A manager preparing for an exit opens the participation model signed four years earlier. The ordinary shares are still there. So are the cumulative preference shares. Yet the old model no longer matches today’s distribution waterfall.
No cash dividend caused the difference. Each year, the preference return was credited and then earned a further return.
Belastingdienst knowledge-group position KG:059:2026:3, published on 3 August 2026, addresses that quiet movement. It concerns the financing test for a lucrative interest under article 3.92b of the Dutch Income Tax Act.
In the published case, ordinary shares initially represented just over 10 per cent of contributed share capital. A 12 per cent return was then credited to cumulative preference shares for one year. The ordinary-share portion fell below 10 per cent.
The knowledge group treated the credited return as part of the relevant financing relationship because it joined the preference principal and participated in future returns. The tax position changed without a new investor, a share issue, or a cash payment.
What enters the calculation
The treatment turns on what the credited amount does inside the structure. It counts when the amount becomes part of the remunerated preference principal or capital and itself earns future preference returns.
That result is comparable to paying the return and contributing it again to the preference shares. In practical terms, the investor has increased the amount carrying priority and future return.
A return held as an ordinary receivable or dividend reserve occupies a different position when it earns no further preference return. A cumulative shortfall also follows another path when it remains outside the accounts until it begins participating in future returns.
The distinction belongs in the bookkeeping, but bookkeeping cannot carry it alone. The articles, shareholder agreement, annual resolution, preference calculation, and ledger entry should describe the same event.
Calling an amount an accrued dividend does little by itself. Its contractual treatment and economic role carry the weight.
The calculation remains tied to contributed capital, including relevant share premium and informal capital. Current growth in the value of ordinary shares sits outside this relationship. An unusually low preference rate does not turn the test into a recalculation based on the economic value of the shares.
A participation keeps moving after signing
Management equity is often treated as a completion-date calculation. That is too static for a structure designed to develop over a holding period.
The Belastingdienst describes private-equity arrangements in which an investor provides much of the funding through cumulative preference shares or subordinated shareholder loans. Management mainly holds ordinary shares. Preference returns and loan interest are often credited rather than paid annually.
That design can give management a sharply amplified return if the company performs well. It also builds a higher hurdle before ordinary shares receive value. Management may hold the same number of shares while standing behind a growing investor claim.
Return to the manager preparing for the exit. The entry model may show a healthy payout at the expected sale price. Four years of credited preference returns can produce a very different answer.
If the shareholder register, annual accounts, and transaction model have not moved together, the disagreement emerges when the sale timetable is tight and everyone needs an answer quickly.
The same movement can affect the financing test for a lucrative interest. A change in contributed capital during the holding period can cause such a position to arise or end.
An annual accrual is therefore more than a line in an investor model. Under the relevant terms, it can alter the tax character of management’s participation.
The ratio is not the whole story
The 10/90 relationship attracts attention because it looks measurable. It is only one part of the analysis.
Article 3.92b also asks whether the expected benefits were intended, at least partly, as remuneration for the taxpayer’s work. The Belastingdienst assesses that question through all relevant facts and circumstances.
The acquisition price, financing, transfer restrictions, leaver terms, and commercial reason for granting the interest matter. So does the question of who could acquire it and what risk management genuinely took.
A February 2026 knowledge-group position considered finance covering 90 per cent of the purchase price of unmarketable shares. Financing on those terms would not ordinarily arise between independent parties. In the wider factual picture, that can point towards a remuneration purpose.
A personal holding company does not remove the underlying lucrative-interest character. The indirect route has statutory conditions. The planned multiplier for certain indirectly held lucrative interests begins on 1 January 2028, rather than creating a charge in 2026.
The records need an owner
For a company inside an investment structure, the sensible discipline is regular and unglamorous. Someone should own the annual reconciliation between the preference calculation, legal terms, shareholder records, accounts, and distribution model.
The participation file should retain the entry valuation, acquisition price, financing, tax treatment, and commercial rationale. Years later, those records explain why management bought the interest, what it paid, and what risk it carried.
That work matters most when the company is busy. Staff need rosters, customers need delivery, invoices need collection, and the founder is watching cash. The participation model can easily become an old spreadsheet in a shared folder. By the time a buyer asks for the exit waterfall, nobody wants to reconstruct four years of preference returns from scattered records.
The deeper lesson is simple. No cash movement does not mean no meaningful movement.
A credited preference return can deepen the investor’s priority, narrow management’s economic room, and alter a statutory financing relationship. The calm response is to keep the living deal as clear as the deal that was signed.
If your preference balance has grown, we can review the contracts, calculations, and management equity file
The data, sourcing, and analysis behind this article were conducted by Paolo Maria Pavan. AI was not used to identify sources, build the factual basis, or produce the analytical judgment contained here. AI was used only as a drafting aid. The final English text was personally reviewed, edited, and approved by Paolo Maria Pavan before publication.
References
- Standpunt bijgeschreven vergoeding cumulatief preferente aandelen en financieringstoets lucratief belang - Taxence
- Belastingdienst - Capitalised preference returns in private-equity management participation
- Belastingdienst Kennisgroepen - Financing and remuneration purpose of a lucrative interest
- Belastingdienst Kennisgroepen - Tax basis and opening balance for a lucrative interest
- Overheid.nl - Indirectly held lucrative interests and current legislative timing
- Belastingdienst - Current 2026 box 2 reference rates
- Belastingdienst Kennisgroepen - Existing treatment of indirectly held lucrative interests
- Belastingdienst Kennisgroepen
