Inmaculada Pineda
Almudena Soler
From the Expatriate Tax & Global Mobility Services Focus Group, we would like to provide you with an update on key tax advantages of stock options, as well as on other plans of compensation.
It is common for companies to offer to their employees shares of the company as a way of compensation. Usually, these plans have 2 key moments. The first one is the granting, when the employees begin to participate in those shares’ plans. The second moment is the vesting of those shares, which is when the conditions indicated in the plan are met and the shares are officially owned by the employee.
In Spain, compensating employees by giving shares is considered as benefit in kind and, therefore, part of the employment income of the employee. The shares will be taxable once the vesting occurs or when the employee decides to execute the shares, this is, in the moment the shares are owned by the employee.
As employment income, this income will have to be included in the payroll of the employee for the difference between the value of the share at the moment of the vesting or execution by the employee and the amount that the employee has borne for those shares. Therefore, if the employee doesn’t pay any amount for the shares, the employment income will be the market value of the shares.
However, there are some tax benefits that can be applied to this kind of employment income if the taxpayer is Tax Resident in Spain:
- The first one is an exemption up to EUR 12,000 annually that can be applied on the benefit in kind related to the shares if some requirements are fulfilled. One of them is that the employee maintains the shares – without selling them - for, at least, three years.
- Also, a reduction of the 30% will be applicable if the period of generation of the shares - this is from the granting to the vesting - is higher than two years and if this reduction has not been applied in the previous 5 tax years by the employee.
If you are an XLNC member interested in this topic and you desire to share information and best practices on taxation matters around this area from your country, please join the Expatriate Tax & Global Mobility Services Focus Group! Within the Group we also comment on other matters related to Global Mobility and share information and updates on the taxation. We hold seminars during the year where we meet each other and share different ideas on how this Global Mobility world is heading to. To request to join the group, please email us directly.
XLNC ARCHIVE| 10 May 2023