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Wednesday, 26.11.2014, 08:18
Riigikogu approves of “golden handcuffs” law from 2011
Currently, a company has to pay the fringe benefits tax at once when issuing a stock option to an employee. According to the new regulation, the tax will not have to be paid if there is a gap of at least three years between granting the option and real acquisition of shares.
Riigikogu finance committee chairman Taavi Rõivas said that so far, issuing options was a very big cost for a company but the new logic is that options are taxed more like securities income: if you buy a share and sell it at a profit you pay income tax on the profit.
He said that the 3-year sale restriction was added to prevent a tendency that companies start paying tax-free wages to employees in stock options.
Rõivas said that currently just 2% of Estonian population earns shareholder’s income but with the law amendment, more people should move from the status of a wage-earning employee to co-owner.