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Newsflash 14.03.2017

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Tax system for stock options

In a parliamentary response on 2 March 2017, the Minister of Finance, Pierre Gramegna, provided some information about the tax system applicable to stock options.

This response follows on from a parliamentary question on 31 January on reactions to the Circulaire L.I.R n°104/2bis of 28 December 2015 (hereinafter referred to as “the Circulaire”) forcing employers to report their stock option plans to the Administration des contributions directes (direct tax authority, hereinafter referred to as “the ACD”).

The Minister began by pointing out that the point of the Circulaire was to provide statistics on which to base the assessment of the tax system applicable to stock options. The purpose of employers’ obligation to report their stock option plans is twofold: i.) to understand employers allocating stock options to their employees better and ii.) to be able to assess any tax waste.

In his response, the Minister of Finance also specified that the information collected in this way by the ACD from employers during 2016 is currently being analysed. We should know the number of plans for stock options issued in 2016 once this analysis is complete, subject to certain technical and practical limitations.

However, the information collected within this context will not help to identify the sectors most involved in using stock option plans, or to provide exact figures for the tax waste independently. It will only help estimate these figures by extrapolating.

Subject to these comments, and while we wait for the complete, final figures for 2016, the Minister of Finance was nevertheless able to provide the following information and initial estimates: 

  • 617 stock option plans were sent to the ACD in 2016 following the publication of the Circulaire, 
  • nearly 85% of all these stock options are fully tradable and not listed on the stock exchange, 
  • 80 of the stock option plans reported are for individual or virtual options that are not freely tradable and whose exchange value is not available at any time for the employee. These options are often connected to shares in the employer itself, or to shares in the group of which it is a member, 
  • the annual gross tax waste can currently be estimated at between 150 and 180 million Euros, where it should be pointed out that this estimate does not take into account the dynamic, favourable impact that the stock option system may have on the economy as a whole.

Parliamentary question and response on the tax system for stock options