New tax legislation on share issues to employees

The Finnish Government has proposed new tax legislation on share issues directed to employees of private companies. The purpose is to create a clear and tax-wise attractive regime to strengthen employee commitment by making it possible to issue shares at book value. Under the current regime and practice, shares issued at below market value constitute taxable income. For this reason, stock options are often used instead of direct share issuances.

The proposed law imposes a number of requirements for the new regime to apply. The most significant is the requirement that the share issue cover the majority of the employees. A second key requirement is that the shares be issued by the formal employer entity, not other group entities.

The new law is aimed to enter into force on 1 July 2020. If and when implemented, the new law will add to the equity incentive toolkit that is used in various incentive programs.