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Estonia Is Internationally Acknowledged for the treatment of Employee Stock Options

5. December 2018 - 12:44

Estonia’s approach for employee stock options is found to be the most favourable in a comparison of 18 countries of the European Union and four other countries, according to a study by the venture capital firm Index Ventures.

„Stock options offer an excellent means for startups to motivate and retain their employees. In order to encourage companies and especially the startup community to take up this possibility, the Estonian Parliament made taxing employee stock options more flexible. Our system is simple and applies to all companies. I am glad that the attractiveness of this solution has been recognised in an international comparison,” Minister of Finance Toomas Tõniste said.

In the analysis, Estonia is followed by Israel, Canada and the United Kingdom. According to the study, tax rules in Estonia, Israel and Canada strongly support stock option programmes for startups in all stages of their lifecycle and for all levels of employees.

The study assessed the competitiveness of stock options based on how simple and cost-effective it is to conduct an employee stock options programme. It also ranked highly countries which defer taxation until the sale of the underlying asset.

In assessing the favourability of the stock options regime, the study considered six factors and Estonia received the maximum result in all six. Index Ventures concludes that all over the world, the taxation regimes of stock options are very divergent. However, in several countries, the regulation is similar to that of the United States of America. In Europe, such countries include Estonia, the United Kingdom, France and Portugal.