For Dutch wage tax purposes, benefits from share option (plans) are currently taxed at exercise. The taxable amount for wage tax purposes is the difference between the exercise price (if any) and the fair market value of the option at exercise. Per January 2023[i], share option (plans) will be taxed at the moment the shares become tradeable. The employee will still have the choice to opt for taxation at exercise.


Share options are an important tool for companies to incentivize their (top) employees and attract new talent. Another important factor is that with share options a company can bind its employees for a longer period. This is  more important now that there is a shortage of highly skilled employees. This is even more so for start- and scale ups since they can generally not pay a salary that established companies can. After all, start- and scale ups are in much need of capital to expand quickly and every euro they can invest in the company is more than welcome. The promise to participate in the growth of the start- and or scale up, companies through incentivizing its employees with share options instead of cash is therefore key in their strategy to attract talent that otherwise would not come. It is therefore not surprising that a cry to change the legislation comes from the start- and scale up sector.   

What is the problem with the moment of taxation at exercise?

The main reason is liquidity. When employees exercise share options they receive shares in the company, and the employee must pay wage tax on the received shares. The employee often does not have the liquidity to fund the taxes. This is often resolved by providing the possibility for the employee to sell shares immediately after exercising the options to pay for the taxes. This is the so-called sell to cover transaction. However, this makes the option plan less attractive for the employee. After all, one of the reasons for the employee to receive share options is the expectation that the shares will increase in value and the employee would like to keep as many shares as possible. This is even more so with start- and scale ups. Another aspect is that, in a sell to cover transaction, start- and scale up must use the much-needed cash to buy the shares from the employees. This makes the current legislation not very attractive for start- and scale ups as they generally are in real need of cash to grow and expand their business.

The Dutch government has acknowledged these bottlenecks under the current legislation. Moreover, The Dutch government is of the opinion that start- and scale ups are a cornerstone of the Dutch economy and that includes an attractive regime for taxation of options share plans[ii]. With the intended change to the moment of taxation when shares become tradeable, the Dutch government addresses the industry’s concerns. Moreover, with this change the Dutch legislation is more aligned internationally on how other countries tax share option plans.[iii]     

What does this mean for you as employer?

Though the cry to change comes from the start- and scale ups, the change in legislation is generic. This means that every employer who provides share options to its employees will be confronted with the change. Though the change is welcome, the administration of a share option plan will become vastly more complex for you as employer. The reason is two-fold: 1) With the possibility for the employee to still opt for taxation at exercise, the employer will need to administer their employees’ preferences utterly at the moment of exercise. The employee has even the possibility to opt to pay taxes at exercise for a part of the options and postpone the rest to the moment when the shares become tradeable making it ever so more complicated for you as an employer to administer. 2) As result of moving the moment of taxation to the moment when shares become tradeable (and for example not to the moment that shares can actually be traded), questions might come up as when are shares tradeable.[iv] The liquidity problem is also de facto not solved in situations where shares become tradeable but cannot (yet) be sold for other reasons.

International aspects

Companies with an internationally active workforce will have to pay extra attention. In general, up to the moment of taxation of share options, the benefit for the employee is to be reported and taxed through payroll in the respective countries where he/she worked. Once the benefit is taxed through payroll, the responsibility for reporting and paying further taxes on income derived from the shares (dividend and / or capital gain) is the responsibility of the employee (in general) through his/her personal income tax return. The complexity in cross-border working situations is that countries have a different moment of taxation of option share plans. Some countries tax e.g., the option plan at grant or at the moment share are actually traded or a combination. This can lead to different treatments of taxation and timing in the respective countries and therefore reporting obligations of the employer and the employee. This will become more apparent in case the employee chooses to deviate from the new main rule and still opt for taxation at exercise.


Despite the fact that the administrative burden for an employer offering share option plans will quickly become more complex, we welcome this change. In our view it solves a fundamental flaw for capital intensive companies such as start- and scale ups whereby now it is not attractive to incentivize employees through share options due to cash flow.

Please contact our specialists if you incentivize – or are thinking about incentivizing – your employees with share options after this upcoming legislative change. Our specialists can help you map out the effect of the changes or advise in setting up and implementing such a plan.    


[i] The date of 1 January 2023 is under the caveat that this Act is approved by the Parliament and announced before the end of the year. If not, the Act will likely apply per 1 July 2023 see 35 929 Brief van de staatssecretaris  van Financiën en belastingdienst van 11 November 2022.

[ii] Landenonderzoek inzake de belastingheffing van aandelenopties voor werknemers, 31 mei 2021, DGBI-O / 21136965 (in Dutch).

[iii] Landenonderzoek inzake de belastingheffing van aandelenopties voor werknemers, 31 mei 2021, DGBI-O / 21136965 (in Dutch).

[iv] In the parliamentary explanation of this legislative change such a situation could occur when tradeable shares are dependent on factors that are mostly outside the sphere of influence of the employee e.g., share share-buy-back schemes for non-listed companies, see 35929 Nota naar aanleiding van het verslag inzake Wet aanpassing fi scale regeling aandelenoptierechten, 19 oktober 2021.