A new law (Law No. 7524), effective 2 August 2024, exempts from income tax the value of shares that employees of technology startups receive for free or at a discount, up to the amount of their annual gross salary. To qualify, the technology startup must be approved by the Ministry of Industry and Technology, and employers are responsible for any exempted tax if employees sell the shares within 12 years, with tax liability decreasing based on holding periods. This amendment to Article 17 of the Turkish Income Tax Code presents an opportunity for eligible companies to optimize their employee incentive programs while carefully evaluating potential implications with professional guidance.

A proposed amendment to the Income Tax Act seeks to simplify the taxation of income from employee stock option plans, allowing employers to choose between the current system of deferred taxation or reverting to pre-2024 taxation practices. The amendment addresses complexities introduced in 2024, such as tracking taxable moments, avoiding double taxation abroad, and coordinating taxation with insurance premiums. Transitional provisions would allow employers to apply postponed taxation retroactively for 2024 without penalties, provided they notify the tax authorities within two months of the amendment’s effective date.

New Zealand's government is proposing to increase tax-exempt thresholds for employee share schemes as part of the Taxation Bill for 2024-25, benefiting startups and tech companies by adjusting for inflation. Under the proposed changes, the maximum annual value of shares provided to employees would rise from $5,000 to $7,500, and the maximum discount on shares would increase from $2,000 to $3,000, effective April 1, 2025. This initiative is aimed at supporting recruitment and growth for early-stage companies, aligning employee incentives with company goals, and ultimately boosting the economy.

In 2018, New Zealand reformed the taxation of employee share schemes (ESS), but many aspects of the new rules, particularly regarding employer deductions under section DV 27 of the Income Tax Act 2007, have remained unclear. The recent Interpretation Statement 24/07 provides guidance, indicating that while the Australian case Clough v Commissioner of Taxation could influence deductions, it is uncertain whether New Zealand courts would apply it due to differences in statutory frameworks. The statement clarifies that deductions may be available if cancellation payments to employees are tied to past employment services rather than capital transactions, encouraging employers to design their ESS with liquidity events in mind to avoid non-deductible expenses.

Brazil's Superior Court of Justice (STJ) ruled that stock options granted to company directors, officers, and employees are not considered compensation for income tax purposes, but are instead subject to capital gains tax upon the sale of the shares. This decision was made under the 'repetitive appeal' mechanism, setting a precedent for tax authorities like the Federal Revenue Service. The ruling counters the Federal Revenue's argument that stock options should be taxed as indirect compensation when exercised, with the court affirming they are a commercial contract.

In Estonia, equity awards are generally taxed as fringe benefits at the corporate level, with a combined tax rate of 66.25% on the net benefit received by the employee, increasing to approximately 70.5% from 2025. The taxable event occurs when employees receive the shares, and the taxable value depends on the type of award, such as RSUs or stock options. Tax exemptions are available for equity awards if there is a minimum holding period of three years and the awards are for shares in the employer or its group, with specific reporting requirements for both the employer and employee.

Turkiye's new Law No. 7524, effective from August 2, 2024, exempts from income tax the benefits of share certificates given to employees by technology startups, up to the amount of the employee's gross salary. The law amends Article 17 of the Turkish Income Tax Code, providing this exemption for shares granted free of charge or at a discount, with tax collected if the employee sells the shares within 12 years, based on a sliding scale. Technology startups should evaluate how this new exemption impacts their business and seek professional guidance if needed.

In a landmark decision, the Antwerp Labour Court of Appeals ruled that Belgian employee social security contributions are not due on equity-based compensation (RSUs) granted by a U.S. parent company to employees of its Belgian subsidiary. The court concluded that these RSUs were not provided as part of the employees' service to the Belgian subsidiary but were instead granted by the U.S. parent company to retain employees long-term, with the parent company assuming full financial and legal responsibility. This decision provides an opportunity for companies to review their equity compensation policies and potentially claim refunds for social security contributions paid in the past three years.

Publicly-traded companies often exclude stock-based compensation from EBITDA and cash flow to present a more favorable financial picture, even though this practice dilutes shareholder value. Snowflake, a data warehouse provider, exemplifies this by reporting high levels of stock-based compensation—43% of its revenue in the recent quarter—while simultaneously announcing a $2.5 billion share buyback plan that fails to offset the dilution caused by new equity issuances. Despite these tactics, Snowflake remains unprofitable, with slowing revenue growth, leading to investor dissatisfaction and a significant drop in its stock price.

SEBI has issued a notice to One97 Communications, the parent company of Paytm, regarding employee stock options (ESOPs) granted to its MD and CEO, Vijay Shekhar Sharma, during the financial year 2022. Paytm clarified that this is not a new development and that they have been in regular communication with SEBI, making the necessary representations. The company also stated that it believes it is compliant with relevant regulations, and this issue has no impact on its financial results for the year ended March 31, 2024.