New companies and American firms often incentivise their staff by giving a portion of their reward in share options.
In the Netherlands, these restricted stock units have a special tax status.
While normally any stock and shares that you have as a Dutch tax resident are taxed in the Box 3 (or Box 2 if you own more than 5% of a company), these special options are treated differently.
“This is a benefit for employees which employers give as a kind of bonus,” explains a Blue Umbrella tax adviser.
“If they get stock or stock options, they pay a certain amount of tax up front, based on the initial value. This will depend on the price where the company has listed, and it could be an international stock market, or the business value used by its accountants if it is unlisted.”
In the year that stock options are granted, then, your employer will deduct wage tax in line with the value the options would have at that time; this means that you as the employee do not need to declare them in your Box 3 or Box 2 shares, but they are taxed at source, as though they are salary according to Box 1 rules.
They are seen as a bonus in terms of the difference between the price that you “pay” for the stock and its real value, and this difference is what is taxed.
It is common for companies to give stock options that can only be cashed in, in reality, after three years (or another period, depending on the contract offered to employees). This means that after this period of time, you can cash in the shares, or keep them, but you do not need to pay any additional tax if they have increased in value during the period.
“In the Netherlands, it is normally only with start-ups or new companies that you have restricted stock units,” said the tax adviser. “It is an incentive to bind people to the company, to encourage them to work harder and then feel the benefits and grow with the company.”
This can be useful for a new business, which may not have the cashflow to reward initial employees as highly in cash, but can give them a clear personal incentive to help the business succeed.
However, more established Dutch firms are unlikely to use this kind of benefit as in the Netherlands people typically get a fixed salary that varies less with personal bonuses and rewards than in some other countries.
RSUs can be an attractive salary perk for employers and employees: just be alert to which tax box they fall under and the terms of your particular contract, in order to avoid paying tax on them twice.
Do you have any questions about RSU taxes?