By offering stock options to one or more employees, you give them the right to buy existing shares (stock options) at a certain time and at a certain price or to subscribe for new shares (warrants).
The benefit associated with the stock option is taxable for the employee as professional income at the moment the options are granted – legally set on the 60th day after the date of the offer, insofar as the offer was accepted in writing within this period. This benefit is exempt from social security contributions (and holiday pay on variable pay) if the beneficiary is subject to social security (RSZ). Beneficiaries subject to the social security system for the self-employed (NISSE) are not granted this exemption from social security contributions. For them, the calculation basis for the NISSE contributions corresponds to the amount of taxable professional income, which includes the ‘stock options’ benefit in kind.
The amount of the taxable benefit is fixed at 18% of the value of the underlying shares, unless the options are listed on the stock exchange (which is rare in the case of options on employer shares). This percentage is increased by 1% if the option has a duration of more than 5 years, and this for each year after the fifth year (e.g., 23% for a duration of 10 years). However, when certain conditions are met, those percentages are halved.
If the above conditions are met (such as the acceptance of the options within 60 days after the offer), the subsequent capital gain, realised at the time the options are exercised or the sale of the underlying shares, is not taxed. In that case, the employer does not have to withhold and pay social security contributions.
Stock options and warrants are a perfect solution for motivating employees and retaining them in the company. As an employer, you can allocate them at your own discretion – to the most promising employees, for example – but also to self-employed workers. Moreover, certain mechanisms can be stipulated to protect the employee against any depreciation of the underlying shares.
Please note that the beneficiary is not a shareholder of the company between the time of allocation of the options and the exercise thereof. Therefore, he or she has neither the right to vote nor the right to dividends. If the options give the beneficiary the right to subscribe for new shares (warrants), he or she may participate in the general meetings in an ‘advisory capacity’ only.