According to Portuguese law, the employees of a company may receive shares in it. The question is: when and under which income category should this be taxed?
| Taxation – when? | Taxation – how? | Tax nature | |
|---|---|---|---|
| Stock option plans | Exercise of the option | free allocation by the company >> market value subscription < market/nominal value >> difference between the share value obtained and the cost for obtaining it subscription = market value >> not subject to taxation | Employment income Taxable under the general rules – progressive tax rates |
| Holding shares | @ 28% | Distribute the profits / Dividends | |
| Share is sold | Share is sold to a third party – capital gain @ 28% Company repurchases: • The repurchase value is determined beforehand – employment income • The repurchase value is not determined beforehand - @ 28% up to market value; the difference between the market value and the value of the repurchase as employment income | Capital gains and/or employment income (taxable under the general rules – progressive tax rates) | |
| Phantom / Ghost shares plans | Exercise of the phantom option, in case the company’s value increases | The company will pay the employee an amount that equals the profit, he would have made under a real stock option plan | Employment income Taxable under the general rules – progressive tax rates |