Rewards and incentives

Employee rewards, options and incentive plans – Finnish tax, social security, employment and legal services

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‍Stock options and equity plans in Finland

Equity-based incentives are one of the most effective tools in securing long-term retention of key personnel, attracting talent, and supporting company growth and long-term value creation. Our team provides advice to both Finnish and international companies on various equity plans, such as option plans, employee share issues, share reward plans, Restricted Stock and Restricted Stock Unit (RSU/RS programs), FCPEs, Management Investment Plans (MIPs) and Employee Share Purchase Plans (ESPPs). In addition, we regularly advise on cash-based incentives, such as retention and performance bonus plans, personnel funds, synthetic options (Share Appreciation Rights, SAR), Long-Term Incentives (LTI) and Short-Term Incentives (STI). Our team handles all legal aspects of rewards and incentives, including corporate law advice, tax and social security advice as well as employment law advice.

‍Designing incentive plans

There is no one-size-fits-all solution when it comes to rewards and incentives. Companies should carefully design and select the incentive type and its terms taking into consideration, among other things, the company's development stage, ownership structure, growth objectives, potential exit and M&A plans, as well as tax and social security objectives. Well-drafted terms align with the shareholders’ long-term needs and anticipate future scenarios such as an exit or M&A event, incoming investors, an IPO, the need to amend the program, and departures of key people (good leaver/bad leaver provisions).

‍Our services

Our cross-practice team provides practical and solution-oriented advice throughout the life cycle of incentive plans: plan design, incentive plan documentation and relevant registrations, as well as implementation and ongoing administration, such as cap table maintenance and vesting tracking. We also seek preliminary rulings from the Finnish Tax Authorities (FTA, fi. Verohallinto) or Central Tax Board (CTB, fi. Keskusverolautakunta), if necessary. Rulings grant protection in case of future scrutiny from the authorities or in case of tax audits. However, often the social security treatment of equity based rewards and incentives are more complicated than the tax treatment (i.e. is the plan “qualified” or not), hence, we have an ongoing dialogue with relevant insurance authorities.  We have in-depth experience advising on hundreds of incentive arrangements in Finland and internationally, spanning corporate law, personal and corporate taxation, and employment and social security. Combined with hands-on experience of private equity and M&A deals, we support our clients from their first option plan through complex international transactions.

‍Questions we frequently get

• How are stock options taxed in Finland?
• What is the difference between qualified and non-qualified option plans in Finland?
• When should a company seek a preliminary tax ruling for an incentive plan?
• What are the social security implications of employee stock options in Finland?
• Can we implement a RSU plan for our employees in the Finnish subsidiary?

These are all questions that we frequently discuss with our clients. If you are looking for advice on the taxation or social security treatment of stock options in Finland, please reach out to our team. Our team advises on the design, implementation, and tax treatment of option plans and other equity-based incentives under Finnish tax law.

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