Dutch Supreme Court: bonus for buyout of conditional share options is deductible

Some companies choose to reward their employees with options on the company’s own shares. A share option plan can be an effective form of remuneration to attract and retain employees. However, it also raises tax issues and uncertainties. This is clearly illustrated by a judgment delivered on 9 October 2026, in which the Dutch Supreme Court clarified that a bonus paid in exchange for the buyout of conditional share options is deductible for Dutch tax purposes in certain circumstances. The judgment is significant for the treatment of share (option) plans for Dutch corporate income tax purposes.

The case

In this case, five employees of the Dutch private limited company X BV were granted conditional rights to receive shares in the capital of its parent company (the options). If the employees were still employed by X BV four years after the grant and had met certain performance targets, they would become entitled to receive a number of shares. It never came to that. The five employees waived their conditional options in exchange for a cash bonus totalling just over EUR 630,000, to be paid by X BV in a later year. The dispute concerned whether X BV was permitted to recognise a provision for this future expense. In essence, the key question was whether the cash bonus was deductible for Dutch corporate income tax purposes.

Non-deductibility rule

Although a company’s business expenses are, as a general rule, deductible for Dutch tax purposes, it was unclear whether this also applied to the cash bonus. Dutch corporate income tax law provides that the grant of a company’s own shares and options on its own shares (or those of a related company) cannot give rise to tax-deductible costs (the non-deductibility rule, Article 10(1)(j) of the Dutch Corporate Income Tax Act 1969). This also applies to the buyout of such options. The legislator did not, however, clearly specify whether this non-deductibility rule also applies to options subject to conditions precedent. These are options that only confer a right to receive shares once certain conditions have been met. As this was the situation in the present case, the Dutch Supreme Court had the opportunity to clarify the point.

Dutch Supreme Court: the cash bonus is deductible

On 9 October 2026, the Dutch Supreme Court ruled that, in this case, the cash bonus is deductible for Dutch corporate income tax purposes. According to the Dutch Supreme Court, the non-deductibility rule did not yet apply, because the options had been granted subject to conditions precedent and those conditions had not been fulfilled.

Please note: not every buyout is deductible

The judgment provides clarity in cases where options are granted subject to conditions precedent. This does not mean, however, that the buyout of conditional share options is tax-deductible in all cases. The non-deductibility rule may still apply if the facts of a specific case differ from those of the case decided. It therefore remains essential to assess carefully, on a case-by-case basis, whether the grant of shares or share options (whether conditional or not) may fall within the scope of the non-deductibility rule. Your BDO adviser can assist you with this.