Due to recent amendments to Art 24.11 of the Polish Personal Income Tax law, and with respect to share-settled awards where the underlying shares are delivered on or after January 1, 2011, employees will be able to defer the taxation of their share-based compensation until sale of the underlying shares if the following conditions are satisfied simultaneously:Delivery of shares. The shares which are delivered to employees at vesting (e.g. in the case of restricted stock units) or exercise (e.g. in the case of stock options) may be newly issued shares or existing shares; prior to the amendment, the deferral was only possible in case of newly issued shares.
Shareholder’s resolution. The equity awards at issue must have been approved by a resolution of the award granting company’s shareholders; no changes to this condition.
Underlying shares. The shares underlying the relevant equity awards must be those of an entity headquartered in the European Union (EU) or the European Economic Area (EEA); prior to the amendment, the provisions did not mention specifically whether the deferral should apply to Polish or non-Polish shares. Yet,according to recent official tax rulings issued by the Polish authorities prior to 2011, it should have been applied solely to Polish shares.
Global equity plans. There are still controversies regarding personal income tax treatment of global equity plans, when Art 24.11 of the Polish Personal Income Tax law does not apply (the controversies result from contradicting rulings issued by Polish tax authorities). Nevertheless, employers applying Art 24.11 of the Polish Personal Income Tax prior to 2011 should review their approach. At the same time, it may be an opportunity to start applying the beneficial treatment for other employers (especially with EU/EEA based plans).
Social security. Please note that there may be some uncertainty in respect of social security approach, when the Art 24.11 tax deferral takes place.
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