The Netherlands | Option grants by innovative companies and new payroll tax proposals

The Dutch government is currently working on new measures that are intended to meet the needs of start-up and scale-up companies, known as "innovative companies", in the Netherlands that grant stock option rights to their employees as an incentive.

The purpose of these measures is to prevent a "dry" tax charge (a paper gain) by shifting the taxable moment from the date of exercise of the options/acquisition of the shares to the point at which the acquired shares are freely transferable.

This shift of the taxable moment would in general be beneficial to employees of innovative companies – who acquired shares that are subject to a so-called "lock-up period" under the rules of the employee option plan – because it would allow the employee to finance the tax payment from the cash proceeds of the sale of the acquired shares.

However, shifting the taxable moment might also have disadvantages for employees of innovative companies as the (later) tax charge, in certain circumstances, could be higher if the value of the shares has increased since the date of exercise.

The Dutch government is still exploring its options, and has not yet proposed a draft bill enacting such an amendment. The intention is to have a virtual consultation of a draft legislative proposal in February 2021, with a view to the measures coming into effect from 1 January 2022.

Contemplated scheme Dutch payroll tax

The Dutch government has announced the introduction of a temporary scheme through which employers may be eligible for a tax reduction (afdrachtsvermindering) on payroll taxes when a specific job-related investment is made (the BIK).

The BIK is intended to be an incentive for employers that make investments:

• from 1 October 2020 while the final payment for the investment is not later than 31 December 2022; and
• in business assets (bedrijfsmiddelen), that need first to be taken into use within six months of the final payment for the relevant investment.
  The BIK will include anti-abuse conditions to prevent abuse of the scheme, but no detailed conditions have yet been announced.

The BIK may come into effect from 1 January 2021 until 31 December 2022. It is intended to be in addition to the existing schemes for employers, such as the small-scale investment tax deduction (KIA), the energy or environmental investment allowances (EIA or MIA); and the VAMIL-scheme that allows an accelerated depreciation for investments in environmental-friendly equipment at the taxpayer's own discretion.

There has been some criticism of the BIK, and it remains to be seen whether the Dutch parliament will approve this scheme.

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