The EU-ESO is a proposal in the EU Inc. regulation. Articles 78 and 79 would let an EU Inc. issue warrants to staff that are taxed only when the shares are sold, on the sale price minus the exercise price. The Council limited the tax rule to companies under 750 employees and EUR 150 million turnover, deleted the equal-treatment guarantee and left the rate to each state. Today the Netherlands taxes options as wage when the shares become tradable, Belgium taxes a lump sum at grant, and Luxembourg taxes options at exercise. Both the Dutch and Luxembourg governments have start-up bills for 2027 that defer tax to sale.
The EU-ESO changes when employees pay, not how much
Employee stock options in Europe share one problem: the tax bill often arrives before the money. In Luxembourg an employee who exercises options in a private company pays income tax on the paper gain at rates of up to about 46%, while the shares cannot yet be sold. In the Netherlands the bill comes when the shares become tradable, at up to 49.5%, which can still be well before any cash arrives. In Belgium the tax is paid even earlier, at grant, on a lump sum, whether or not the option ever pays out.
The EU Inc. proposal tries to fix the timing. Its Chapter VIII creates an EU employee stock option plan, the EU-ESO: warrants that an EU Inc. issues to staff and board members, with a waiting period of at least two years. Article 79 then says that nothing is taxed at grant, vesting or exercise. Tax arises once, when the shares are sold, on the sale price minus the price the employee paid.
Three points matter before anyone plans around it. First, it is a proposal: the Council has its mandate, Parliament has not voted, and nothing applies before 2028. Second, the Council narrowed the tax rule to companies under 750 employees and EUR 150 million turnover. Third, the rate stays national. The EU-ESO removes the cash problem; it does not promise a lower bill, and in some cases the bill is higher.
Below, the proposal is set against the rules in force in the Benelux and two national start-up bills.
Arts 78 and 79
EU-ESO warrants in COM(2026) 321, reshaped by the Council.
Tax at sale
No tax at grant, vesting or exercise.
National
Each state decides income or capital gain, and the rate.
Small mid-caps
Under 750 staff, turnover up to EUR 150m.
What Articles 78 and 79 say, and what the Council changed
Article 78 of the Commission proposal lets an EU Inc. establish an EU-ESO by a resolution of the general meeting. The resolution names the eligible group, the maximum number of warrants, and a waiting period of at least 24 months from issue before exercise. Warrants are issued for no consideration and cannot be transferred. The exercise price is paid in cash. Existing shareholders have no pre-emption rights.
Eligibility is limited to board members and employees of the company and its subsidiaries. Anyone who holds, directly or indirectly, more than 25% of the votes or of the rights to proceeds, or held such a stake in the 24 months before issue, is excluded.
The Council kept the structure and tightened the procedure. Its mandate requires the majority set out in Article 49(3) for the resolution, adds the rules for calculating the exercise price and the dilution effect to its minimum content, fixes the exercise price at the point of issue, and obliges the company to tell employees in writing what they get, what they pay, whether the tax rule of Article 79 applies and what the financial risks are (new Article 78(4a)).
Article 79 is the tax provision. The Council rewrote it as follows.
| Point | Commission proposal | Council mandate (ST 14376/26) |
|---|---|---|
| Scope of the tax rule | All EU-ESO warrants of any EU Inc. | Only if, at issue, the company employs fewer than 750 people and turnover is up to EUR 150 million, measured on the preceding year (Art. 79(1), (1a)) |
| Timing | Tax only on disposal of the shares | Unchanged (Art. 79(2)) |
| Taxable amount | Fair market value at disposal minus acquisition price | Disposal price minus acquisition price; an authority may substitute market value if the price is manifestly undervalued (Art. 79(3)) |
| Characterisation and rate | National law | National law and treaties for all other aspects (Art. 79(4)) |
| No less favourable treatment | Required (Art. 79(4)) | Deleted |
| Anti-abuse and exit tax | Not mentioned | National anti-abuse and residence-change rules preserved (Art. 79(4a)) |
Recital 57a makes the EU-ESO optional; national schemes and their incentives stay available to an EU Inc. Recital 58 says Member States stay "entirely free" to treat the gain as income or as a capital gain and to set the rate, and may levy social security contributions on it. It still asks states to extend national preferential regimes to EU-ESO shares that meet their criteria, but a recital does not bind like the deleted article. The cover note records that the Council is expected to make a statement that this tax provision is exceptional and no precedent for other files.
Law and practice: COM(2026) 321 final, Articles 78 and 79; Council mandate ST 14376/26 of 19 October 2026, Annex, Articles 78(2) to (4a), 79(1) to (4a), recitals 57a, 58 and 58aa, and cover note; Commission Recommendation 2025/1099 for the size test. See the text of Articles 78 and 79.
Dutch options: wage tax when the shares become tradable
In the Netherlands an employee stock option is wage. Since 1 January 2023 the taxable moment is the moment the shares acquired on exercise become tradable, which for a private company is often an exit or a secondary sale. The employee may opt for exercise instead. The benefit is the value of the shares at that moment minus the exercise price. It is taxed in box 1 at progressive rates, with a top rate of 49.5% on income above EUR 78,426 in 2026,. The employer withholds wage tax.
The 2023 change removed the worst case, tax at exercise on shares that cannot be sold, but not the whole problem. Afterwards the shares sit in box 3, taxed yearly on a deemed return, or in box 2 at 5% or more.
The government has proposed a regime for start-ups and scale-ups from 1 January 2027. Only 65% of the benefit, sale proceeds minus exercise price, would be taxed as wage, which is about 32% at the top rate, and the tax would as a rule fall due when the shares are sold. The company must be an unlisted growth company with a scalable, innovation-based model, not more than 25% owned by a listed company. The measure is a bill presented with the 2027 tax plan package. It is not law until both chambers adopt it.
An employee holds 10,000 options at an exercise price of EUR 1. After three years the company is sold in part and the shares become tradable at EUR 4. The benefit is EUR 30,000 and, at 49.5%, the tax is EUR 14,850, due in that year. If the shares are later sold at EUR 10, the further EUR 60,000 is not wage; it is caught by box 3 while the shares are held. Under the 2027 bill, if the company qualifies, the employee would pay nothing until the sale and then 65% of EUR 90,000 at 49.5%, or EUR 28,958.
Our note on Dutch employee stock options covers the bill and the alternative of depositary receipts through a STAK in more detail.
Law and practice: Wet op de loonbelasting 1964, Article 10a, as amended by the Wet aanpassing fiscale regeling aandelenoptierechten (Stb. 2022, 539), in force 1 January 2023; box 1 rates for 2026 (belastingdienst.nl); draft bill on fiscal stimulation of start-ups and scale-ups, consultation April 2026, and 2027 tax plan package (Loyens & Loeff, KPMG, PwC summaries).
Belgian options: a lump sum taxed at grant
Belgium taxes early but lightly. Under the Law of 26 March 1999 an option is taxed when it is granted, which the law fixes at the 60th day after the offer, provided the employee accepts in writing within those 60 days. A late acceptance takes the option outside the regime.
For options on unlisted shares the taxable benefit is a lump sum: 18% of the value of the underlying shares at the offer, plus 1% for each year or part of a year by which the option term exceeds five years. The percentages are halved, to 9% and 0.5%, when five conditions are met: the exercise price is fixed at the offer, the option cannot be exercised before the end of the third calendar year after the offer year or after the tenth, it cannot be transferred except on death, the employer does not cover the risk of a fall in value, and the shares are those of the employer or its parent. An exercise price below the share value at the offer adds the difference to the benefit.
The benefit is employment income, taxed at progressive rates of 25% to 50% plus the municipal surcharge. Exercise and sale used to be tax-free for a private investor. That changed on 1 January 2026. Parliament adopted the new capital gains tax on financial assets on 3 April 2026, with effect for gains realised from 1 January 2026. Most gains are taxed at 10% above an indexed annual exemption of EUR 10,000; stakes of 20% or more have their own rates.
For shares acquired through options, practitioners read the law as using the share value at exercise as the acquisition value, so only growth after exercise is caught. The valuation of options sold without exercise is less clear.
Same 10,000 options, exercise price EUR 1, share value EUR 1 at the offer, ten-year term, plan meeting the halving conditions. The lump sum is 9% plus 0.5% for each of the five years beyond five, so 11.5% of the EUR 10,000 underlying value, or EUR 1,150. At 50% the tax is EUR 575, due in the year of grant even if the shares never rise. Exercise at EUR 4 is tax-free. A sale at EUR 10 gives EUR 60,000 of gain over the exercise value; after the EUR 10,000 exemption, 10% is EUR 5,000.
The 1999 benefit is generally exempt from social security, except an in-the-money discount. From 2026 employers also face a 7.5% special contribution on lump-sum benefits in kind, options included, to the extent they exceed 20% of total pay under the Law of 17 December 2025.
Law and practice: Law of 26 March 1999, stock option provisions; Royal Decree of 5 October 1999 (social security); Law of 17 December 2025 (special contribution); capital gains tax on financial assets adopted 3 April 2026, applying from 1 January 2026 (Deloitte Belgium, Claeys & Engels analyses); Loyens & Loeff, tax regime for stock options in Belgium.
Luxembourg options: employment income under general rules
Luxembourg once taxed tradable options and warrants favourably under an administrative circular. It was withdrawn with effect from the 2021 tax year, and no special regime replaced it. Since then options are taxed under the general rules for employment income.
In practice an option that cannot be transferred is taxed at exercise, on the value of the shares minus the exercise price, as a benefit in kind. The top income tax rate is 42%, plus a solidarity surcharge of 7% or 9% of the tax, so up to 45.78% at the margin. Social contributions apply within the ceiling. A later gain on the shares is tax-free for a resident who held them for more than six months and owns no more than 10% of the company; within six months it is a speculative gain at progressive rates.
The government filed bill 8782 on 1 July 2026. It would codify these rules, taxing transferable options at grant and the others at exercise, with a lock-up discount of 5% a year, capped at 20%. It would also create a regime for young innovative companies: under ten years old, under 150 employees, balance sheet or turnover up to EUR 30 million, and at least 15% of operating costs on research and development. Their employees would be taxed only on sale, on the sale price minus the exercise price, at a quarter of the global rate. It is meant to apply from 2027 and has not been adopted.
The other tool is the profit-sharing bonus, half of which is exempt from income tax within limits tied to the employer's profit and the employee's pay. It is cash, not equity, and needs profits.
Same 10,000 options, exercise at EUR 4 after three years. The benefit is EUR 30,000 and at 42% the tax is EUR 12,600, due in the year of exercise. A sale two years later at EUR 10 is tax-free for a holder below 10%. Under bill 8782, for a qualifying company, the employee would pay at sale a quarter of 42% on EUR 90,000, or EUR 9,450.
Law and practice: Loi concernant l'impôt sur le revenu (L.I.R.), Articles 95, 99bis and 100; circular L.I.R. n° 104/2 of 29 November 2017, withdrawn with effect from 2021; bill 8782 filed 1 July 2026, proposed Articles 100bis, 104bis and 104ter L.I.R. (Deloitte Luxembourg, EY, Arendt summaries); L.I.R. rules on the profit-sharing bonus since 2021. See also Luxembourg personal income tax.
Four regimes, one grant
The table puts the regimes on the same worked numbers: 10,000 options, exercise price EUR 1, share value EUR 1 at grant, EUR 4 at exercise after three years, EUR 10 at sale two years later.
| Regime | When tax is due | Tax before sale | Tax at sale | Total |
|---|---|---|---|---|
| Netherlands, law in force | Exercise or tradability | EUR 14,850 | Box 3 while held | EUR 14,850 plus box 3 |
| Netherlands, 2027 bill | Sale | EUR 0 | EUR 28,958 | EUR 28,958 |
| Belgium, Law of 1999 | Grant | EUR 575 | EUR 5,000 | EUR 5,575 |
| Luxembourg, law in force | Exercise | EUR 12,600 | EUR 0 | EUR 12,600 |
| Luxembourg, bill 8782 | Sale | EUR 0 | EUR 9,450 | EUR 9,450 |
| EU-ESO, Dutch resident taxed as wage | Sale | EUR 0 | EUR 44,550 | EUR 44,550 |
The Belgian regime is the cheapest in total when the shares rise a lot, because it taxes a fixed slice of the starting value. But the EUR 575 is lost if the company fails. The Dutch and Luxembourg rules tax the gain to exercise in full and leave later growth largely alone.
The EU-ESO line is the one to read carefully. Article 79 makes the whole gain from exercise price to sale taxable at disposal. If a state chooses to tax that as employment income at the top rate, the total is higher than under any national rule here, because later growth that today escapes income tax is pulled into the base. If a state taxes it as a capital gain, or applies its start-up regime, the total could be lower. None of the three states has said which it will choose.
Under the EU-ESO the cash needed before a sale is the exercise price and nothing else; under the Dutch and Luxembourg rules it is the exercise price plus up to half the paper gain.
Law and practice: Figures computed by us from the rules in sections 03 to 05 and Article 79 of the Council mandate. Social security and local surcharges excluded.
Six open questions, and how to plan a plan now
The EU-ESO tax rule is the most contested part of the EU Inc. file. In September 2026 a majority of Member States was reported to oppose any harmonisation of option taxation. Malta voted against the mandate because Article 114 TFEU excludes fiscal provisions, and the Dutch government doubts Article 114 can carry the tax parts.
- Survival. Parliament has not adopted its position, and trilogues have not started. Article 79 could be narrowed further, moved into a separate instrument or dropped.
- Characterisation. Each state decides whether EU-ESO income is wage or capital gain, and at what rate. No Benelux state has said what it will do.
- Mobile employees. An employee who works in one state and sells while resident in another may face two claims. Treaties allocate the gain, and Article 79(4a) keeps exit taxes.
- Valuation. The Council lets an authority replace a manifestly undervalued sale price with market value. Sales to insiders or in down rounds will need support.
- Withholding. If the gain is wage, someone must withhold at sale. The employee may have left the company years earlier.
- Application date. 12 months after entry into force in the Commission text, 21 months in the Council text, so 2028 at the earliest.
For a start-up hiring now, use a national plan designed for change. In the Netherlands that is an option plan or depositary receipts, in Belgium a 1999 Law plan with the halving conditions, in Luxembourg options that cannot be transferred, possibly under bill 8782 once adopted. Give the board power to amend or replace the plan on a change of legal form, and keep a clean register of every grant. A company that forms now and converts later can then offer the EU-ESO to new hires.
Where the company registers decides the corporate side; our note on where to register an EU Inc. compares the options. Tax follows each employee's residence and place of work.
Law and practice: Council mandate ST 14376/26, Articles 79(3), 79(4a) and 109; Agence Europe reporting of 11 September and 24 October 2026; BNC-fiche on EU Inc., 24 April 2026 (Tweede Kamer). See the EU Inc. hub for the latest status.
Compare the tax on your options
Enter a grant and three share values. The calculator shows, for each regime, when tax is due, how much is due before any share is sold, and how much at sale. Adjust the marginal rates to the employee's income.
Option tax: when and how much, four regimes side by side
Enter one employee's grant and the share values you expect. You see the tax and its timing under the Dutch, Belgian and Luxembourg rules in force, the two national bills for start-ups, and the EU-ESO as the Council would shape it, with the cash the employee must find before any share is sold.
Ready to form the company first? See company formation in the Netherlands, in Luxembourg or in Belgium.
The EU-ESO defers tax to sale; each state keeps the rate.
Council: under 750 staff and EUR 150m turnover at issue.
Lump sum at grant, then 10% on growth after exercise.
Use a national plan with a clause to replace it later.
EU-ESO and Benelux options: frequent questions
Is the EU-ESO law yet?
No. It is Chapter VIII of the Commission proposal for an EU Inc. regulation, COM(2026) 321. The Council agreed its negotiating mandate on 23 October 2026, the European Parliament has not voted, and trilogues have not started. Nothing would apply before 2028.
Does the EU-ESO lower the tax rate on employee options?
No. Article 79 fixes only the moment of taxation, the disposal of the shares, and the amount, the sale price minus the exercise price. What the employee gains is timing: no tax before there is cash from a sale.
Which companies could use the EU-ESO tax deferral?
Only an EU Inc. could set up an EU-ESO. Under the Council mandate, the tax rule in Article 79 would apply only if, when the warrants are issued, the company employs fewer than 750 people and has an annual turnover of no more than EUR 150 million, measured on the preceding financial year.
When is an employee taxed on stock options in Belgium?
Under the Law of 26 March 1999, at grant: on the 60th day after the offer, if the employee accepts in writing within those 60 days. For unlisted shares the benefit is a lump sum of 18% of the underlying share value, plus 1% per year of term beyond five, halved if conditions are met.
How are stock options taxed in Luxembourg in 2026?
There has been no special regime since the circular on stock options and warrants was withdrawn with effect from 2021. Non-transferable options are taxed as employment income at exercise, on the spread. Bill 8782, not yet adopted, would add a start-up regime taxed at sale.
What happens if an employee moves country before selling EU-ESO shares?
The texts do not give a full answer. The Council added Article 79(4a), which keeps national anti-abuse rules and rules that secure taxation when an individual changes tax residence, such as exit taxes, insofar as they comply with Union law. Treaties still allocate the gain between states.