more certainty concerning stock option plans for consultants active through management companies

The implementation of a stock option plan is possible using either options or warrants. Many companies wish to reward certain ‘ key persons ‘ well and commit them for a long time to the company. Because of its favorable tax treatment, the granting of stock options is an interesting tool. Until recently, ┬áit was unclear whether this tax system also applies where the relevant person is active through a management company. On 2017, April 13, the tax administration has introduced a circular and set out how such stock options should be treated and thus implicitly confirmed that the tax system of the stock options indeed applies at “the granting by a company of stock options on its shares to the Managing Director of a management company that provides services to the former company”.

This circular also clarifies the calculation of the benefit: the tax base is basically equal to 18% of the actual value of the underlying shares. However, when the option is granted for a period exceeding five years, the taxable benefit is increased by 1% per year (or part of a year) that exceeds five years. The rate of 18% cannot be reduced by 50% even if the management company is appointed as a director of the company that has issued the stock options.

Do not hesitate to contact us if you would like more information about the practical application of this system.