Letter Secretary of State on Lucrative Interest Scheme

On 1 July 2025, the Secretary of State for Finance submitted a letter to Parliament addressing alternative proposals regarding the current lucrative interest scheme (the “Letter”). The lucrative interest scheme has been subject to intense debate. Following the adoption of a motion in April 2024, a report was published outlining two alternative approaches to the existing rules (the “Report”), Subsequently, a public consultation was held, inviting stakeholders and interested parties to provide feedback on the alternatives presented in the Report which we discussed in a previous tax alert. The Letter outlines the Secretary of State’s response to these alternatives and his position on a newly tabled motion.
 
Background
The lucrative interest regime targets taxation of gains realized primarily by (fund) managers operating within the private equity and management participation sectors. These gains typically arise from capital interests granted as part of their remuneration arrangements, enabling high returns.

Generally, lucrative interests are taxed under Box 1 at a progressive rate of up to 49.5%, consistent with taxation on income from other activities. However, taxpayers may opt to substitute Box 1 taxation with Box 2 taxation by interposing a (holding) company in which the taxpayer holds a substantial interest (i.e., 5% or more). This structuring route is permitted only if at least 95% of the lucrative interest income received by the holding company is subsequently distributed to the taxpayer.

The alternative solutions presented in the Report concern (i) abolishing the possibility to interpose a company and thus taxing lucrative interests exclusively in Box 1 (Alternative A), and (ii) introducing a multiplier in Box 2 to increase the effective tax rate on lucrative interest income held through a substantial interest (Alternative B).
 
The Letter
The Secretary of State provides his views on both alternatives. Alternative A would eliminate the option to tax lucrative interests in Box 2, leaving Box 1 as the sole applicable regime. This change is expected to increase disputes regarding whether certain interests qualify as lucrative, particularly while the current deemed return system in Box 3 remains unchanged. Moreover, implementation of Alternative A is deemed legally and practically unfeasible in the short term and should not be pursued prior to the introduction of the new Box 3 rules. The Secretary of State further notes that this measure is unlikely to generate additional tax revenues and may even result in budgetary losses due to increased legal uncertainty regarding treaty rights, potential taxpayer migration, and a shift towards more tax-efficient remuneration mechanisms such as deductible bonuses.
 
Alternative B proposes increasing the effective tax burden in Box 2 on gains from lucrative interests held via a substantial interest in a capital company. For example, by introducing a multiplier that raises the effective Box 2 rate to approximately 36%, this approach preserves the existing structure of the lucrative interest regime while mitigating or avoiding the complexities associated with Alternative A. This alternative aligns with the objectives of the motion adopted April 2024 by targeting taxpayers with indirectly held lucrative interests, while exerting only limited impact on the Netherlands’ investment climate.
 
The New Idsinga Motion
During the debate on the 2025 Spring Memorandum held on 18 June last, a new motion was tabled, announced, and subsequently suspended. The motion calls for the inclusion, in the 2026 Tax Plan, of a measure increasing the tax burden in Box 2 on gains from lucrative interests. This proposal corresponds to Alternative B as outlined in the Report. As noted by the Secretary of State, this measure is legally and operationally feasible for inclusion in the 2026 Tax Plan with effect from 1 January 2026. However, based on the public consultation outcomes, there is no clear mandate to amend the current lucrative interest regime. Accordingly, the Secretary of State considers the motion premature.

As set out in the Report as well, it is not desirable to implement new tax rules on the lucrative interest scheme before the introduction of the new Box 3 regime, which is expected to come into force as of 1 January 2028. Given that the Secretary of State currently serves within a caretaker government and that elections are scheduled for October 2025, the development of this issue remains subject to future political developments.

Update
Further to our above tax alert regarding the letter from the Secretary of State for Finance, we note that the Dutch Parliament has adopted the motion with a significant majority (110 votes in favour, 40 against). The motion calls for the inclusion in the 2026 Tax Plan of a legislative proposal to apply a higher Box 2 tax rate to income derived from arrangements qualifying as lucrative interest by private equity managers in cases where a (holding) company is interposed.

The 2026 Tax Plan is scheduled to be presented on Budget Day, Tuesday, 16 September 2025. At that time, it will become clear whether—and in what form—the proposed measures in the motion will be included. This will also clarify whether any transitional rules will be introduced for existing lucrative interest structures. As highlighted in our previous alert, the upcoming general elections in October may influence the future of these measures, as the newly elected Parliament will ultimately vote on the 2026 Tax Plan. However, as a preliminary observation based on the parties that supported the motion, it appears likely that a parliamentary majority will also support the legislative proposal after the elections.