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Rewarding employees is not always done through wage payments. The employer has an interest in various reward systems, for example, to keep good employees within the company or to attract external employees. Many employers choose to pay part of the wages through employee participation.
Employee participation can take several forms. Shares can be issued, but also stock options or RSUs (restricted stock unit).
If you, as an employee, have to deal with this it can become tax-technically complicated when there is a cross-border situation. The tax consequences are different for each form of employee participation. Therefore, an overview will be presented so you know what is relevant in your situation.
1 | Tax at immigration
When a stakeholder arrives in the Netherlands, it is important to determine which part of the value growth is taxable in the Netherlands. This concerns the part that arose during the Dutch period.
The level of the acquisition price of the shares/options is set at the market value at the time of immigration. This may result in the stakeholder having to deal with a step-up or a step-down.
- A step-up is an increase from the historical cost/acquisition price to the actual value.
- A step-down means the share has a lower value than the original acquisition price.
The step-up/step-down method is only applied if it concerns shares in a company established abroad.
All value growth after the moment of immigration is relevant for Dutch taxation. When options or RSU’s are exercised in the Dutch period, the income from this is included in the Dutch tax.
2 | Tax at remigration
The step-up/step-down method is not applicable for remigration. The value of the options is set to the same value at the time of emigration. If there is a protective assessment (in Dutch: “conserverende aanslag”) that has not yet been paid, it will be reduced by the amount that is still outstanding. If the protective assessment has been paid or partially paid, this will increase the acquisition price of the options.
3 | Taxable options in cross-border situations
Options are not included in the Dutch tax in the same way shares are. The big difference between shares and options is the moment of taxation. The taxable benefit of options is calculated at the time the options are exercised. In contrast to shares, where the moment of issue of shares is important.
The amount of the taxable income from options is set at the fair value less the purchase price of the option right or other costs that have been charged. There may be double taxation with another country. In this case, it is important to consult the tax treaty. The income must be divided in proportion to the activities that have been performed abroad and in the Netherlands.
4 | Taxable RSU
A common reward system is the granting of RSUs to employees. These are options that are issued with the restriction to exercise thereof until vesting. When all conditions are met, ownership is transferred to the employee (vesting). At this point, the taxable benefit is calculated. At the time the shares are sold, this obligation can be met by paying the tax due.
When the RSU is exercised, tax is paid on the benefit obtained. Often by the country of employment and country of residence. How are these taxation rights allocated? The total taxable amount is divided according to the time that the employee is resident in the Netherlands.
How much tax do I need to pay concerning my income from employer participation?
Box 2
If the total value of your shares/options/RSUs is directly or indirectly 5% or more, then you are a substantial interest holder. The benefits achieved through the shares/options/RSUs will be taxed at a rate of 26.9% in 2021.
Box 3
Assuming that the total value is less than 5%, the income will be taxed in box 3. The actually realized profits do not have to be reported in box 3. The income on the value of the assets is included in the tax. In box 3, the tax-free amount amounts to €50,000 if you do not have a tax partner and €100,000 if you have a tax partner.
How can we assist ?
Due to the enormous amount of information and complicated constructions, it is possible that you do not report the correct information to the tax authorities, which can lead to an incorrect tax return. The TaxSavers ensures that a clear overview is made with the correct calculations with regard to your portfolio. In that way, you pay the correct amount and you immediately have an overview. In addition, we think it is important that you understand exactly what happened, so we are happy to explain this.
We are happy to help!
Do you have any questions regarding employee participation and immigration or remigration? Or do you have other questions relating taxes? We are happy to help! Please feel free to contact us using the information mentioned below.
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+31 (0)20-2170120
