Netherlands court upholds 2015 provision for cancelled employee share rights

A French parent had granted five employees of its Dutch subsidiary rights to receive parent-company shares in 2013 and 2014. Delivery depended on continued employment four years after grant and on performance conditions. The rights could not be transferred during that period. Following a sale of 66.7% of the parent's shares in 2015, the employees accepted unconditional cash bonuses instead of the conditional share rights.^[1]

The Dutch company sought a €630,750 provision against its 2015 taxable profit for payments due in 2016 and 2018. The Inspector relied on article 10(1)(j) of the Wet op de vennootschapsbelasting 1969, using the wording applicable in 2016–2018. As reproduced in the judgment, that provision excludes deductions for granting shares in the company or a connected entity and rights to acquire those shares or equivalent rights.^[1][2]

The Supreme Court explained that the civil-law timing of suspensive conditions under articles 6:21 and 6:22 of the Burgerlijk Wetboek remained relevant. An employee does not enter the position comparable to a shareholder while the rights remain subject to an unfulfilled suspensive condition. When the conditions are fulfilled and the rights become enforceable in fact and law, article 10(1)(j) prevents deduction of their value.^[1][2]

That distinction does not allow a company to reserve against the anticipated vesting of conditional shares. The Court of Appeal had expressly separated that situation from cancellation before vesting. Here, the original rights never became unconditional and no shares were delivered. The Supreme Court upheld the conclusion that no grant within the deduction exclusion had occurred. For that situation, the parties did not dispute that the cash-bonus provision could be deducted in 2015.^[1]

For multinational employers, the decision highlights the significance of the precise legal conditions attached to share awards and the timing of their cancellation. It is not a general deduction for equity remuneration or every cash-settled award. A group considering the decision must distinguish genuinely unvested rights from already enforceable rights and the specific cancellation facts from a provision anticipating eventual share delivery.^[1]