Swedish Tax Alert – Proposed new tax rules for stock options

Today, the Swedish Government has proposed new tax rules for stock options granted by start-ups. The purpose is to encourage start-up businesses. A range of requirements are set out in order for the rules to apply. Below is a summary of some of the requirement.

To qualify as a start-up, the company must in the year of grant have:

  • (i) a maximum of 50 employees on an average;
  • (ii) revenues of maximum SEK 80 million; and
  • (iii) operated its business for less than 10 years.

The total value of all stock options granted may not exceed SEK 75 million and the value of each employee’s stock options may not exceed SEK 3 million.

Some companies are excluded from the proposal, such as banks or financial companies, insurance companies, real estate companies and companies providing tax or auditing services.

Employees holding stock options that qualify under the proposed rules will be subject to capital income tax when the underlying shares are sold rather than employment income tax when the stock options are exercised. For the employing entity, no social security charges shall be payable.

Provided that the European Commission approves the proposal, it may enter into force on 1 January 2018. The new rules are proposed to apply to stock options issued after 31 December 2017.

The proposal (in Swedish) can be found here.