28.07.2017

News

Amendments in the taxation of options are enforced in Estonia

On August 1, 2017 the rules concerning the taxation of options in the Income Tax Act change. The amendments are enforced retroactively from July 1, 2017.

According to the general rule if an employer (a company) does not wish to pay taxes on the share of the company transferred to the employee, there has to be a 3 year waiting period between entering into an option agreement with the employee and the actual transfer of the share to the employee. With the amendments to the Income Tax Act, three exceptions were regulated from this general rule. The general rule is not fully applied in three cases: (i) all shares of the company are transferred to an investor (full exit), (ii) the employee becomes permanently incapable to work, (iii) the employee dies. If one of those events occurs before the 3 year waiting period has passed, the employer does not have to pay taxes on the part of the share that has vested by the time the event occurs. If the employer affords the employee to acquire the unvested part of the share also, the employer has to pay taxes on that unvested part.

In order for the employer to profit from the amendments described above, the employer has to forward the option agreement concluded with the employee to the Tax Board in five days from concluding the agreement. This requirement does not apply to digitally signed option agreements and option agreements authenticated by a notary, since the Tax Board is reliably able to detect when such agreements were signed.

The amendment applies only to option agreements concluded after July 1, 2017.

Latest news

Restructuring is not bankruptcy!

Often businesses think that restructuring equals bankruptcy, but that is not even remotely true. Restructuring is not the same as bankruptcy! If the purpose of bankruptcy proceedings is to liquidate the business, then the goal of restructuring is preserving it.

NJORD Estonia gives advice: Submit your restructuring application on time

For a successful restructuring, it’s extremely important to submit the restructuring application on time. There is no point in starting the restructuring proceedings at the last minute if the business has already used up all the resources necessary for a successful restructuring proceeding. According to legal literature, the main cause for a failed restructuring is […]

NJORD Estonia explains: Restructuring – what is it?

The Reorganisation Act defines restructuring (legal term reorganisation) as follows: “The reorganisation of an enterprise means the application of a set of measures in order for an enterprise to overcome economic difficulties, to restore its liquidity, improve its profitability and ensure its sustainable management.” Not the worst definition, but still might be quite confusing.

Get the latest legal news

We gladly share our knowledge with you. Subscribe to our newsletters.

Subscribe here