Employee Stock Options: New Fiscal Regime for Innovative Start-Ups and Scale-Ups
The Dutch government has announced a new fiscal regime aimed at making employee stock options more attractive in innovative start-ups and scale-ups.
This regime, expected to take effect on 1 January 2027, is designed to help young, fast-growing companies attract and retain talent by reducing the tax burden and shifting the taxation moment to a more practical stage. In this article, we explain what is changing, who can benefit, and what steps employers and employees should prepare for.
Why a new regime?
Employee participation through stock options is an important tool for start-ups and scale-ups. It allows companies with limited cash resources to reward employees with a share in future growth. However, under the current rules, taxation is often seen as a barrier:
- Gains are taxed as employment income (or Box 1 for the income taxes) at progressive rates up to 49.5%.
- Tax is often due at the moment options become exercisable or tradable, meaning employees may face a tax bill before having liquidity to pay this as there may not be cash received yet.
The new regime is intended to make the Netherlands more competitive internationally, aligning better with practices in other innovative economies.
Key features of the proposed regime
- Reduced Tax Base: Only 65% of the option gain will be taxable as employment income. This brings the effective tax rate in the highest bracket of Box 1, which is 49.5% down to around 32%, closer to Box 2 levels (which has a top marginal tax rate of 31%).
- More Flexible Tax Moment: Taxation will, in principle, take place at the moment of sale of the shares, not at exercise or tradability. This avoids the cash-flow problem of paying tax without having sold the shares.
- Targeted Eligibility: The scheme is reserved for innovative, non-listed start-ups and scale-ups with a scalable and innovative business model. Companies will need an official confirmation (beschikking) from the Rijksdienst voor Ondernemend Nederland (RVO).
- Duration: The regime is planned to run for seven years (2027–2033) after which it will be evaluated.
What this means for employees
For employees receiving options, the regime offers:
- A lower effective tax burden, allowing them to retain more of the upside.
- Better liquidity management, since taxation is shifted to the moment of sale.
- A clearer, more competitive incentive to join innovative start-ups.
What this means for employers and founders
For companies, the regime makes stock option plans a stronger tool to attract and retain staff. However, they will need to:
- Apply for RVO qualification to ensure eligibility.
- Review and update their option plans and shareholder agreements.
- Prepare payroll and administration for the new rules.
- Consider how equity incentives fit into the overall compensation strategy.
Example
Suppose an employee is granted 1,000 options at €10 per share. By the time of sale, the shares are worth €50, creating a gain of €40,000.
- Current rules: The full €40,000 is taxed at Box 1 rates, leading to roughly €19,800 tax if taxable in the highest bracket.
- New regime: Only 65% of the gain (€26,000) is taxable, leading to about €12,870 tax. The employee saves nearly €7,000 and only pays tax at the time of sale.
What is the next step
The law is expected to come into effect from 1 January 2027. Until then, companies and employees should:
- Stay updated on the legislative process and final details.
- Plan new stock option grants with the upcoming regime in mind.
- Review whether existing option agreements need adjustment.
How Dutchtaxadvice.nl can help
At Dutchtaxadvice.nl, we guide both employers and employees through the complexities of stock option taxation. We can assist with:
- Assessing whether your company may qualify for the new regime.
- Designing and implementing compliant option plans.
- Calculating tax outcomes under current and future rules.
- Supporting employees in understanding their personal tax position.
If you are considering stock options as part of your compensation or company strategy, contact us to discuss the possibilities.
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