Startups and scale-ups rarely have the cash to compete on salary. Stock options bridge the gap, giving employees a stake in the company’s future success. But in the Netherlands, stock options come with a catch: tax is due at the moment of exercise, before the employee receives any cash. If the shares later drop in value, the tax bill stays the same.
A previous legislative change improved this by moving the taxable moment to the point at which shares become tradeable. That helped, but employees can still owe tax before actually selling their shares. And the gain is always taxed at the same progressive rates as ordinary salary, with no discount to account for the risk that comes with accepting equity instead of cash.
That is set to change. In April 2026, the Dutch government published a legislative proposal for a new stock option facility, available exclusively to qualifying startups and scale-ups. It addresses both shortcomings: tax is deferred until the employee actually sells the shares, and 35% of the gain is exempt. Companies that do not qualify remain under the existing regime.
Worth noting: the startup and scale-up definition introduced by this proposal will also be used for personal income tax purposes in the new Box 3 wealth tax system, expected to take effect on 1 January 2028. Under the new Box 3 system, shareholders in startups and scale-ups as well as owners of real estate will be taxed on actual realised capital gains; all other investments will be taxed on unrealised gains. The Box 3 implications are beyond the scope of this article.
This article covers the effective dates, the tax treatment, the qualifying criteria, the feedback received during the public consultation, and practical steps to prepare.
1. Effective dates
The new facility is intended to enter into force on 1 January 2027, but it can apply to stock options granted from 17 April 2025 onwards, provided (i) no taxable moment under the existing regime has occurred before 31 December 2026, (ii) the employer obtains a startup or scale-up ruling (application filed no later than 31 December 2027), and (iii) the stock options satisfy all requirements of the new facility.
This retroactive reach makes the proposal relevant right now. Companies that have granted stock options in 2025 or 2026 should assess whether they may qualify and take care not to trigger a taxable moment under the current regime before the new facility takes effect.
One further point on timing: the facility includes a sunset clause. It will automatically expire on 1 January 2035 unless replacement legislation has been introduced before that date. This is worth factoring into long-term planning.
2. Lower tax
Under the new facility, only 65% of the net gain (i.e. the sale proceeds minus the exercise price) is taxed. The remaining 35% is exempt. The regular progressive income tax rates still apply to the taxable portion (with a nominal top rate of 49.5%). The resulting effective rate is between 32.2% and 36.4%, depending on the employee’s total income.
The reduced rate applies when the employee sells shares acquired through exercising the options, and to dividends received on those shares. However, if the option right itself is sold without first being exercised into shares, the full gain is taxed at regular progressive rates. The policy rationale is to reward employees who commit to long-term participation in the company’s growth.
3. Deferred tax
Under the current rules, tax becomes due when options are exercised, sold, or the underlying shares become tradeable. The new facility changes this for employees of qualifying startups and scale-ups: tax is deferred until the shares are actually sold. No sale means no tax.
Employees can voluntarily elect to be taxed at an earlier point, either on exercise or when the shares first become tradeable. This election is irrevocable and must be communicated in writing to the employer no later than the chosen taxable moment. The 35% exemption still applies (except where the option right itself is sold). Employees should think carefully about their expectations for the company’s future value and their personal tax situation before making this choice.
To ensure that tax can be collected when shares are sold, the stock option agreement must require the employer’s prior written approval before any share sale, documented in a three-party agreement signed by the employee, the employer and the buyer. Former employees must pay the wage tax due directly to the employer. This enables the employer to remit wage tax on the gain.
A separate issue arises when employees leave the Netherlands before their options or shares have been taxed. In that scenario, the employee is treated as having disposed of the options or shares at fair market value. The Dutch tax authorities impose a so-called protective assessment on the accrued but unrealised gain. Payment of this assessment is automatically deferred until the shares are actually sold or another taxable event occurs. No security needs to be provided, unless the employee moves to a country outside the EU or EEA.
The protective assessment can be reduced if the value of the shares or options has fallen since the assessment was imposed, if another country also taxes the gain (in which case the Dutch assessment is reduced by the foreign tax levied), or if the Dutch tax exceeds what would have been due had the employee remained a Dutch resident.
4. Qualifying startups and scale-ups
Not every company qualifies. The facility is available only to companies that meet a specific statutory definition and obtain a ruling from the Netherlands Enterprise Agency. The key criteria are:
- The company must operate a business oriented towards rapid growth through a scalable, repeatable and innovation-driven business model.
- Its shares must not be traded on a regulated market.
- No listed company may directly or indirectly hold more than 25% of its shares.
In practice, scalable and repeatable means the ability to grow revenue without a proportional increase in costs, typically through technology. The innovation element requires developing or improving products, services, processes or technologies that involve technical novelty or significant functional improvement. Companies that use the R&D tax credit facility or have received venture capital funding are likely to have a head start. The Netherlands Enterprise Agency will assess applications on the basis of business plans, financial statements and similar evidence.
Companies apply to the Netherlands Enterprise Agency for a ruling confirming their startup or scale-up status. A ruling is valid for eight years and can be extended up to three times by five years each, giving a maximum total duration of 23 years.
If a company ceases to meet the qualifying criteria or enters bankruptcy, the ruling is revoked. The company must notify the Netherlands Enterprise Agency within four weeks. Failure to do so can result in an administrative fine.
The facility also covers corporate reorganisations. In the case of a share merger, demerger or acquisition of 50% or more of the shares, replacing existing options or shares with new instruments does not trigger tax, provided the new instruments relate to a qualifying startup or scale-up. If the resulting company does not qualify, tax becomes due under the current regime and the 35% exemption applies only proportionally, reflecting the period during which the new facility was in place.
The same proportional approach applies when the facility ends for other reasons, such as loss of qualifying status or expiry of the ruling. In each case, options or shares revert to the current general regime, with the 35% exemption applying only for the period during which the new facility was in place.
5. Qualifying stock options
Beyond the company-level requirements, the stock options themselves must meet a number of conditions:
- The option must give the right to acquire shares in the employer itself. Options on shares in affiliated group companies, which are permitted under the current general stock option regime, do not qualify.
- At the time of grant, the employer must already qualify as a startup or scale-up under a Netherlands Enterprise Agency ruling. The ruling can have retroactive effect.
- The options must not be exercisable within two years of the grant date.
- The exercise price must be at least equal to the fair market value of the underlying shares at grant.
- The stock option agreement between the employer and the employee must oblige the employee to obtain the employer’s prior written approval before any share sale. At the point of sale, that approval must be documented in a separate three-party agreement signed by the employee, the employer and the buyer.
- The employer must maintain records sufficient for the Netherlands Enterprise Agency and tax authorities to verify who holds options and shares, what transactions have occurred, and that all approval requirements have been met.
- Options and shares qualifying as a carried interest are excluded.
6. Public consultation and possible changes
The legislative proposal was published for public consultation, inviting stakeholders to comment on the draft text and its practical implications. Respondents broadly supported the facility’s objectives but raised serious concerns about workability. The main criticisms: the growth and scalability requirements are too rigid and hard to demonstrate for early-stage companies, and the mandatory ruling process adds unnecessary complexity where simpler, objective criteria, or a safe harbour, could provide greater certainty.
On the option-level conditions, the key concerns are: (i) options must relate to shares in the employer itself, whereas in practice they are almost always granted over shares in the parent company; (ii) the fair market value exercise price is difficult to determine before a first funding round or sale; and (iii) the 35% exemption may not apply in the most common exit scenario, where options are cash-settled rather than exercised into shares.
Several respondents argued that the facility should not be limited to startups and scale-ups, since regular SMEs face the same challenges.
It is common for legislative proposals to be amended after a public consultation, and this proposal is likely no exception. How much the final legislation will differ from the current draft remains to be seen.
7. How to prepare
Even though the final legislation may differ from the current draft, early preparation is important. Because the facility reaches back to options granted from 17 April 2025, decisions taken now directly affect future eligibility. Key steps include: assessing whether the company meets the qualifying criteria, avoiding triggering a taxable moment under the current regime (where appropriate), and submitting the ruling application in time. Stock option agreements and equity incentive plans should be reviewed against the requirements.
A related point concerns corporate tax. Stock options and other share-based remuneration are generally not deductible for Dutch corporate income tax purposes. Cash-settled alternatives, such as stock appreciation rights that track the increase in value of the company’s shares, may qualify as deductible employee costs. Companies designing their incentive structure should weigh the employee-side benefits of the new facility against this corporate tax limitation.
Employees holding or expecting to receive stock options should familiarise themselves with the deferral mechanism and the consequences of an early election.
The benefits of the new facility can be substantial, but the requirements are detailed and interconnected. Errors in structure, documentation or timing risk pushing options into a less favourable tax regime. Getting the details right from the outset is essential.
Please feel free to contact Ashraf Abdirizak and Arnoud Knijnenburg to explore the best course of action for your situation.
This article provides general information and does not constitute legal or tax advice.
For further information, please contact:
Ashraf Abdirizak, Bird & Bird
ashraf.abdirizak@twobirds.com
