Changes in Stock Options taxation

On 1 February 2020 amendment of part 1 of Article 17 of Lithuanian Law on Personal Income Tax (PIT), which lists non-taxable income of the residents of Lithuania, comes into force.

The provision of the amendment states, that if the shares acquired free of charge or at preferential price not earlier than 3 years after the grant of the stock options from the employer or a person related to the employer, such benefit received is not considered to be subject to PIT.

Please note, the provision of this amendment applies to the benefit received according to the stock options agreements concluded after 1 February 2020, i.e. benefit shall not be considered as subject to PIT, if the shares are acquired free of charge or at preferential price no sooner than 1 February 2023.

Prior this amendment, Law on PIT stated, that the employee or employer becomes liable to PIT, when an employee becomes the owner of shares and difference between granted price and the market price of shares is considered as subject to PIT.

Please note, that shares received according to stock options agreements are exempted from Social Security Contributions, if the shares are granted to the employees and if the shares are acquired not earlier than 3 years after the grant of the stock options. Please note that there are additional conditions.

With this amendment, stock options become more attractive employees’ motivation tool.

Please be informed, that Leinonen tax team can provide tax advices related to PIT and various employees’ benefit taxation which may be relevant to Your business and your employees.

Information above was prepared by Leinonen Lithuania Tax Team.