The Dutch government presented the 2026 Tax Plan to the House of Representatives on 16 September 2025. These proposals need to be approved by both houses of parliament before they can be implemented as legislation, which is expected to be finalised in December 2025.
The key tax proposals affecting employers and employees are highlighted below.
Dutch tax law allows employers to provide arrangements for their employees to retire before the state-mandated pension age. Such arrangements can be made in some sectors for specific groups of workers, for instance, those that perform heavy physical work. These “early retirement schemes” are subject to a “pseudo final levy" of 52% paid by the employer. This means that if an employer offers an employee an early retirement scheme, the employer would owe a 52% pseudo final levy on the payments. The pseudo-final levy is imposed in addition to the regular taxation of the employee.
Under a temporary exemption introduced in 2021 and set to expire on 31 December 2025, if an employee retires within three years of reaching the Dutch pension age, the employer does not have to pay the pseudo-finaI tax on the benefit paid to the employee, up to an amount equal to the state pension benefit.
The budget proposal would retain the exemption, but it would also increase the threshold amount by EUR 300 gross per month, with effect from 2026. The budget also proposes to gradually increase the rate of the pseudo-final levy exceeding the threshold exemption to 57.7% in 2026, 64% in 2027 and 65% in 2028.
Tax withholding agents have -- under certain conditions -- the option of reimbursing non-Dutch employees temporarily residing in the Netherlands for the additional costs of temporary stays outside their country of origin in the context of their employment, referred to as extraterritorial costs.
There are two schemes for the tax-free reimbursement of these extraterritorial costs: a flat-rate scheme, formerly known as the 30% ruling, and a scheme based on the actual extraterritorial costs. The budget proposes limiting the application of the actual extraterritorial costs scheme by repealing two deductions – that for the additional cost of living expenses and the reimbursement of additional costs incurred by making telephone calls to the country of origin.
As part of private equity structures and in the context of management participation schemes, it is possible for fund managers in the Netherlands to receive assets (shares, receivables or other property rights) as part of their remuneration package, which they can use to achieve high returns.
These arrangements are referred to as a lucrative interest for Dutch tax purposes. ln principle, benefits from a lucrative interest are taxed as Dutch personal income tax in box 1 at a maximum rate of 49.5%. lt is possible for an individual taxpayer to hold the interest through a company; in that case, it is considered an indirect lucrative interest.
Measure 1
Under the current lucrative interest scheme, if the taxpayer so chooses, the benefits derived from an indirectly held lucrative interest in a calendar year are not taxed in box 1 (at 49.5%), but in box 2 (at a maximum rate of 31%). This requires the taxpayer to hold at least 5% of the shares or other rights in the company that holds the lucrative interest. ln addition, the benefits must be held through a company and, in that calendar year, at least 95% of the benefits must be enjoyed as income from a substantial interest that reflects those benefits. This is known as the substantial interest variant.
The Dutch legislature has responded to the political desire to tax the substantial interest variant more heavily in box 2. The 2026 tax plan includes a measure that would increase the tax burden on the relevant benefits from an indirectly held lucrative interest to a maximum of 36% in box 2 via a base-broadening multiplier. The 36% rate is in line with the rate in box 3.
Measure 2
A second measure is meant to combat undesirable structures. The proposed scheme would ensure that the benefit arising from the transfer from box 3 to box 2 in the Dutch personal income tax return would still be taxed in box 1 as income from a lucrative interest to which the 95% distribution obligation does not apply at the time the benefits are realised.
For more information on the Dutch budget proposals, please consult your regular BDO contact or the author of this article.
Robin Schalekamp
BDO in Netherlands
The key tax proposals affecting employers and employees are highlighted below.
Early Retirement Scheme
Dutch tax law allows employers to provide arrangements for their employees to retire before the state-mandated pension age. Such arrangements can be made in some sectors for specific groups of workers, for instance, those that perform heavy physical work. These “early retirement schemes” are subject to a “pseudo final levy" of 52% paid by the employer. This means that if an employer offers an employee an early retirement scheme, the employer would owe a 52% pseudo final levy on the payments. The pseudo-final levy is imposed in addition to the regular taxation of the employee.Under a temporary exemption introduced in 2021 and set to expire on 31 December 2025, if an employee retires within three years of reaching the Dutch pension age, the employer does not have to pay the pseudo-finaI tax on the benefit paid to the employee, up to an amount equal to the state pension benefit.
The budget proposal would retain the exemption, but it would also increase the threshold amount by EUR 300 gross per month, with effect from 2026. The budget also proposes to gradually increase the rate of the pseudo-final levy exceeding the threshold exemption to 57.7% in 2026, 64% in 2027 and 65% in 2028.
Extraterritorial Costs
Tax withholding agents have -- under certain conditions -- the option of reimbursing non-Dutch employees temporarily residing in the Netherlands for the additional costs of temporary stays outside their country of origin in the context of their employment, referred to as extraterritorial costs.There are two schemes for the tax-free reimbursement of these extraterritorial costs: a flat-rate scheme, formerly known as the 30% ruling, and a scheme based on the actual extraterritorial costs. The budget proposes limiting the application of the actual extraterritorial costs scheme by repealing two deductions – that for the additional cost of living expenses and the reimbursement of additional costs incurred by making telephone calls to the country of origin.
Lucrative Interest Regime
As part of private equity structures and in the context of management participation schemes, it is possible for fund managers in the Netherlands to receive assets (shares, receivables or other property rights) as part of their remuneration package, which they can use to achieve high returns.These arrangements are referred to as a lucrative interest for Dutch tax purposes. ln principle, benefits from a lucrative interest are taxed as Dutch personal income tax in box 1 at a maximum rate of 49.5%. lt is possible for an individual taxpayer to hold the interest through a company; in that case, it is considered an indirect lucrative interest.
Measure 1
Under the current lucrative interest scheme, if the taxpayer so chooses, the benefits derived from an indirectly held lucrative interest in a calendar year are not taxed in box 1 (at 49.5%), but in box 2 (at a maximum rate of 31%). This requires the taxpayer to hold at least 5% of the shares or other rights in the company that holds the lucrative interest. ln addition, the benefits must be held through a company and, in that calendar year, at least 95% of the benefits must be enjoyed as income from a substantial interest that reflects those benefits. This is known as the substantial interest variant.
The Dutch legislature has responded to the political desire to tax the substantial interest variant more heavily in box 2. The 2026 tax plan includes a measure that would increase the tax burden on the relevant benefits from an indirectly held lucrative interest to a maximum of 36% in box 2 via a base-broadening multiplier. The 36% rate is in line with the rate in box 3.
Measure 2
A second measure is meant to combat undesirable structures. The proposed scheme would ensure that the benefit arising from the transfer from box 3 to box 2 in the Dutch personal income tax return would still be taxed in box 1 as income from a lucrative interest to which the 95% distribution obligation does not apply at the time the benefits are realised.
For more information on the Dutch budget proposals, please consult your regular BDO contact or the author of this article.
Robin Schalekamp
BDO in Netherlands