Netherlands: Deduction limitation in Section 10(1)(j) did not apply to grant of conditional rights to shares (Supreme Court decision)
First Supreme Court decision interpreting Section 10(1)(j)
The Supreme Court on October 9, 2026, held that the deduction limitation in Section 10(1)(j) of the Corporate Income Tax Act 1969 (CITA 1969)—which disallows the deduction of costs relating to the issue or grant of own shares, options on own shares, profit-sharing certificates, or comparable rights—did not apply to conditional rights to shares granted to employees.
Summary
In 2013 and 2014, the taxpayer’s parent company granted employees of the taxpayer conditional rights to shares in the capital of the parent company, provided they remained employed for four years and met certain performance metrics. In 2015, the employees accepted offers to cancel those conditional rights in exchange for cash payments. The taxpayer claimed deductions for the cash payments, which the tax authority denied on the grounds that they were disallowed under the deduction limitation in Section 10(1)(j) CITA 1969.
The Supreme Court held that because the rights granted to the employees were conditional, there had not yet been an issue or grant of shares (or option rights on shares) within the meaning of Section 10(1)(j) CITA 1969. Therefore, the deduction limitation did not apply, and the taxpayer could deduct the 2015 cash payments.
KPMG observation
This is the first Supreme Court decision addressing the interpretation of the deduction limitation in Section 10(1)(j) CITA 1969.
Read an October 2026 report prepared by the KPMG member firm in the Netherlands