Updated: October 2026. A SAR works the same way in most countries. The tax figures in this article are Dutch (2026 rates) and are marked "Netherlands".
Stock appreciation rights (SARs) are the quickest way to let employees share in the growth of your company. You need no notary and the employee does not have to put any money in. On the other hand, a SAR does not make anyone a co-owner, and the payout is taxed heavily.
"If the company has grown from €400,000 to €1 million in four years, you get €15,000."
That is a SAR in one sentence. If the employee leaves earlier, they usually get nothing. It is a generous gesture and often better than no plan at all, but it remains a bonus that moves with the value of the company. Because it is an ordinary contract, a SAR works in the Netherlands and in other countries alike.
What is a SAR?
A SAR is an agreement that the employee receives money if the company has become more valuable by a certain date. The higher the value on that date, the higher the payout. No share is bought and no money goes from the employee to the company.
You record a SAR in a private agreement, just like economic ownership rights. A private agreement is a contract you sign directly with the employee, without a notary. Netherlands: you do need a notary to set up a STAK before you can issue depositary receipts for shares, which is one reason SARs are faster to start.
A SAR agreement should at least set out: how many shares the SAR covers, the base value, the vesting, the date or event that triggers the payout (for example a sale of the company), how the value is determined and what happens if someone leaves. Also agree whether dividends and capital repayments during the term count towards the payout. The full guide to stock appreciation rights covers the plan in more detail.
What are the benefits of SARs?
No notary, quick to set up
You do not need a notary to set up or change a SAR. That saves time and money, especially if you only want to reward one or two people.
The employee puts in no money of their own
A SAR is a promise to pay cash later. The employee does not pay anything, unlike with options or depositary receipts. If the value falls, they get nothing, but they have not lost anything either.
No new shareholders
A SAR carries no shareholder rights. The employee gets no vote and is not entered in the shareholders' register. For a family business that wants to keep ownership in the family, that is often exactly why it chooses a SAR.
Deductible for the company
Netherlands: for the company the payout is ordinary wage, and wage costs are as a rule deductible from profit (Kienhuis Legal; Blenheim). You only pay once the company has become more valuable, although you do need that amount in cash at the time.
What are the drawbacks of SARs?
The payout is taxed as wage
Netherlands: a SAR payout is wage. The company withholds wage tax and the employee pays income tax in box 1, just as on a bonus. Because they invested nothing and own no shares, the whole amount counts as income from work. These are the 2026 box 1 rates for people below the Dutch state pension age (Belastingdienst):
| Bracket | Taxable income | Rate |
|---|
| 1 | up to €38,883 | 35.75% |
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| 2 | €38,884 to €78,426 | 37.56% |
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| 3 | above €78,426 | 49.50% |
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In the example above the employee receives €15,000. If they already earn more than €78,426, 49.50% goes to tax: €7,425, leaving €7,575. If the payout falls entirely in the second bracket, the tax is €5,634 and they keep €9,366. We leave tax credits out of this. In both cases the company pays the full €15,000.
That is why Quintus Willemse, CEO of Share Council, called a SAR on the Equidam podcast "nothing else than a bonus calculated in a very nice way, which carries the highest taxes on the gains".
The employee does not become a co-owner
A SAR is a cash bonus for later. The employee owns nothing and does not share in growth after the payout. The relationship between company and employee runs through a contract, so much of what co-ownership means, such as sharing in growth for the long term or having a say in the direction of the company, is missing. That is why Share Council does not see a SAR as employee ownership in the full sense. If that is what you want, look at options on depositary receipts or economic ownership rights. The differences are explained in options on shares vs SAR and SAR vs STAK.
Leaving early usually means losing the SAR
A SAR is meant to keep people on board. The right usually lapses when someone leaves, and you normally cannot transfer a SAR to someone else.
SARs compared with options and a STAK
| SAR | Options | STAK with depositary receipts |
|---|
| How it works | A right to a cash payment equal to the increase in value of a number of shares. The employee puts nothing in; the company pays out. | A right to buy depositary receipts for shares at a fixed exercise price after vesting. The employee puts money in and becomes a co-owner. | A foundation holds the shares and issues depositary receipts. Receipt holders have the economic interest. Employees usually get them through options. |
|---|
| When it is taxed | Netherlands: the payout is wage, taxed in box 1. Nothing is taxed at grant. | Netherlands: the benefit is wage, taxed in box 1 when the shares become tradable, or at exercise if the employee chooses. If the 2027 bill passes: at start-ups and scale-ups with an RVO decision, only at sale and on 65% of the benefit. | Through options: the benefit is wage in box 1, as in the options column. If the employee buys receipts at market value, the purchase is not wage. Later the holding falls in box 3, or in box 2 from 5% (article 4.6, Dutch Income Tax Act 2001). |
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| Setup cost | No notary: an agreement with the employee. You do need a sound valuation at grant and at payout. SARs are not included in Share Council's free plan. | At Share Council: Co-Ownership Starter, €2,490 for the first year (including setup support) and €1,990 a year after that. You grant options over a future STAK, so you do not need a notary to start. Setting up the STAK at the notary later costs €1,950 one-off (prices as of October 2026). | A notarial deed to set up the foundation and to transfer the shares. Through Share Council the setup costs €1,950 one-off, plus the platform: Co-Ownership Starter €2,490 for the first year, then €1,990 a year (prices as of October 2026). |
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| Control | None. The employee does not become a shareholder or receipt holder. | No vote while they are options. After exercise the employee holds receipts and the votes sit with the board of the STAK. | The board of the STAK votes on the shares. Receipt holders only have meeting rights if the articles grant them (article 2:227, Dutch Civil Code). |
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| Suits | Rewarding a few key people without new co-owners, or employees in other countries. | Companies that want their team to become co-owners and expect to grow or one day sell. | Co-ownership for a growing team with bundled votes, or succession in a family business. |
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Netherlands: a bill has been submitted that would lower the tax on share options at start-ups and scale-ups with a decision from the Netherlands Enterprise Agency (RVO) from 1 January 2027 (Kamerstuk 37 024, not yet passed). Nothing changes for SARs: the payout stays wage. More on this in options on shares vs SAR.
Frequently asked questions about SARs
What are stock appreciation rights?
Stock appreciation rights are contractual rights to a cash payment equal to the increase in value of a set number of shares over an agreed period. The employee does not buy or receive shares. "Share appreciation rights" means the same thing.
Can private companies use SARs?
Yes. A SAR is a contract between employer and employee, so a private company can use one. What it needs is a sound valuation at grant and at payout, because there is no share price to look up. In Share Council's paid plans a year of Equidam valuations is included (prices as of October 2026, see pricing).
How is a SAR valued?
The payout is the value per share on the payout date minus the base value per share at grant, multiplied by the number of shares the SAR covers. Agree in the contract which valuation method you use and apply the same method on both dates, so the employee can check the outcome.
What does an example SAR plan look like?
A company is worth €400,000. An employee gets a SAR over 2.5% of the shares with a four-year vesting period. If the company is worth €1,000,000 after four years, their 2.5% has grown by €15,000 and they receive that amount before tax. If the company has not grown, they receive nothing.
How much tax do you pay on a SAR?
In the Netherlands the payout is taxed as wage in box 1, at the rate of the bracket your income falls in: 35.75%, 37.56% or 49.50% in 2026 (Belastingdienst). Nothing is due when the SAR is granted. Other countries have their own rules, but most also tax the payout as employment income.
What are unit appreciation rights?
The same idea for companies whose ownership is divided into units instead of shares, such as some partnerships and US LLCs. The holder gets the increase in value of a number of units in cash.
Set up your SAR plan with Share Council
In the Share Council platform you choose the structure and the contracts, and the administration then runs in the background. You can see per employee what has been granted and what has vested. A step-by-step guide is in how to set up a SAR. Want to combine options and SARs? See options and SARs, or read more about SARs at Share Council. Thinking about a STAK? Start with the STAK.
Want to know which plan fits your situation? Start for free or join our webinar.
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