Favourable rules on employee shares have been adopted
As expected, the Danish Parliament has adopted a bill to amend the rules on taxation of employee shares that entails an extension of the possibilities of being taxed under the more favourable rules in section 7 P of the Danish Tax Assessment Act.
Under section 7 P of the Danish Tax Assessment Act, undertakings may under certain conditions offer their employees remuneration of part of their annual salary in the form of employee shares (including options to purchase and subscribe for shares) without employees being taxed at the time when shares are allocated or at the time when options to purchase or subscribe for shares are exercised. Instead, any gains on the shares will be taxed when the shares are sold, and then as share income at a rate of 27% or 42%, depending on the amount of such income.
Previously, the employee could be allotted employee shares of up to 10% of his or her annual salary. This limit has now been increased to 20% to the effect that the employee may be remunerated in the form of employee shares of up to 1/5 of his or her annual salary under the more favourable taxation rules. However, it is a condition that the undertaking offers the share-based salary arrangement on the same terms to at least 80% of its employees. The limit of 80% is determined in accordance with general criteria.
It is still possible to offer a share-based remuneration arrangement to a selected group of employees, but in that case only with respect to 10% of the employee's annual salary.
The amended rules on share-based remuneration will have effect on agreements entered into on 1 January 2018 or later.
Read more about section 7 P of the Danish Tax Assessment Act and the new rules (in Danish) in our insight here