Companies often use options over their own shares to attract and retain employees. Although share option plans can be an effective form of compensation, they also raise important tax questions. In a decision issued on 9 October 2026, the Dutch Supreme Court clarified that, in certain circumstances, a cash bonus paid to buy out conditional share options is deductible for Dutch corporate income tax purposes. The decision is particularly relevant to companies that operate employee share and share option plans in the Netherlands.
The case before the Supreme Court involved five employees of X BV, a Dutch private limited company. The employees received conditional rights to shares in X BV’s parent company (the options). They would become entitled to the shares four years after the grant only if they remained employed by X BV and met specified performance targets. Before those conditions were satisfied, the employees waived their options in exchange for a cash bonus totalling EUR 630,000, payable by X BV in a later year. The dispute centered on whether X BV could recognise a provision for that future expense and, in practical terms, deduct the cash bonus for Dutch corporate income tax purposes.
Business expenses are generally deductible for Dutch tax purposes, but the treatment of the cash bonus was uncertain. Article 10(1)(j) of the Corporate Income Tax Act 1969 provides that a company may not deduct costs arising from the grant of its own shares, options over its own shares or options over shares of a related company (the nondeductibility rule). The rule also applies to the buyout of such options. However, the legislation does not clearly state whether the rule applies to options subject to conditions precedent — that is, options that confer a right to shares only after specified conditions are fulfilled. Because the options in this case were subject to such conditions, the Supreme Court had an opportunity to clarify the scope of the rule.
The Supreme Court held that the cash bonus was deductible for Dutch corporate income tax purposes. The nondeductibility rule did not apply because, when the employees waived their options, the conditions precedent had not been satisfied and the employees had not yet become entitled to the shares.
The decision provides welcome clarity for options granted subject to conditions precedent, but it does not establish that every buyout of conditional share options is deductible. The nondeductibility rule may still apply where the facts differ from those considered by the court. Companies should therefore review each arrangement carefully, including the applicable conditions and whether those conditions have been satisfied when the options are bought out, to determine whether a grant or buyout of shares or share options — conditional or otherwise — falls within the scope of the nondeductibility rule.
Bart van der Burgt
Ferry van Hal
Lisanne Rijff
BDO in Netherlands
The Case
The case before the Supreme Court involved five employees of X BV, a Dutch private limited company. The employees received conditional rights to shares in X BV’s parent company (the options). They would become entitled to the shares four years after the grant only if they remained employed by X BV and met specified performance targets. Before those conditions were satisfied, the employees waived their options in exchange for a cash bonus totalling EUR 630,000, payable by X BV in a later year. The dispute centered on whether X BV could recognise a provision for that future expense and, in practical terms, deduct the cash bonus for Dutch corporate income tax purposes.
Nondeductibility Rule
Business expenses are generally deductible for Dutch tax purposes, but the treatment of the cash bonus was uncertain. Article 10(1)(j) of the Corporate Income Tax Act 1969 provides that a company may not deduct costs arising from the grant of its own shares, options over its own shares or options over shares of a related company (the nondeductibility rule). The rule also applies to the buyout of such options. However, the legislation does not clearly state whether the rule applies to options subject to conditions precedent — that is, options that confer a right to shares only after specified conditions are fulfilled. Because the options in this case were subject to such conditions, the Supreme Court had an opportunity to clarify the scope of the rule.
Supreme Court Decision
The Supreme Court held that the cash bonus was deductible for Dutch corporate income tax purposes. The nondeductibility rule did not apply because, when the employees waived their options, the conditions precedent had not been satisfied and the employees had not yet become entitled to the shares.
Key Takeaway: Deductibility Depends on the Facts
The decision provides welcome clarity for options granted subject to conditions precedent, but it does not establish that every buyout of conditional share options is deductible. The nondeductibility rule may still apply where the facts differ from those considered by the court. Companies should therefore review each arrangement carefully, including the applicable conditions and whether those conditions have been satisfied when the options are bought out, to determine whether a grant or buyout of shares or share options — conditional or otherwise — falls within the scope of the nondeductibility rule.Bart van der Burgt
Ferry van Hal
Lisanne Rijff
BDO in Netherlands