Netherlands: Updated hybrid mismatch guidance; clarifications on treatment of CFC inclusions under participation exemption and debt related to real estate under Belgian treaty
Recent tax guidance in the Netherlands
The Secretary for Finance on July 16, 2026, issued the Hybrid Mismatches Policy Decree 2026, replacing the previous guidance on the application of the Netherlands’ hybrid mismatch rules under the Corporate Income Tax Act 1969. The updated decree introduces new guidance on the treatment of the U.S. global intangible low-taxed income (GILTI) and net controlled foreign corporation (CFC) test income (NCTI) regimes, foreign permanent establishments (PEs), business assets, and inventory, and provides additional examples on the concept of double-included income, including certain cost-plus structures. In particular, the decree clarifies that GILTI and NCTI inclusions do not constitute income inclusion for hybrid mismatch purposes and do not prevent the application of hybrid mismatch rules in relevant cases.
In addition, the Dutch tax authority on July 21, 2026, clarified that a CFC inclusion under Article 13ab of the Corporate Income Tax Act is not taken into account when determining whether a controlled foreign entity’s assets qualify as low-taxed passive investments for purposes of the participation exemption. The guidance states that where the controlled entity fails both the subject-to-tax test and the asset test, the participation does not qualify for the participation exemption, and related foreign exchange gains remain taxable.
The Dutch tax authority on July 20, 2026, also clarified that debts related to Belgian real estate may be taken into account when calculating double tax relief under the Netherlands-Belgium income tax treaty, even if the debt is not secured by a mortgage on the property. The guidance states that the relevant test is whether the debt is economically connected to the acquisition, improvement, or financing of the foreign property, rather than the existence of a mortgage right.
For more information, contact a KPMG tax professional in the Netherlands:
Paul te Boekhorst | teboekhorst.paul@kpmg.com