QUESTION: ESPP in Netherlands
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I know we have several ECE members located in the Netherlands. I would love ti hear your opinions about Employee Stock Purchase Plan participation in the Netherlands.
Is participation low purely because of adverse tax consequences?
Are there purchase plan design considerations that can greatly increaser the levels of particpation?
Can you recommend anyone I can speak to regarding this topic? I know a lot of global experts located in the US, but would like to talk to someone actually in the Netherlands.
Any help would be appreciated.
Thaks
Dan
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Are there any ECE members with Employee Stock Purchase Plan experience in Netherlands?
Hi Dan,
Just got around to your question.
Participation in ESPP is low because there are no real advantages attached to such plans. Stock will have to be bought out of net income. Any difference between market value and purchase price is considered to a payment in kind and thus taxable. Stock become part of the assets of the individual might become taxed at a rate of 1,2% per annum. That is on value on realised & non-realised gains.
Therefore, no real financial advantages to the participant. Participation might even create a less diversified personal asset portfolio.
Trust this provides some background,
Regards,
Paul
Thanks Paul,
What if the alternative was an Employee Stock Purchase Right? In this type of plan design a monetary (rather tha stock) payout would be made to the participant at the end of the purchase period. It is essentially a company fund svaings plan where growth is dependent on the companies stock price.
Dan,
Correct me if I am wrong. The ESPR provides the participant the cash equivalent of the increase in "underlying" stock value, without the particpant actual being the stock.
If that is the case, there will be taxation of this cash equivalent also. So, I still don´t see any advantge for the participant except from buying the stock. The other thing is that the company has to fund for the increase, either by setting aside enough cash or by setting aside the relevant number of stock to cover the potential cash claims.
Trust this helps.
Rgrds. Paul