condition is met instead where the taxpayer produces a statement from the tax authorities of the state of establishment confirming that the documentation is correct. The documentation burden sits on the taxpayer either way, and the information limb is a separate requirement that the facts of the establishment do not by themselves answer.
For a Norwegian group holding through a Dutch BV, this is the operative provision. Article 22 of the Wet Vpb charges the first 200,000 euro of taxable profit at 19 per cent and the excess at 25.8 per cent, and both figures sit above two thirds of the Norwegian rate, so on ordinary corporate rates the Netherlands is not a low tax country and letter a should not engage on that limb. What it does establish is that a Norwegian structure has to be able to prove the substance of its European holding, and to prove it with documents.
Three per cent of what was exempted
The sixth paragraph, letter a, provides that three per cent of a dividend within the second paragraph, letter a, that is exempt under the preceding paragraphs is nevertheless treated as taxable income, with the same rule applying to distributions from partnerships within section 10-40, first paragraph. Its perimeter is narrower than the list of exempt subjects. Letter a reaches the taxpayers in the first paragraph, letters a to h, which leaves out letter i, the company resident abroad corresponding to one of them. Letter b then brings that company back in, but only where it is taxable in Norway under section 2-3, first paragraph, letter b, on income from a business carried on here or managed from here. At the 2026 corporate rate of 22 per cent set by section 3-3, first paragraph, of the Storting’s tax resolution for the income year, the three per cent inclusion is an effective charge of 0.66 per cent on the dividend.
The provision applies to dividends and not to gains. A Norwegian holding company that realizes value by selling the shares takes the gain wholly free of the charge, while the same value taken out as a dividend carries the three per cent inclusion. That is a genuine difference in outcome between two ways of doing the same thing.
Letter c removes the inclusion within a group, and it is worth reading what the group has to look like. The recipient must belong to the same group as the distributing company within the meaning of the two companies acts, and the conditions in section 10-4, first paragraph, must be met, which is to say that the parent owns more than nine tenths of the shares in the subsidiary and holds a corresponding share of the votes that can be cast at the general meeting, with the requirements tested at the end of the income year. The exception is extended, on the same conditions so far as they fit, to dividends received from and paid to companies resident within the Area, with the section 10-64, letter b, conditions applying to those companies. A group comfortably inside a five per cent participation threshold can still sit outside a nine tenths one.
The Netherlands has no equivalent inclusion. Article 13, paragraph 1 exempts the benefit in full and disallows the costs of acquiring and disposing of the participation. Norway reaches a similar position on costs through section 6-24, which allows a deduction for costs incurred to earn exempt share income but denies acquisition and realization costs, whether or not the transaction completes.
What the Netherlands asks instead
The Dutch limits are structural rather than geographical. Article 13, paragraph 9 disapplies the exemption for a participation held as an investment unless it is a qualifying investment participation, and paragraph 10 treats a participation as held that way in any event where the assets of the company, on a consolidated basis, ordinarily consist for the greater part of interests below the five per cent line, or where its function, taken together with the bodies in which it holds at least five per cent, consists for the greater part of financing the taxpayer or connected bodies or the assets they use.
Paragraph 11 provides the escapes: a real levy by Dutch standards on the company’s profits, or assets ordinarily consisting for less than half of low taxed free investments. There is no list of countries and no comparison against a foreign rate. The question is what the participation does and how its returns are taxed.
On one point the two regimes converge, although their tests are not worded alike. Article 13, paragraph 17 withdraws the exemption to the extent the benefit consists of payments that can be deducted against a profits tax at the level of the company making them, and the third paragraph, letter h, of section 2-38 excludes a dividend to the extent the distributing company is given a deduction for it.
Run a Norwegian trading company under a Dutch BV through both regimes and the answer is the same on both sides, because an operating company with real activity and Norwegian tax at 22 per cent satisfies each test comfortably. Run a passive holding chain through both and the answers can diverge, because Norway looks at the residence and effective tax of the entity while the Netherlands looks at the composition of its balance sheet.
Where the two regimes actually meet
The point of contact is withholding. Section 10-13 charges tax on a dividend distributed to a shareholder resident abroad at a rate fixed by the Storting in the annual tax resolution, and section 3-5, third paragraph, of the resolution for 2026 sets that rate at 25 per cent, or the rate that follows from a tax treaty.
Section 2-38, fifth paragraph, is the domestic provision that removes it, and it is drafted narrowly. The exemption relieves from liability under section 10-13 only where the taxpayer is genuinely established and carries on genuine economic activity in a state within the Area, on conditions corresponding to section 10-64, letter b.
Read those two together and the shape of the problem appears. A Dutch holding company that qualifies for the Dutch participation exemption on its Norwegian shares has answered a question about its own asset composition. It has not yet answered the question section 2-38, fifth paragraph asks, which is about its establishment in the Netherlands and Norway’s ability to verify it. The domestic exemption from the withholding charge turns on that second question, and without it the charge falls at the statutory twenty five per cent or at the treaty rate where one is available; the question is decided under Norwegian law by Norwegian authorities on evidence the group has to assemble in advance.
For a Dutch holding company the treaty rate is not always a charge at all. Under article 10 of the treaty between the Netherlands and Norway, paragraph 2 caps the Norwegian tax at 15 per cent of the gross amount of the dividend where the recipient is its beneficial owner, and paragraph 3, letter b, provides that Norway shall not levy a tax on the dividend at all where its beneficial owner is a company, other than a partnership, resident in the Netherlands that holds directly at least ten per cent of the capital of the company paying it. Paragraph 7 sets both aside where the holding is effectively connected with a permanent establishment that the Dutch company has in Norway, and sends the dividend to the business profits article instead.
The consolidated treaty text does not show two further conditions. Both states list this treaty as a covered agreement in the positions they deposited under the Multilateral Instrument, Norway’s and the Netherlands’, and neither position excludes it from article 7 or article 8. Under article 7, paragraph 1 of the Multilateral Instrument, a treaty benefit is not granted where it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining it was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in it, unless granting it in those circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty. And because both states notified article 10, paragraph 3, letter b, under article 8, paragraph 4, the nil rate applies only if the direct holding of at least ten per cent is kept throughout a 365 day period that includes the day the dividend is paid, with changes of ownership that would directly result from a corporate reorganisation, such as a merger or divisive reorganisation, of the company holding the shares or of the company paying the dividend left out of the count. Where every one of those conditions is met, the Norwegian charge is nil whatever the answer to the establishment question. Where the holding is below ten per cent, is held indirectly or fails the 365 day period, the group is back on section 2-38, fifth paragraph, or on the 15 per cent cap of paragraph 2.
Choosing between them
Where the assets are Norwegian and the group is Norwegian, the Norwegian exemption is the more generous of the two on entry, because it asks for no threshold and no holding period within the Area. Its cost is the three per cent inclusion on dividends and the establishment documentation.
Where the group is building a platform for holdings across several European states and beyond, the Dutch exemption is the more durable, because a five per cent threshold is easy to hold deliberately and there is no low tax country comparison that moves when another state changes its rate.
The mistake is to assume that satisfying one disposes of the other. A Norwegian company under a Dutch holding sits inside both regimes at once: the Dutch one on the way up at the level of the BV, and the Norwegian one on the way out through section 10-13. The structure has to be built to the stricter of the two conditions at each point, which in practice means, for the dividend leaving Norway, either a Dutch holding with genuine establishment that can be documented or a holding that meets the treaty’s conditions for its nil rate, among them a direct holding of at least ten per cent kept through the 365 day period, and, at the level of the BV, a shareholding that clears five per cent with margin. On that last point the Dutch rules give back a little, because article 13, paragraph 16 keeps the exemption running for three years where a holding that the taxpayer has held for more than a year, and that qualified continuously through that period, drops below five per cent. It does nothing for a holding that was never above the line, and nothing at all for the Norwegian establishment question or for the treaty’s conditions.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.