Generally, income from employee stock plans arises on receipt of the shares fully or partially free of charge and qualifies as income from employment or personal services. As such, it is subject to progressive taxation (up to 32%) and national insurance contributions.

However, on certain conditions the tax point may be deferred until sale of the shares, with the applicable tax being 19% and national insurance contributions excluded.
One of the conditions is that the scheme must be authorised by a resolution of the company's general meeting.

The Provincial Administrative Court in Cracow has recently held that this condition should be interpreted liberally because other jurisdictions can well allow employee incentive plans to be set up by other corporate organs (e.g. management board or board of directors). Thus, the court says, sale of shares should be permitted to be the first tax point also in such schemes in order to ensure that the purpose of the law is achieved. 

This judgment sits well with a broad line of more liberal authority from the Supreme Administrative Court. With this in mind, it may be advisable to reassess the approach to incentive scheme taxation in your company.

 

Find more in the PRO HR July 2024.