Changes to the taxation of employee share and option plans or the new-old way

For reminder, from 1 January 2024, the employer was obliged to tax non-cash income related to participation in the ESOP at the moments defined by the law (so-called deferred taxation), including social and health insurance contributions (the date of taxation and contributions unified only from 1 July 2024). However, this deferred taxation has created practical problems for many employers rather than the expected boost to ESOP.

Tax new-old way

If the employer chooses the second option, i.e., deferred taxation, the employer is obliged to notify the tax administrator of this fact by the 20th day of the calendar month following the month the employee acquired the share or option. If the notification is not made within the statutory deadline, the income must be taxed at the time of acquisition.

Practical impacts

The transitional provision which introduces the above-described regime retroactively also for shares and options acquired before 1 April 2025 is worth noting. This implies that if an employer wishes to retain the deferred tax regime for shares and options acquired between 1 January 2024 and 1 April 2025, it must be announced to the tax authorities by 30 May 2025 at the latest.

In practice, this means that if the employer does not announce by 30 May 2025 its intention to continue deferred taxation in respect of shares and options (acquired between 1 January 2024 and 1 April 2025), the employee's income from the acquisition of that share or option will be considered to have been accounted for in the second month after the amendment takes effect, i.e. in May 2025. The same regime will apply to income that is taxed through a tax return, i.e. it will also be income in 2025.

If you wish to analyze the area in more detail, please contact us. We have extensive experience in implementing or reviewing these employee benefits and will be happy to help you.