Tax Alert: New Tax Measures Proposed for Employee Participation in Start-ups and Scale-ups

The Measures were first announced in the Spring Memorandum of 17 April 2025, and its further framework is set out in this public consultation. In this Tax Alert, we outline the key features of the proposed Measures and flag certain practical points of attention.

1. Background

The Dutch government considers access to talent to be one of the greatest obstacles to the successful growth of start-ups and scale-ups. Start-ups and scale-ups do not always have the financial means to offer employees a competitive salary. Stock options (internationally the most widely used form of participation in the start-up sector) can potentially help to bridge this gap, by giving employees the opportunity to share in the potential growth of the company. The Dutch government further notes that employee participation can benefit both the attraction and retention of qualified employees and can strengthen the start-up ecosystem by enabling employees to reinvest their proceeds in the next generation of companies.

The Dutch government has identified the current tax treatment of employee stock options as a competitive disadvantage for the Netherlands relative to other jurisdictions with well-developed start-up ecosystems, such as the United Kingdom and Sweden, which generally tax the benefits from stock options at a lower rate or as capital gains. At the same time, according to the government, start-ups and scale-ups in the Netherlands currently grow less successfully than in other European countries. The Measures are designed to address these issues.

2. Key Features of the Measures

2.1 Current tax treatment of employee stock options

Under the existing Dutch wage tax rules (as in effect from 1 January 2023), employee stock options are generally speaking subject to taxation at the moment of exercise. However, in case the underlying shares – acquired through the exercise of the stock option – are not yet tradable at the moment of exercise, taxation is deferred until the moment they do become tradable. Employees can opt to keep taxation at the time of exercise, with the taxable amount being determined by the fair market value of the underlying shares at that time.

This moment of taxation can be quite burdensome in practice, as it can result in employees facing a significant tax liability without having received any cash proceeds from the shares from which to fund such liability.

2.2 Reduced tax base and deferred taxation

The Measures consist of two key elements. First, the tax base for income in relation to qualifying employee stock options is reduced to 65% of the benefit realised, resulting in an effective tax rate of approximately 32%. Such effective rate is broadly in line with the combined rate that would apply if the income were taxed as substantial interest (aanmerkelijk belang) in Box 2. Second, the moment of taxation is deferred to the moment of actual disposal of the shares, rather than the moment they become tradeable. Employees may opt to be taxed at an earlier moment (either at exercise or at the moment the shares become tradeable) provided that such election is communicated in writing to the employer no later than the relevant earlier moment. The reduced tax base of 65% applies regardless of the chosen moment of taxation.

It is noted that the reduced tax base does not apply where an employee disposes of the option itself (i.e. prior to exercise). In that case, the full amount realised is subject to tax without the benefit of the 65% reduction, ensuring that application of the Measures is limited to situations of actual entrepreneurial participation.

2.3 Eligible companies and the RVO decision

A company qualifies as a start-up or scale-up for the purposes of the Measures if it: (i) operates a scalable and repeatable business model which originates from innovation; (ii) does not have shares or profit-sharing certificates traded on a regulated market; and (iii) does not have more than 25% of its shares held, directly or indirectly, by a listed entity. 

A scalable and repeatable business model is defined as the ability of an enterprise to grow its revenue rapidly without a linear increase in people, resources or costs, by making use of technology that results in lower marginal costs and offers economies of scale. 

Innovation is defined as the development or improvement of products, services, processes or technologies, involving technical novelty or significant functional improvement relative to the sector.

Qualification is determined by RVO (Rijksdienst voor Ondernemend Nederland, or “RVO”) upon application by the company. As indicators RVO can take into account, for example, participation in schemes such as the WBSO (Research and Development Promotion Act) or Innovation Credit (Innovatie Krediet), or the obtainment of venture capital funding by the applying company. The resulting decision (beschikking) is valid for eight years from the date of the decision and may be renewed for further periods of five years, provided the relevant conditions continue to be met.

2.4 Conditions for qualifying employee stock options

For an employee stock option to qualify under the Measures, each of the following conditions must be satisfied on a cumulative basis: 

1. relate to shares in the employer itself (options on group company shares do not qualify);
2. be granted whilst a valid RVO decision is in place;
3. not be exercisable within two years of the date of grant;
4. have an exercise price at least equal to the market value of the underlying shares at the time of grant;
5. be subject to a written approval procedure for any subsequent sale of shares acquired upon exercise, involving the employee, the employer and the buyer; and
6. the employer must maintain its administration in such a manner that the shareholding, the options and all transactions (including compliance with the approval requirements) can be verified at any time.

3. Certain further practical aspects of the Measures

3.1 Termination of employment

Termination of the employment relationship does not constitute a taxable moment under the proposed Measures. Taxation upon departure would undermine the purpose of the Measures in attracting and retaining talent and would be inconsistent with international practice. Accordingly, taxation for a former employee still takes place only upon disposal of the shares. The written approval procedure for share sales (condition (v) above) enables the employer to withhold and remit the taxes due at that time, even where the employment relationship has since ended.

3.2 Expiry or loss of start-up or scale-up status

Where the RVO decision expires or the company ceases to meet the qualifying conditions (including upon an IPO), the existing general employee stock option regime applies to any outstanding options or shares which have not yet been subject to taxation. The employee retains the tax benefit for the period during which start-up or scale-up status applied on a pro rata temporis basis.

3.3 Emigration

Upon emigration, a deemed disposal of the shares (and/or stock options) is assumed to take place at fair market value, with the resulting tax claim in principle secured by means of a protective assessment (conserverende aanslag). Payment of that assessment is automatically deferred for an indefinite period and is triggered (in whole or in part) when liquid proceeds become available (for example, upon an actual disposal of the shares) or when another taxable moment under the Measures arises. No collection interest is charged during the deferral period, and security is only required where the taxpayer relocates outside the EU or EEA.

3.4 Interaction with the lucrative interest regime

Stock options or shares qualifying as a lucrative interest (lucratief belang) within the meaning of Article 3.92b of the Income Tax Act 2001 are expressly excluded from the Measures. This exclusion is intended to prevent taxpayers from using the Measures as a mean to circumvent the announced multiplier measure applicable to indirectly held lucrative interest taxed in Box 2 (which is, following the amendment of November 2025, expected to enter into force on 1 January 2028; see also our Tax Alert of 17 September 2025). Whether a stock option, or the shares acquired upon exercise thereof, qualify as a lucrative interest will need to be assessed on a case-by-case basis prior to applying the Measures.

3.5 Retroactive application

The Measures are intended to apply retroactively to employee stock options granted by qualifying start-ups and scale-ups on or after 17 April 2025 (the date of the Spring Memorandum), provided the stock options have not yet been subject to taxation as of 31 December 2026 and all other conditions of the Measures are met. In order to benefit from this retroactive application, the employer must apply for an RVO decision no later than 31 December 2027.

4. Final Remarks

A number of aspects of the Measures will require particular attention in practice. The qualifying conditions for both the start-ups and scale-ups and the granted employee stock options are detailed and will require careful assessment to ensure eligibility for taxation in line with the proposed Measures. In particular, the two-year exercise restriction and the written approval procedure for a sale of the shares will need to be reflected in the documentation relating to employee participation arrangements. The start-ups and scale-ups will also need to ensure that their RVO decision is in place at the time of grant in order for the employee stock options to qualify.