Shares represent securities that are part of the capital of a trading company. In this article, we will look at the possibility of providing shares to employees and what the benefits are.
Granting employees shares is a strategy to inspire and assure them that their work and dedication are acknowledged and rewarded.
What options are there for providing shares?
- As a free acquisition.
- As an option to purchase shares – in this case, employees are given the right to purchase shares in the company at a price lower than the market price. With the employee's consent, the employer directly purchases the shares on his behalf, withholding their value from the employee's remuneration. In this way, the acquired shares are stored with an investment intermediary in the name of the employee.
In both cases, the provision is treated as additional remuneration. This means it is subject to tax if the employee's remuneration is below the maximum social security income and contributions.
For which employees is this incentive suitable?
This incentive is suitable mainly for key position employees who are loyal to the company, are not in a risky group to terminate their employment relationship or are about to retire.
What income do acquired shares bring to employees and what tax is levied?
In case of annual profit, the company may decide to distribute dividends to shareholders on which a 5% tax is due.
Do acquired shares and received dividends need to be declared?
Acquired shares and received dividends from an employer are declared in a tax return under Art. 50 of the Personal Income Tax Act. If it is a foreign company, it depends on the agreement between Bulgaria and the respective country.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.