Budget Day: Legislative Proposal To Change Lucrative Interest Regime

On 16 September 2025 at the occasion of Budget Day, the caretaking government presented new legislative proposals to increase the taxation of so-called lucrative interest. The lucrative interest regime applies to the taxation of financial interests which originate from for example carried interest schemes or management participation plans. Benefits from a lucrative interest yield substantial returns that are not proportionate to the investment or the risk incurred.

Background
Lucrative interests are generally taxed in Box 1 at progressive rates of up to 49.5%. Alternatively, an individual taxpayer may interpose a (holding) company in which they hold a substantial interest (at least 5%). In such cases, income realized by the interposed company may be exempt from corporate income tax under the participation exemption rules. This structure, which is commonly used in practice, is permitted only if at least 95% of the lucrative interest income received by the holding