Significant Tax Ruling re Employee Share Subscription
This case was about a for decades lasted interpretation and assessment of subscription of shares by employees in an employer entity for tax purposes, which had not been in accordance with the current Companies Act and caused, therefore, a lot of ambiguity. So, we succeeded in amending this controversial state of tax practice to reflect the current legislation, even if in a case concerning a non-Finnish listed employer entity and the employee shares subscribed therein by Finnish employees.
Significant Tax Ruling re Employee Share Subscription
This case was about a for decades lasted interpretation and assessment of subscription of shares by employees in an employer entity for tax purposes, which had not been in accordance with the current Companies Act and caused, therefore, a lot of ambiguity. So, we succeeded in amending this controversial state of tax practice to reflect the current legislation, even if in a case concerning a non-Finnish listed employer entity and the employee shares subscribed therein by Finnish employees.
Significant Tax Ruling re Employee Share Subscription
This case was about a for decades lasted interpretation and assessment of subscription of shares by employees in an employer entity for tax purposes, which had not been in accordance with the current Companies Act and caused, therefore, a lot of ambiguity. So, we succeeded in amending this controversial state of tax practice to reflect the current legislation, even if in a case concerning a non-Finnish listed employer entity and the employee shares subscribed therein by Finnish employees.
In this case a Finnish company with employees was part of a large multinational infrastructure company, listed on the Oslo Stock Exchange.
The case was particularly challenging from a Finnish legal and tax perspective because the employer entity was a Norwegian listed company, whereas the employees subscribing for the shares were Finnish tax residents. The Norwegian Companies Act was applied to the share subscription and issuance of shares, which was to be compared to the Finnish Limited Liability Companies Act for the purposes of the tax assessment.
The Finnish tax rule examined in the ruling was the one applied on “Directed Employee Share Issue. The rule constitutes a right for employees to subscribe for shares in an employer entity for a price less than the FMV (fair market value), and the benefit accrued based on the discount would not be taxable if (i) the majority of the employees would be entitled to subscribe for the shares, and (ii) assuming the discount would not exceed 10% of the FMV of the subscribed shares.
The Finnish employees were entitled to subscribe for treasury, not newly issued shares in the Norwegian employer entity, whereas in prevailing practice by the Finnish Tax Administration the rule has for decades been interpreted in a way where the subscription of treasury shares would not qualify for the benefit as described above.
Finally, the Finnish Supreme Administrative Court concluded that the said rule was to be interpreted in line with the Finnish Companies Act and accordingly a subscription of treasury shares would also entitle to the benefit. The Norwegian rules on share issue were considered by the Court as comparable to the Finnish equivalents.
This preliminary ruling changed the practice applied by the Finnish Tax Administration for the past 25 years.
In this case a Finnish company with employees was part of a large multinational infrastructure company, listed on the Oslo Stock Exchange.
The case was particularly challenging from a Finnish legal and tax perspective because the employer entity was a Norwegian listed company, whereas the employees subscribing for the shares were Finnish tax residents. The Norwegian Companies Act was applied to the share subscription and issuance of shares, which was to be compared to the Finnish Limited Liability Companies Act for the purposes of the tax assessment.
The Finnish tax rule examined in the ruling was the one applied on “Directed Employee Share Issue. The rule constitutes a right for employees to subscribe for shares in an employer entity for a price less than the FMV (fair market value), and the benefit accrued based on the discount would not be taxable if (i) the majority of the employees would be entitled to subscribe for the shares, and (ii) assuming the discount would not exceed 10% of the FMV of the subscribed shares.
The Finnish employees were entitled to subscribe for treasury, not newly issued shares in the Norwegian employer entity, whereas in prevailing practice by the Finnish Tax Administration the rule has for decades been interpreted in a way where the subscription of treasury shares would not qualify for the benefit as described above.
Finally, the Finnish Supreme Administrative Court concluded that the said rule was to be interpreted in line with the Finnish Companies Act and accordingly a subscription of treasury shares would also entitle to the benefit. The Norwegian rules on share issue were considered by the Court as comparable to the Finnish equivalents.
This preliminary ruling changed the practice applied by the Finnish Tax Administration for the past 25 years.
In this case a Finnish company with employees was part of a large multinational infrastructure company, listed on the Oslo Stock Exchange.
The case was particularly challenging from a Finnish legal and tax perspective because the employer entity was a Norwegian listed company, whereas the employees subscribing for the shares were Finnish tax residents. The Norwegian Companies Act was applied to the share subscription and issuance of shares, which was to be compared to the Finnish Limited Liability Companies Act for the purposes of the tax assessment.
The Finnish tax rule examined in the ruling was the one applied on “Directed Employee Share Issue. The rule constitutes a right for employees to subscribe for shares in an employer entity for a price less than the FMV (fair market value), and the benefit accrued based on the discount would not be taxable if (i) the majority of the employees would be entitled to subscribe for the shares, and (ii) assuming the discount would not exceed 10% of the FMV of the subscribed shares.
The Finnish employees were entitled to subscribe for treasury, not newly issued shares in the Norwegian employer entity, whereas in prevailing practice by the Finnish Tax Administration the rule has for decades been interpreted in a way where the subscription of treasury shares would not qualify for the benefit as described above.
Finally, the Finnish Supreme Administrative Court concluded that the said rule was to be interpreted in line with the Finnish Companies Act and accordingly a subscription of treasury shares would also entitle to the benefit. The Norwegian rules on share issue were considered by the Court as comparable to the Finnish equivalents.
This preliminary ruling changed the practice applied by the Finnish Tax Administration for the past 25 years.
Bernhardinkatu 5 A 5
00130 Helsinki, Finland
+358 40 523 2020
office@weckstromattorneys.com
© 2024 Weckström Attorneys Ltd.
Bernhardinkatu 5 A 5
00130 Helsinki, Finland
+358 40 523 2020
office@weckstromattorneys.com
© 2024 Weckström Attorneys Ltd.