Netherlands: Proposed legislation to tax “carried interests” as ordinary income

Tax “carried interests” in private equity structures at the progressive individual income tax rates (top rate of 49.5%)

Tax “carried interests” in private equity structures

The lower house of the Dutch Parliament adopted a motion asking the government to propose legislation that would tax “carried interests” in private equity structures at the progressive individual (personal) income tax rates (top rate of 49.5%).

It is unclear what “carried interests” exactly means, but it likely would include management incentive plans that qualify as indirectly held lucrative interests (i.e., sweet equity)—payments with respect to which are not deductible for corporate income tax purposes. Currently, an indirectly held lucrative interest is taxed beneficially (33% in 2024) if the personal holding company pays at least 95% of the interest to the manager (which is taxed as income from substantial interest).

It is also unclear whether the rules would apply only to private equity structures and whether transitional rules might apply. 

Read an April 2024 report prepared by the KPMG member firm in the Netherlands



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