Updated: October 2026. Rules marked "Netherlands" apply to Dutch companies and employees. Everything else holds in most countries, but check the tax rules where you live.
Stock options and stock appreciation rights (SARs) both pay off when the company becomes worth more. The difference is what the employee ends up with. An option lets the employee buy shares at a price fixed today, so they pay in and become a shareholder. A SAR pays out the increase in value, usually in cash, so the employee pays nothing and never owns a share.
Stock options
A stock option gives an employee the right to buy a set number of shares at a fixed price, the exercise or strike price, usually the share value on the day of the grant. Options vest over time, often four years, and expire after a set period. If the company grows, the employee buys shares below their market value and keeps the difference. If it does not, the options are worth nothing, but the employee has lost nothing either.
Options turn employees into co-owners. In the Netherlands, employees of a BV usually hold the shares through a STAK, a foundation that issues depositary receipts, so they share in the value while voting stays with the foundation board.
Stock appreciation rights (SARs)
A stock appreciation right is a contract that pays the employee the growth in value of a set number of shares between the grant date and the payout date. The payout is the number of SARs × (share value at payout − share value at grant). Most SARs pay in cash; some plans settle in shares instead. You will also see the names share appreciation rights, equity appreciation rights, phantom shares or, for US LLCs and partnerships, unit appreciation rights. They all work the same way.
Because no shares change hands, a SAR needs no notary, no changes to the shareholder register and no foundation, and it works for staff in any country. The cost is tax. Quintus Willemse, founder of Share Council, said it this way on the Equidam podcast: "Stock appreciation rights or virtual shares are, dishonourably said, nothing else than a bonus calculated in a very nice way, which carries the highest taxes on the gains."
Stock options vs SARs at a glance
| | Stock options | SARs |
|---|
| Employee pays | The exercise price | Nothing |
| Employee receives | Shares (or depositary receipts) | The value increase, usually in cash |
| Becomes a shareholder | Yes | No |
| Cash needed by the employee | Exercise price, plus tax if the shares cannot be sold yet | None, tax is withheld from the payout |
| Cash needed by the company | None, the employee pays in | The full payout |
| Set-up | Option plan, often with a STAK and a notary for the shares | A contract, no notary |
| Netherlands, tax today | Salary, at exercise or later when the shares become tradable | Salary, at payout |
| Netherlands, 2027 proposal | 65% of the gain taxed, at sale, for qualifying companies | Not covered |
How stock options and SARs are taxed
In most countries both are taxed as employment income: options on the gain when the employee exercises or later, SARs when they pay out. The details differ per country, so treat the rules below as Dutch only.
Netherlands, options: the value of an option at grant is not taxed. Since 1 January 2023 the gain (share value minus what the employee paid) is taxed as salary when the employee exercises if the shares are tradable then, otherwise when they become tradable. The employee can choose in writing to be taxed at exercise (art. 10a Wet op de loonbelasting 1964). Granting options early therefore does not save tax; all growth up to the taxable moment is taxed. Early grants are about fairness and a lower entry price for your first employees. More in the tax treatment of options.
Netherlands, SARs: Dutch law firms agree that the payout is taxed as salary, with wage tax withheld by the employer, and that the company can usually deduct it from its profit (Kienhuis Legal; Blenheim).
A worked example: 1,000 options vs 1,000 SARs
Illustrative only. The numbers are made up to show the mechanics, not advice for your situation.
An employee at a Dutch company receives either 1,000 options with a €5 strike price or 1,000 SARs with a €5 base value. A few years later a share is worth €20. We assume the employee already earns more than €78,426 a year, so the whole gain falls in the top Dutch income tax bracket of 49.50% (Belastingdienst, 2026 rates). Lower earners pay less.
| | 1,000 options | 1,000 SARs | 1,000 options, 2027 proposal |
|---|
| Employee pays | €5,000 | €0 | €5,000 |
| Gross gain | €15,000 in shares | €15,000 in cash | €15,000 in shares |
| Taxed when | At exercise or when tradable | At payout | When the shares are sold |
| Taxable amount | €15,000 | €15,000 | €9,750 (65%) |
| Tax at 49.50% | €7,425 | €7,425 | about €4,826 |
| Roughly left after tax | €7,575 | €7,575 | about €10,174 |
Under today's rules the net result is the same. What differs is timing and cash. The SAR holder gets €15,000 in cash, sees €7,425 withheld and keeps the rest, but owns nothing. The option holder pays €5,000 to exercise and may owe €7,425 in tax on shares that cannot be sold yet, which is why Dutch law by default taxes shares that cannot be sold at the moment they become tradable. Under the 2027 proposal, the option holder at a qualifying company would pay tax only when selling, and on 65% of the gain.
The proposed 2027 option rules in the Netherlands
The bill "Wet fiscale stimulering start-ups en scale-ups" (Kamerstuk 37024) is a proposal, not law. In October 2026 it was still before the Tweede Kamer, the intended start date is 1 January 2027, and the Raad van State was critical, so it may change or be delayed (Taxlive; nader rapport, Ministry of Finance). If adopted as proposed:
- it covers options at companies with a start-up or scale-up decision (beschikking) from RVO;
- tax moves to the moment the employee sells the shares;
- only 65% of the gain is taxed, which the government puts at about 32% effective at the top rate;
- it applies to options granted on or after 17 April 2025, with a two-year lock-up from grant;
- employees with a substantial interest (aanmerkelijk belang) or a lucratief belang are excluded.
SARs are not part of the proposal. If your company could qualify for an RVO decision, that is a reason to look at options before SARs. Read our article on the 2027 option rules for more.
Which should you choose?
- Choose options if you want employees to own part of the company and you are building for the long term. For Dutch start-ups and scale-ups that qualify, the 2027 proposal would make options the lower-tax route.
- Choose SARs if you want to share growth without changing the shareholder register, have staff in several countries, or want something you can set up this month. Plan for the cash: the company pays the full payout.
- Combine both if your team is mixed, for example options for staff in the Netherlands and SARs for people abroad.
See how both work in practice on our Options + SAR page (in Dutch: opties en SAR's). For listed-company instruments such as RSUs, read the difference between RSUs, ESOPs and SARs.
Frequently asked questions
What is the main difference between stock appreciation rights and stock options?
With a stock option the employee pays the exercise price and receives shares. With a stock appreciation right the employee pays nothing and receives only the increase in value, usually in cash. Option holders become shareholders; SAR holders do not.
How is a SAR payout calculated?
Number of SARs × (share value at payout − share value at grant). With 1,000 SARs granted at €5 and paid out at €20, the gross payout is €15,000, before wage tax.
What are unit appreciation rights?
Unit appreciation rights are SARs for companies that have units instead of shares, such as US LLCs and partnerships. They pay the increase in value of a set number of units, just as a SAR does for shares.
What is the difference between a stock grant and a stock option?
A stock grant gives the employee shares, usually for free once vested; RSUs are the most common form. A stock option only gives the right to buy shares at a fixed price, so it is worth something only if the share value rises above that price.
Are SARs taxed differently from options in the Netherlands?
Today both gains are taxed as salary. The difference is timing: a SAR is taxed when it pays out, an option at exercise or when the shares become tradable. Only options fall under the proposed 2027 start-up regime.
Set up options or SARs with Share Council
Share Council lets you set up and run options, SARs and depositary receipts from one platform, with vesting, documents and a cap table that stays up to date. See plans and start for free, or talk to Quintus about your plan.
About the author: Quintus Willemse is the founder and CEO of Share Council, the Dutch platform for employee ownership.
