News & Views

Legal Update: Proposed New Swedish Rules for Stock Options

28 December 2016

On December 20th, 2016, the Swedish Government proposed new tax rules for stock options granted by start-ups. The proposal includes several requirements for the rules to apply and in general they only apply to start-ups of a limited size (cf. below). This is somewhat ironic since the biggest drivers behind the change is the likes of Spotify, companies that will not benefit from the proposed changes. However, the proposal is welcomed by start-ups of limited size wishing to attract key competence to fuel growth.

Short summary of the proposal

The key requirements for the rules to apply are as follows:

  • The company can only have:

  1. a maximum of 50 employees (on average);
  2. a maximum SEK 80 million in revenues; and
  3. operated business for less than 10 years.
  • Total value of all stock options may not exceed SEK 75 million and each employee’s stock options may not exceed SEK 3 million.

  • Companies such as banks or financial companies, insurance companies, real estate companies and companies providing tax or auditing services are excluded from the proposal.

Provided the new rules apply, the employee will be subject to capital income tax (25-30%) as opposed to employment income tax (up to 60%) on gains arising from the sale of the underlying shares. Further, no social security contributions (31.42 %) is due for the employer.

Subject to approval by the European Commission (as the rules constitute state aid), the new rules may enter into force on 1 January 2018 (applying) to stock options issued after 31 December 2017.

We at Hannes Snellman regularly advice on incentive programs and are happy to discuss this proposal and other matters, just give us a call. Your first point of contact is Christian Carneborn.

Please find additional comments on the proposal (in Swedish) here. The entire proposal (in Swedish) can be found here.