Taxation of stocks and business shares of individuals - changes from 1.1.2024
A novelty from 2024 is the effort to support the remuneration of employees and so-called contractors (individuals with income according to Section 6(1) and (2) of the Income Tax Act, such as sole traders) in the form of shares or a business share in a limited liability company (LLC). The change will affect so-called ESOPs (Employee Stock Ownership Plans), which will have clearer tax rules. Individual investors can also expect positive changes.
Exemption of employee shares / business share in LLC
The acquisition of employee shares or business share in LLC in connection with the employee's performance of a dependent activity in the company (employer) in which the employee shares or business share are acquired will be exempt from income tax.
Similarly, the acquisition by a contractor (e.g. a sole trader) of shares or a business share in LLC in connection with the contractor's performance of activities for the company whose shares or business share he acquires will also be exempt from income tax.
In both cases of acquisition of in-kind income (employee shares or business share), i.e. in the case of an employee as well as in the case of a contractor (sole trader), the following conditions must be met at the same time in order to qualify for the exemption from income tax:
- The employer or the company did not pay profit shares (dividend) out of its profits from the date of registration for income tax until the tax period preceding the tax period in which they were first paid;
- The shares have not been and are not admitted to trading on a regulated market or on a similar foreign regulated market until the end of the tax period in which the benefit was acquired by the employee or contractor (sole trader).
Employees or contractors (sole traders) will not have to tax in-kind income at the time of acquiring shares or business share. It is clear from the conditions (e.g. no past profit distribution) that the tax exemption will be used primarily by startups. However, it may also find use in "ordinary" companies.
Income derived from the sale of (employee) shares or business share is taxable income. When these shares are acquired free of charge, it will not be possible to include the value of the employee shares or business share acquired in tax-deductible expenses when they are sold. Nor will the sale itself be exempt from income tax.
New income tax exemptions are added (financial activities)
Income from the sale of securities listed on a regulated market (stock exchange) or a similar foreign regulated market will continue to be exempt from income tax after one year from the date of acquisition.
Income from the sale of securities (with a few exceptions such as bills of exchange or certificates of deposit) that are not admitted to trading on a regulated market or similar foreign regulated market will be exempt from income tax after three years from the date of acquisition.
Income from the transfer (sale) of a participation (share) in a limited liability company after three years from its acquisition will also be exempt from income tax.
Addition of the income tax exemption for securities not listed on a regulated (foreign) market or for business shares based on meeting the holding period test of at least three years will be particularly welcomed by individual investors.
Income from the transfer of securities and shares that were the taxpayer's business assets will not qualify for income tax exemption.
Income from the redemption of shares in mutual investment fund will also be exempt from tax after three years from the date of issue.
If you need advice, whether it is about remuneration of employees or contractors (sole traders) or if you are an individual investor, please do not hesitate to contact our specialists.
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