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News & MediaFlash AlertStock Options: New Tax Regime

23 de January, 2023

Flash Alert by Antas da Cunha ECIJA

Legal Certification of Start-up and New Rules on Taxation of Stock Options


A New Law for Start-ups (hereinafter referred to as ” Proposed Law”) is currently before the Portuguese Parliament, introducing a regulatory framework that will encourage the foundation of new start-ups and scaleups, as well as the development of the innovation sector.

The scope of this Proposed Law is mainly structured in two areas: (I) the concepts of start-ups and scaleups, (II) legal certification and (III) amendments to the rules on taxation of Stock Options, which we will describe below.

I. Legal Concept of Start-Ups and Scaleups

A start-up is considered to be a legal person that complies all the following requirements:

a. Has been operating for a period of less than 10 years;
b. Employs less than 250 workers;
c. Has an annual turnover that does not exceed 50 million euros;
d. Does not result from a demerger of a large company and does not have in its share capital any direct or indirect majority shareholding by a large company
e. Has a registered office or at least 25 employees in Portugal; and
f. Is considered to be an innovative company under the terms defined by Ministerial Order no. 195/2018, of July 5th or which has been recognised by the National Innovation Agency in the practice of research and development activities or certification of the recognition process for companies in the technology sector;


Has concluded at least one round of risk capital financing by an entity qualified to invest in risk capital subject to supervision by the CMVM or by a similar international authority, or through the contribution of capital instruments by investors other than the founding partners or business angels, certified by IAPMEI; or

Has received investment from Banco Português de Fomento, S. A.

A scaleup is considered to be a legal person that meets only requirements d) to f) and, cumulatively, fulfils the necessary conditions to obtain the certification tech aims.

II. Acquisition of legal recognition

With the definition of a start-up or scale-up in the law, there is now a procedure for recognition of that status under the responsibility of Startup Portugal, which also ensures the monitoring, follow-up and control of recognised start-ups and scaleups.

The procedure to acquire the legal recognition involves a previous online communication addressed to Startup Portugal. A certified digital document will be issued, which constitutes a valid title of recognition for all legal purposes.

Startup Portugal will maintain in its website an updated list of recognised start-ups and scaleups.


III. Amendments to the rules on taxation of Stock Options

The new taxation rules apply to option plans, subscription plans, attribution plans and other plans with equivalent effects attributed by the following entities:

a. Startups;
b. Micro, small or medium-sized companies (SME’s) or small mid-caps, in accordance with the criteria established in the annex
to Decree-Law No. 372/2007, of November 6th
c. Entities that develop their activity within the scope of innovation, being considered as such those that incur in expenses with R&D, patents, industrial designs or computer programs equivalent to at least 10% of their expenses or turnover;

It is proposed that earnings arising from shares acquired/received from the entities covered above and which are held for a period of not less than one year, will be on the first of the following moments (instead of the moment of exercise of the option), thus ceasing to be subject to taxation in accordance with the general rules on income from dependent employment and corresponding compulsory subjection to aggregation:

i. Alienation of shares moment

The positive differential between the realisation value and the strike price of the option or right, plus any payments made to acquire the option or right, is considered to be50% of its value for tax purposes, at a rate of 28%, which corresponds to an IRS tax rate of 14%.

ii. Lost of residency qualification

The following are excluded from this regime:

a) Taxpayers who directly or indirectly hold at least 10% of the share capital or voting rights of the entity granting the plan;
b) The members of the governing bodies of the entity awarding the plan (except if it is an SME).

Being the Proposed Law approved, the same shall enter into force on the following day of its publication, producing effects on January 1st, 2023, except for the referred in Point

I and II, which shall only produce effects 180 days after the publication date.

by Practice Areas – Corporate and Commercial Law and Tax Law
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