Dutch tax reform for employee stock options: what startups and scaleups need to know
The Dutch legislator is working on a new tax regime for employee stock options, with planned implementation as of 1 January 2027. Startups, scaleups and fast-growing SMEs may have better opportunities to allow employees to share in the company’s success.
With these proposed changes, the Dutch government aims to remove tax obstacles to employee participation and align the Netherlands more closely with startup-friendly jurisdictions such as France, Estonia and the United Kingdom.
The changes are part of a broader legislative proposal targeting the tax treatment of stock options in employment relationships. For founders, management teams, employees and investors, the reform is relevant because employee participation is often essential for attracting and retaining talent in companies that cannot yet compete with large corporates on salary alone.
What are the proposed changes?
Currently, Dutch wage tax is generally levied when employee stock options are exercised or, under the rules introduced in 2023, when the shares acquired upon exercise become tradeable. In practice, this can still create a tax liability before the employee has actual liquidity to pay the tax.
This is a particular issue for startups and scaleups. Shares are often illiquid, there may be transfer restrictions, and in structures involving a Dutch trust foundation, or STAK, the question whether shares or depositary receipts are freely tradeable can be difficult to determine.
In the Dutch 2025 Spring Budget Memorandum, the government announced several reforms to the fiscal treatment of stock options granted by startups and scaleups.
1. Deferral of taxation until sale of the shares
The most important proposed change is that taxation would be deferred until the employee actually sells the shares acquired under the stock option plan.
Under the current regime, taxation can arise when the shares become tradeable. This may result in a tax obligation before the employee has realised any cash proceeds. The new proposal shifts the tax moment to the actual sale of the shares.
That is a significant improvement. It means that tax would be due when liquidity is available, rather than at a moment when the employee may hold shares but have no cash to pay the tax.
For startups and scaleups, this better aligns the tax system with the economic reality of employee participation. Employees often accept stock options because they want to share in future upside, not because they have immediate liquidity.
2. Reduction of the taxable base
The second major change is the reduction of the taxable base.
Under the proposal, only 65% of the benefit would be treated as taxable employment income. The benefit is generally the difference between the sale proceeds and the exercise price paid by the employee.
The income would remain taxable in Box 1 of the Dutch Income Tax Act, meaning that it is still treated as employment income and subject to progressive wage and income tax. However, because only 65% of the benefit would be taxed, the effective maximum tax rate would be approximately 32.17%, assuming the current top Box 1 rate of 49.5%.
This is materially lower than the current situation, where the full benefit can be taxed at the top progressive rate.
The proposal therefore does not recharacterise employee stock option gains as capital gains or entrepreneurial income. Instead, it reduces the taxable base within the existing wage tax framework.
3. Effective date and target group
The proposed rules are expected to enter into force on 1 January 2027.
The regime is intended to apply to qualifying innovative startups and scaleups. The precise eligibility criteria are still important. These criteria will determine which companies can actually use the new regime.
That point should not be underestimated. If the definition is too narrow, the practical impact of the reform may be limited. If the definition is workable and predictable, the proposal could meaningfully improve the position of Dutch startups and scaleups in the international competition for talent.
Further legislative detail and secondary rules are therefore essential.
Why this matters for startups and scaleups
Employee stock options are not merely a remuneration tool. For startups and scaleups, they are often a strategic instrument.
They can help companies:
- attract senior talent without immediately increasing fixed salary costs;
- retain key employees during high-growth phases;
- align employees with founders and investors;
- create a shared economic interest in long-term value creation;
- compete with larger companies and international employers.
A competitive employee participation regime is therefore relevant not only from a tax perspective, but also from a corporate and financing perspective.
Investors will often look at the employee participation structure during due diligence. They will want to understand whether the option pool is properly documented, whether grants have been validly made, whether tax risks have been assessed and whether the plan fits the company’s cap table and governance structure.
Option holders remain in Box 1: entrepreneurial risk without full entrepreneurial treatment
The proposal is a clear improvement, but it does not resolve every issue.
Employees participating through stock options would still be taxed in Box 1. The gain remains employment income. Although the proposed reform introduces taxation at a more logical moment and reduces the effective tax burden, it does not fully recognise the entrepreneurial risk that option holders often take.
That is the central tension.
Employees who accept stock options often accept uncertainty. They may accept a lower salary, take the risk that the options never become valuable and depend on a future liquidity event. Economically, this resembles risk-bearing participation.
However, for tax purposes, the gain remains treated as employment income rather than investment income or entrepreneurial income.
That distinction remains important. Entrepreneurs and investors may benefit from different tax treatment, including in Box 2 or Box 3 depending on the structure and circumstances. Option holders do not automatically receive similar treatment, even though their reward is also linked to long-term company value.
A broader fiscal recognition of the risk-bearing nature of employee options could therefore further improve the Dutch regime.
International comparison
With the proposed amendments, the Netherlands is moving closer to countries such as the United Kingdom, Estonia and France, where employee participation is generally treated more favourably from a tax perspective.
The United Kingdom is a useful comparison. Under the Enterprise Management Incentive, or EMI, regime, qualifying employee options may benefit from a more favourable tax treatment, including taxation by reference to capital gains in certain circumstances.
Such regimes make employee participation more attractive for both employers and talent.
The proposed Dutch changes help address this competitive gap. They may make it easier for Dutch startups and scaleups to recruit and retain employees in an international labour market.
However, the Dutch proposal still appears more limited than some foreign regimes because the benefit remains embedded in the Dutch wage tax system.
Practical points for founders, management teams and investors
Founders and investors should not wait until 2027 before thinking about employee participation.
The proposed reform may affect how companies structure their option plans, but several practical points already require attention:
- whether the company uses shares, options, depositary receipts through a STAK, SARs or another incentive structure;
- how the option pool is reflected in the cap table;
- whether existing arrangements can be amended or should be replaced;
- how vesting, leaver provisions and exit mechanics are documented;
- whether employees understand the tax consequences;
- how the plan interacts with future financing rounds;
- whether the structure will be acceptable to future investors or buyers.
For companies preparing for a funding round, it is particularly important that employee participation arrangements are cleanly documented. Poorly structured or unclear incentive plans can create friction during due diligence and may affect valuation discussions or investment documentation.
Conclusion
The proposed Dutch tax reform for employee stock options is a welcome development for startups, scaleups and fast-growing SMEs.
The deferral of taxation until sale and the reduction of the taxable base to 65% could make employee stock options more workable and more attractive in practice.
At the same time, the reform remains incomplete. Option holders continue to be taxed in Box 1, and the practical value of the regime will depend heavily on the final eligibility criteria for qualifying startups and scaleups.
For founders, management teams, employees and investors, the key message is clear: the direction of travel is positive, but careful structuring remains essential.
Employee participation is not just a tax issue. It is part of the company’s corporate structure, financing strategy, governance framework and long-term growth plan.
Need advice on employee participation or stock option plans in the Netherlands?
For startups and scaleups, employee participation can be a powerful tool to attract and retain talent, but the legal, tax and corporate structuring must be properly aligned. Stock option plans, STAK structures, SARs, option pools, vesting terms and leaver provisions should be documented clearly before they become issues in a financing round, acquisition process or exit.
Dirk de Waard, corporate and M&A lawyer in the Netherlands, advises startups, scaleups, founders, investors and shareholders on corporate structuring, venture capital, employee participation arrangements, M&A transactions and strategic growth-related legal issues.
For questions about employee stock option plans, startup and scaleup structuring, venture capital documentation, shareholder arrangements or preparation for an investment or exit process, please contact Dirk de Waard at dirk.dewaard@viottalaw.com.
