For determining the regular income from a substantial shareholding (Box 2 income) in the Netherlands, the costs that can be deducted from the regular income consist of virtually all expenses incurred for the earning, collection and retention of the income. In essence interest expenses on funding loans are tax deductible, with the exception of interest on certain loans originating from inheritance. 

The following expenses are not deductible from regular income:

• expenses funded with debt which debt is legally or factually under certain circumstances not enforceable;
• dividend withholding tax (in Dutch: “Dividendbelasting”) and gaming tax (in Dutch: “Kansspelbelasting”);
• foreign taxes levied on income or profits, unless a regulation for the avoidance of double taxation (like a tax treaty) applies.

The deductible expenses must be reported annually in the Dutch income tax return.

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