Consultation on legislative proposal for tax incentives for startups
10/04/26
The government aims to improve the business climate for innovative companies in the Netherlands. On 1 April 2026, a public consultation was therefore launched on the legislative proposal introducing specific tax benefits for the sector in the ‘Tax Incentives for Startups and Scale-ups Act’. Interested parties can respond to this consultation until 29 April 2026. The legislative proposal contains two specific tax measures: a new definition of startups and scale-ups for box 3 purposes and a new tax favourable regulation that supports employee participation through stock options. To cover the costs of this scheme, the co-working deduction and business continuation relief in the income tax will be scaled back and ultimately abolished as of 1 January 2030.
What does this mean for your organisation?
This legislative proposal is particularly relevant for startups and scale-ups, but also for their investors, employees and shareholders in box 3. The broader definition of startups and scale-ups in the legislative proposal may result in more companies falling under the definition. As a result of this, shareholders of such companies taxable in box 3 will be taxed on their capital gains rather than their capital growth in the new box 3 system., Tax is therefore only paid on realised capital gains. In addition, the legislative proposal provides a favourable regulation for stock options granted to employees of startups and scale-ups. The regulation potentially offers significant tax advantages but is subject to specific exhaustive conditions that may have an unintended effect on the scope of the regulation. It is advisable to assess at an early stage whether your company qualifies for aruling from The Netherlands Enterprise Agency (‘RVO Ruling’), whether the current or intended employee stock option plan meets the conditions, and what the impact of the regulation will be on your overall remuneration policy.
The scaling back and ultimate abolition of the co-working deduction and business continuation relief affects a different group: entrepreneurs who make use of these facilities. As of 1 January 2027, they will face a reduction of 75 percent. As of 1 January 2030, both tax benefits will be fully abolished.
Background to the legislative proposal
According to the explanatory notes to this legislative proposal, a significant part of the future economic growth of the Netherlands depends on the success of startups and scale-ups and the innovation that these companies bring. With this legislative proposal, the government aims to give these companies better opportunities to grow successfully in the Netherlands, among other things by facilitating access to early-stage financing and by encouraging the attraction and retention of talent.
New definition of startups and scale-ups for box 3
The government is working on the introduction of a new system in box 3 where taxation will be based on actual returns (capital gains and capital growth). In this new system, an exception applies to shares in start-up companies: they are not taxed on their annual capital growth, but only actual capital gains are taxed. This means that tax is only paid on value increases when the shares are actually sold.
However, the current definition of 'start-up enterprise' does not sufficiently align with the specific characteristics of startups and scale-ups. Therefore, a new definition is proposed in the legislative proposal. A startup or scale-up is an enterprise focused on rapid growth through a scalable and repeatable business model that originates in innovation. The shares may not be traded on a regulated market and may not be held, directly or indirectly, for more than 25 percent by a listed entity.
A scalable and repeatable business model means that an enterprise, thanks to technology, can rapidly grow its revenue without a proportional increase in costs and resources. Innovation is understood to mean the development or improvement of products, services, processes or technologies, involving technical novelty or substantial functional improvement compared to the market.
The Netherlands Enterprise Agency (RVO) assesses whether an enterprise qualifies as a startup or scale-up and issues a ruling to that effect. This ruling is valid for eight years and can be renewed a maximum of three times for five years each. The new definition is intended to take effect upon the introduction of the new box 3 system in 2028.
Tax incentives for employee stock options
Startups and scale-ups often lack the financial means to offer employees competitive compensation packages, and employee participation can partially bridge this gap. Employee participation takes various forms in practice, but the legislative proposal only provides for a favourable treatment of employee stock option schemes at startups and scale-ups that fall under the definition described above. The explanatory notes to the legislative proposal state that the current tax treatment of (employee) stock options in the Netherlands appears unfavourable compared to other (European) startup countries such as the UK, France and Sweden. The benefits realised from employee stock options are currently taxed in box 1 at progressive rates up to 49.5% (FY26), whereas other countries often tax such benefits at a lower rate or qualify them as capital gains.
The legislative proposal amends the tax treatment of employee stock options that meet the requirements to fall in scope of the favorable regime in two ways.
On the one hand, the taxable base is reduced: only 65 percent of the taxable benefit from employee stock options is taken into account as employment income, resulting in an effective tax rate of approximately 32 percent. In addition, the taxable moment is shifted to the moment at which the shares acquired through the exercise of the employee stock options are actually sold. This also applies if the employee leaves employment early. Under the current rules, taxation occurs at the moment the shares become freely tradable, which can lead to liquidity problems because the employee may not have been able to sell the shares at that point. An employee may choose to have the taxable moment occur at the moment of exercise, or if the shares are not yet tradable, at the moment they become tradable, and must notify the employer of this choice in writing. The base reduction also applies when an earlier taxable moment is chosen by the employee. If an employee sells the option right to a third party before exercise, the full benefit is taxed at that moment. The base reduction to 65 percent does not apply in that case.
The exhaustive conditions for an employee stock option right to fall under the new favourable regulation are as follows:
- The employee stock option rights must relate exclusively to shares in the capital of the withholding agent for employment tax purposes itself. Stock option rights on shares in the capital of a related entity do not qualify for this new favourable regulation.
- At the time of issuance of the employee stock option right, the company must qualify as a startup or scale-up, for which an RVO Ruling has been issued. This ruling may be issued with retroactive effect.
- It must be agreed in writing that the employee stock option right cannot be exercised within two years of the grant date.
- The exercise price must be at least equal to the market value of the underlying shares at the time of grant.
- In the event of an intended sale of the shares acquired upon exercise of the employee stock options by the employee, a mandatory written approval procedure applies.
- The employer must maintain an adequate administration of, among other things, the share ownership, the granted employee stock option rights and the transactions.
Employee stock options granted to employees of startups and scale-ups that no longer meet the conditions fall in scope of the general tax treatment for employee options under the Dutch wage tax act. Employee stock options or shares in a startup or scale-up that qualify as a lucrative interest within the meaning of Section 3.92b of the Income Tax Act 2001 are excluded from the proposed employee stock option regulation, which may have an unintended effect on the scope of the regulation. In addition, it should be taken into account that emigration of the employee may lead to a deemed disposal of the shares (option rights) triggering a dry tax charge.
Given the significant tax advantage that can be achieved under the proposed new regime, it is advisable to assess at an early stage of implementation whether — but also whether in the near future — the conditions of the scheme will be met.
Scaling back and abolition of the co-working deduction and business continuation relief
The costs of the new employee stock option regulation are covered by the scaling back and ultimate abolition of the co-working deduction and business continuation relief in the income tax. As of 1 January 2027, both schemes will be reduced by 75 percent. As of 1 January 2030, they will be fully abolished.
Transitional provisions
The legislative proposal provides for transitional provisions: the regulation can also be applied to employee stock options granted on or after 17 April 2025, provided that these have not yet been taxed with employment taxes as of 31 December 2026 and meet all of the exhaustively stipulated conditions. The RVO Ruling must then have been applied for by 31 December 2027 at the latest.
The aim is for the employee stock option regulation to enter into force on 1 January 2027. The new definition for box 3 will enter into force upon the introduction of the new box 3 system, which is envisaged for 2028. The plans set out in the legislative proposal still need to be converted into definitive legislation, and the European Commission must grant its approval. Whether the proposals will ultimately make it across the finish line depends on the political and public debate.
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