Sociedade de Advogados - Porto - Lisboa

Alternative Remuneration Components – Directors and Senior Management

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 plansExercise of the optionfree 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 soldShare 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 increasesThe company will pay the employee an amount that equals the profit, he would have made under a real stock option planEmployment income
Taxable under the general rules – progressive tax rates

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