The Government proceeds with changed rules for taxation of employee stock options

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PwC-skatteradgivning-Capitol-solid_0001_maroon.pngIn an article in Dagens industri, June 29, Mikael Damberg and Per Bolund presented the Government’s views as regards its proposal for new rules for the taxation of qualified employee stock options.

We have previously reported on the Incentive Committee’s proposal regarding changed rules for taxation of incentive programs. The Committee’s proposal implies, primarily, that employees receiving employ stock options on advantageous terms will not be taxed on the benefit, rather, taxation will first take place when the underlying shares are sold and, then, as income from capital.

The proposal required the approval of the EU Commission as it can be considered to comprise state support to companies who can apply the new rules. This approval has now been granted by the EU Commission and the Government has now announced that it will proceed with the proposal.

The proposal has been a hot issue in the media, where a number of corporate representatives, largely from the tech industries, have stated that the present proposal should be scrapped and an entirely new proposal should be produced. The criticism has primarily been aimed at the fact that the proposal is limited and excludes many companies from the possibility of utilizing the rules.


Our understanding is that the proposal opens up for interesting and alternative means of rewarding and attracting key individuals in, and to, smaller companies. The model of using options as a means of compensation to employees is widely applied, internationally, while the trend of using employee stock options has seen a downturn in Sweden during a number of years. The reason for this downturn is not only the high tax charge but is also due to the fact that many employee stock option programs have not, historically, provided any real yield. In many of these cases, the employees have received low salaries in exchange for the possibility of a future (high) yield on the options. In the US, options are used to a large degree as a supplement to salaries.

At the same time, we believe that the proposal is limited due to the criteria which the issuing company has to fulfill. The future taxation of possible profits on options will, in all likelihood, be taxed according to the 3:12 framework, which is the reason the fiscal upside for the employee receiving options can be limited. As the 3:12 framework is also being changed, it remains to be seen how effective the proposed employee stock option rules can be.

Do you have any questions on tax?

Michal Herink

Michal Herink

Michal Herink arbetar sedan 2006 vid PwC:s kontor i Stockholm med internationell individbeskattning och är specialiserad på incentiveprogram. Michal har tidigare även arbetat vid PwC:s kontor i London med M&A.
010-213 35 96
Michal Herink has worked at PwC Sweden since 2006. Michal is a tax advisor in personal income taxation, and is specialised in incentive programs and other types of compensation arrangements. Michal has previously worked at PwC in the UK in the London M&A team.
+46 10-213 35 96

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