There is a new taxation regime in town!
Here are the main take-aways from the new taxation regime of stock options:
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WHAT IS IT?
The Parliament has recently approved the creation of a new tax incentive for the acquisition of shares in start-up companies, which allows employees of these companies to be taxed on gains derived from option plans, subscription plans, allocation plans or other plans of equivalent effect only at the time of disposal of the shares acquired this way (and not, as previously, right at the time of exercise of the option) and at a flat rate of 14% (and not at progressive rates, as at present).
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WHICH COMPANIES ARE COVERED?
- The new tax incentive covers option plans, subscription plans, attribution plans or other plans with equivalent effects attributed by the following entities (as qualified in the year before the plan is issued):
| Entities |
What does it mean |
| Startup |
i.In business for less 10 years; and
ii.< 250 employees; and
iii. <= 50M€ turnover;
iv. was not established as a result of a spin-off;
v. it is established in Portugal (or has, at least, 25 workers in Portugal);
vi. has either high potencial of growth or has received venture capital funds. |
| PME |
i.< 250 employees; and
ii.<= 50M€ turnover or <= 43 M€ balance sheet total |
| Small Mid Cap |
i.< 500 employees. |
| Large companies with R&D |
i.> 500 employees; and
ii.R&D expenses, patents, industrial designs or computer programs >= 10% of total expenses or turnover |
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HOW ARE PLANS UNDER THIS INCENTIVE TAXED?
- Provided that the acquired/received shares are held for a minimum period of one year, the gains generated from these plans will be taxed as follows:
| Moment |
Tax base |
Rate of taxation |
| Sale of shares |
Difference between:
i.Sale value; and
ii.Exercise price of the option/right (plus the amount paid for the acquisition of the option/right) |
14%
(with the option for aggregation)
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| Transfer of shares as a gift |
Difference between:
i.Market value; and
ii.Exercise price of the option/right (plus the amount paid for the acquisition of the option/right)
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14%
(with the option for aggregation)
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| Loss of resident status (exit tax) |
Difference between:
i.Market value; and
ii.Exercise price of the option/right (plus the amount paid for the acquisition of the option/right) |
14%
(with the option for aggregation)
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WHO IS EXCLUDED?
- The following entities are excluded from this incentive:
| Entities |
What does it mean? |
| Shareholders |
Partners/shareholders holding directly or indirectly not less than 20% of the share capital or voting rights of the entity attributing the plan.
Note: this exclusion does not apply if the entity is a startup or a small or micro company on the year before the stock options are issued.
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Members of corporate bodies
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Members of corporate bodies of the entity awarding the plan (except SMEs).
Note: this exclusion does not apply if the entity is a startup or a small or micro company on the year before the stock options are issued. |
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WHEN DOES IT COME INTO FORCE?
- It is already in force and it applies to stock options issued after January 1st 2023.
- It can even apply to stock options issued before that date, as long as the issuing company is recognised as a startup with effects dating back to the date of issuance.
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How can we help?
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We are a Tax Law Firm based in Portugal, made of Tax Lawyers and Tax advisors.Our focus is Portuguese Tax and Customs Law. |
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