NETHERLANDS Law and Practice Contributed by: Marc Habermehl, Jeroen Smits, David de Groot and Max de Heer, Stibbe
5.4 Implementation The steps required to implement a participation plan largely depend on the specific characteris - tics of the plan. Contractual participation plans, such as SARs, typically involve minimal imple - mentation steps beyond obtaining the necessary corporate approvals and resolutions. Equity-based plans, however, generally require more extensive implementation. Under Dutch law, the issuance and transfer of shares require notarial intervention, meaning that notarial deeds must be drafted and executed before a civil-law notary. If employees or managers par - ticipate in the company’s equity through a STAK (see 3.3 Investment Structure ), additional steps are required, including the incorporation of the STAK, the issuance or transfer of shares to the STAK, and the subsequent issuance of deposi - tary receipts by the STAK to the participating managers and/or employees corresponding to such shares issued/transferred to the STAK. Specifically for management incentive plans (MIPs), which are often seen in a private equity context, the following applies: as negotiating long-form documentation for MIPs before sign - ing the transaction documentation is often not feasible from a timing perspective, investors and management generally aim to agree on a commitment letter plus term sheet prior to or at signing the transaction. Often, the period following signing is used to negotiate the long- form documentation and to commence a tax ruling process with the Dutch tax authorities seeking to confirm the Dutch tax treatment of the managers’ investment (see 5.3 Taxation of Instruments for a description of certain relevant Dutch tax considerations in this respect). Once the tax ruling is obtained (if applicable), the MIP can be implemented through the execution of the relevant notarial documentation. As the tax
value and the price paid by the recipient may give rise to a taxable employment benefit. Any income and/or gains subsequently derived after the moment of grant/purchase generally fall under the lucrative interest regime. Under this regime, any income and/or gains derived from lucrative instruments are, in principle, subject to Dutch personal income tax at progressive rates, up to 49.5% (maximum rate for 2025). However, if the lucrative instruments are held through a personal holding company, any income and/ or gains derived therefrom may be taxed under the Dutch substantial interest regime at a 31% rate (a step-up rate of 24.5% applies to the first EUR67,804 of taxable income), provided that certain conditions are met (the “structuring option” ). It is noted that this structuring option is under scrutiny by the Dutch parliament and the Dutch Ministry of Finance is currently exploring certain potential amendments to the (structuring option laid down in) the lucrative interest regime. In March and April of 2025, the Dutch Ministry of Finance conducted a public internet consultation in which two potential alternatives have been explored, pursuant to which – in short – income and/or gains from lucrative interests would: (i) be taxed solely at the progressive rates of up to 49.5% (in other words, the structuring option would be abolished); or (ii) could, in principle, still be taxed under the Dutch substantial inter - est regime (in other words, the structuring option would remain available), but at an effective tax rate that is higher than the existing 31% headline rate for regular income from a substantial inter - est. The results from the internet consultation are currently being examined by the Dutch Ministry of Finance and it is expected that these will be discussed in the Dutch parliament – but it is not yet clear when such discussions will take place.
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