Incentive schemes - preferential taxation for employees

Incentive schemes are a widely used remuneration policy instrument in the European Union, the United Kingdom, Switzerland and the United States. Polish tax residents benefit from such schemes more and more frequently, providing work under employment contracts or under a sole proprietorship business activity conducted for the benefit of entities belonging to domestic or international capital groups in which such schemes exist. Under what conditions can they benefit from preferential rates of taxation on income from such schemes?

Preferential taxation of income from incentive schemes

Article 24(11b) of the Personal Income Tax Act specifies in detail what conditions must be met for the income obtained under the incentive scheme to qualify for the preferential tax rate, i.e. 19% on capital gains, and only at the time of sale of the shares acquired under the scheme. The first condition is the necessity for the general meeting of shareholders of the employer joint-stock company or the parent company of the employer joint-stock company to adopt the assumptions of the incentive scheme in the form of a remuneration system. Another condition is the acquisition of the right to take up or acquire shares in the employer joint-stock company or the parent company referred to in the previous sentence. In short, in order to benefit from preferential taxation of the income:

• the incentive scheme should be established by:
  • a joint stock company (employer) or
  • a parent company (within the meaning of Article 3(1)(37) of the Accounting Act) in relation to the employer company;
• the scheme should be approved by a resolution of the company's general meeting of shareholders;
• the scheme participant (employee) should take up or acquire shares in the company.

When does an incentive scheme fail to meet the conditions?

In the individual interpretation issued on 5 May 2021, No. 0113-KDIP2-3.4011.100.2021.2.IR by the Director of the National Fiscal Information, there is a situation in which one of the conditions is not met. The incentive scheme described in the application was not established on the basis of a resolution of the general meeting, but was introduced by the company's management board (Board of Directors), in accordance with the corporate regulations applicable to the American company and based on the US commercial law. In view of the presented situation, the Director of the National Fiscal Information explained that the incentive scheme was not established by a resolution of the general meeting of shareholders or introduced under an authorisation granted by a resolution of the general meeting of shareholders, so it should be stated that the conditions set out in Article 24 (11b) for this scheme were not met. Thus, income obtained from the participation in this scheme cannot qualify for preferential taxation.