Norwegian Legal Update, Summer 2021 – Norwegian scheme taxation of options for employees in start ups

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An improved scheme regarding taxation of options for employees in start-ups has been a work in progress for some time and the proposal was notified in the revised budget for 2021. In June this year the hearing memo was published which means we now have some more details on the proposal. We will here give an overview of the main highlights. Since the proposal is planned to be implemented from 2022, it does however remain to be seen whether the proposal survives the Norwegian election taking place in the fall of 2021.

The main aspects of the new option tax scheme are:

  • Taxation only takes place when the share is realized (not at exercise of the option as would be the main rule), and then fully as share income as opposed to salary income. This is the case even if the employee leaves the company after option exercise.
  • The option may, as under current rules, be exercised in shares no earlier than three and no later than ten years after the option grant.
  • The options must be owned personally, in other words they cannot be held through a holding company in order to qualify for Norwegian participation exemption.
  • The scheme is likely to be applicable only to companies that are a maximum of 10 years old, have a maximum of 50 employees and a maximum of MNOK 80 in turnover and balance sheet. If the company is part of a group, the restrictions apply to the group as a whole.
  • There will be limitations on the value of the underlying shares both on the individual employee level and on a company level measured at the time of allotment. The levels have not yet been proposed. Indications are that the limits will be below the corresponding MSEK 3 per employee and combined MSEK 75 for the company in the Swedish scheme. The Swedish levels are however currently in process to be increased, so there is some hope that this process in Sweden could also influence the Norwegian levels.