The rules surrounding share (stock) options in the Netherlands have not changed since 1 January 2005.
Share options are not an especially attractive employee benefit because of the Dutch taxation rules.
The rate which applies to any share option gains could be as high as 52%. Furthermore, in certain specific circumstances, a share option could be considered a ‘carried interest’ which might trigger more complex tax rules. Contact us for more detailed information on this.
Dutch rules for employee share option plans
Under current Dutch law, share options granted to employees are taxable at the date of exercise or sale.
The share transaction is taxed on the same basis as salary - the tax rates of which are progressive - with a maximum rate of 52%.
The taxable gain arising at exercise is the difference between the fair market value of the underlying shares at exercise minus the option exercise price paid by the employee.
The Dutch employer, as a withholding tax agent for employee income tax purposes, must withhold the correct amount from the employee.
Taxation after exercise
From the moment an employee has exercised the share options, the shares obtained will be, in principle, taxed as ‘income from savings and investments’ (assuming that the shares do not qualify as a ‘substantial interest’). ‘Substantial interest’ is generally considered an interest of at least 5% of the issued and outstanding capital.
A standard 4% rate of return on the average assets over the course of one year is calculated.
The result of this calculation is defined as 'income from assets'. An employee is charged 30% on this calculated income. The assets will be considered annually, on 1 January.
This is up to the individual employee to deal with and is not a concern for the employer.
Corporate tax consequences
For Dutch corporate tax purposes, the value of the option is, in principle, deductible in the year that the option is granted (provided the annual salary of the employee who receives the options is less than or equal to €556,000).
There is currently no deduction at the time that the options are exercised or sold.
For more information on share options in the Netherlands or for more general advice on doing business in the country, contact firstname.lastname@example.org.