Taxation on stock remuneration, options, RSU, ESPP, etc.

Taxation of stock remuneration, RSU and ESPP

Does your company have employees who receive stocks, ESPP, or RSU as part of their salary? It can be an effective way to motivate and retain your employees, but how about the taxes? The taxation of stocks, ESPP, and RSU can be complex and lead to unexpected costs if not handled properly.

At SkatteInform, we offer expertise in navigating these tax rules and avoiding pitfalls, so that both the company and employees can get the most out of these opportunities.

How is employee stock compensation taxed?

The tax for both employees and employers depend on the set of rules, under which the stock compensation is granted. Therefore, it is beneficial to choose the compensation, that involves the least amount of tax-liability.

The taxation of employee stock compensation depends on the legal provisions under which it is granted:

• Section 7P of the Danish Tax Assessment Act – deferral of tax until the time of sale
• Section 28 of the Danish Tax Assessment Act – deferral of tax until the time of exercise
• Section 16 of the Danish Tax Assessment Act – taxation at the time of acquisition of rights

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Pitfalls to be aware of

• Incorrect Tax Planning: If ESPP or RSU are not planned correctly, employees may face high tax bills because the beneficial element of the stocks is taxed as salary income upon award . Understanding timelines is essential.
• Lack of Reporting: Incorrect reporting can result in interest and penalties from the tax authorities. It is crucial to accurately report and avoid unforeseen tax consequences.
• Understanding Double Taxation: For employees working internationally, double taxation can be a risk. Proper coordination of tax rules across multiple countries is essential.

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Contact Us

At SkatteInform, we advise both companies and employees on how best to optimize taxes using stock compensation regimes. Our goal is to ensure that the reporting of stock compensation is correct, and that our clients avoid unnecessary interest charges.

Do you have questions or would you like to know more about how we can help you? Please do not hesitate to contact us

Disclaimer

The above information is for guidance purposes only, and we accept no responsibility for decisions made based on this information without prior individual advice. We accept no responsibility for errors or omissions.