In short, this applies when the disparity between the investment and the entitlement to profits is deemed excessively large by the tax authorities.
For example, this occurs when an employee, with a relatively modest investment, claims a significant portion of the company's profits. Each case must be assessed individually, but this applies when the difference between the investment and the right to profit sharing is excessive. If the Tax Authority determines that there is a lucrative interest, the taxation is handled in box 1, and the employee is required to pay regular income tax, up to a maximum of 52%.
So, a lucrative Interest for an employee arises when they receive a benefit that, relative to the invested capital or the risk undertaken, is significantly higher than normal. This can occur, for example, with employee participations such as stock options or shares in the company where the employee works.
Characteristics of a lucrative interest:
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Excessive return: The benefit the employee receives is objectively higher than what regular investors would expect from a comparable investment and risk.
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Connection to work activities: There is a direct link between the value development of the asset and the employee's work activities.
Tax treatment:
When a lucrative interest is present, the benefits from this interest are taxed under box 1 of the income tax, which can lead to a tax rate of up to 49.5% (2023). This is significantly higher than the tax rates in box 2 (25%) and box 3 (depending on the return).
Examples of situations that may be considered a lucrative interest:
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Stock options: When an employee receives stock options that yield a return disproportionate to the investment and risk.
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Company shares: When an employee acquires shares in the company under conditions that result in an excessive return.
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Receivables: When an employee holds a receivable whose return is largely dependent on the company's performance.
Important considerations:
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Value development: The value development of the asset must be largely dependent on the company's performance and the employee's work activities.
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Financing: An excessively low interest rate on a loan from the employer combined with minimal personal contribution by the employee can lead to the qualification as a lucrative interest.
It is essential to carefully assess whether a particular benefit qualifies as a lucrative interest, as this can have significant tax consequences. It is advisable to seek expert advice to determine whether and to what extent a specific benefit is considered a lucrative interest., Marc Oostenbroek of Van Loman tax advisers is a trusted partner of Share Council on this topic, and wrote his promotion paper on the subject.