Share plans – New tax regime

In brief

Law 21/2023, of 25 May, establishes the legal framework applicable to startups and scaleups. The Law also amends the Personal Income Tax (PIT) Code and the Tax Benefits Code (EBF) concerning the taxation for PIT purposes of gains from stock option, subscription, attribution or other plans with equivalent effect, on securities or similar rights, including phantom share plans, granted in the benefit of employees or board members.

Said regime is foreseen in Article 43C of the EBF and applies to plans granted by the following entities, startups included:

• An entity that qualifies as a micro, small or medium sized company, or as a small-medium capitalization company (“Small-mid cap”), as per Decree-Law 372/2007 of 6 November, with reference to the year prior to the approval of the share (or equivalent rights)  plan.
• An entity carrying innovative activities, which includes entities incurring investment expenses with R&D, patents, drawings or industrial models, or computer programs. Said expenses shall correspond to at least 10% of the total expenses incurred or of the turnover. Reference is made to the year prior to the approval of the share (or equivalent rights) plan.

Gains derived from said share plans shall be taxable only on 50% of the respective amount. The applicable rate is 28% (notwithstanding the option to be taxed under the applicable PIT progressive rates).

In addition there is a deferral from taxation to the moment in which the first of the following events occur:

• Disposal of securities or equivalent rights acquired through the exercise of options, corresponding the gain to the positive balance between the sales proceeds and the price of exercise of the option or right, increased by any amount paid for the acquisition of said option or right.

• Loss of the tax resident status in the Portuguese territory (exit tax). The gain corresponds to the positive balance between the market value and the price of exercise of the option or right, increased by any amount paid on the acquisition of said option or right.

• Free transfer of the securities or equivalent rights. The gain corresponds to the positive balance between the amount assessed under the rules foreseen in the PIT Code applicable to free transfers and the price of the exercise or subscription. The latter is increased by any amount paid on the acquisition of said option or right.

The application of this tax regime will depend on the maintenance for a minimum 1-year period of the rights underlying the titles that generate the gains or equivalent rights, including phantom share plans.

The new regime shall not apply to taxpayers that:

• Hold directly or indirectly a shareholding of not less than 20% of the share capital or of the voting rights of the entity that grants the plan;

• Are members of the statutory board of the entity that grants the plan.

An exception to the above applies (and thus the regime is applicable) to plans granted by entities that qualify as startups or micro or small companies, with reference to the year prior to the approval of the plan.

The new regime is effective from 1 January 2023 onwards. It also applies to plans approved up to 31 December 2022 provided that they are granted by entities recognised as startups under the applicable legal framework within 12 months upon the entry into force of this Law or that duly demonstrate to qualify as startups with reference to the date of approval of the plan. 

^{© 2023 PwC. This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers Tax Services TLS, Lda. We will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice.}