Dutch Lower House approves new tax exemption for startups

Good news for start-up employees: they will be paying less in taxes when they exercise their options. The Dutch House of Representatives has approved the VVD-proposal to implement the new policy by 1 January 2018. Member Aukje de Vries (VVD): “Start-ups are important contributors to innovation and job creation. With the measure it will be a lot easier for start-up employees to co-profit from achieved growth.”

In the first years after launching, start-up employees often earn a lot less than their corporate peers. More often than not, startups therefore try to attract talent by paying employees in options or shares.  With fast-growing startups, however, this can mean a steep increase in share-value and thus a high income tax. Without the option to cash in shares and on a low salary this can lead to cash flow issues for shareholding employees. The tax measure for exercising options while working for a startup is a first step towards solving the issue.

Anne-Wil Lucas from StartupDelta welcomes the decision from the Lower House: “This is an important step in making the Netherlands more attractive for launching a startup”. The Tax Plan 2017 already set forth the government’s intention to make wage regulations for major-shareholder startup directors more flexible. The proposal to make 25 per cent of benefits from exercising options tax exempt is well aligned with that intention.  To clearly define to whom this tax exemption applies, eligibility has been narrowed down to startups that are registered under the Dutch WBSO-regulation, proving they are innovative and R&D-certified.

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