Sale of shares at a reduced price (free of charge)

In order to encourage employees to participate in its shareholding, a company may allow them to acquire shares at a lower price than their market value (or even free of charge).

When a company sells a certain number of its own shares, or shares in the company of which it is considered to be a subsidiary or sub-subsidiary, to its employees at a reduced price or free of charge, this results in a taxable benefit for the acquirer. The benefit is taxable in the year in which the shares were acquired by the beneficiary. The value of the taxable benefit corresponds to the difference between the real value/stock market value of the shares acquired (on the day of acquisition by the beneficiary) and the price actually paid by the beneficiary.

The tax authorities also allow a discount of 20/120th (16.67%) of the taxable benefit to be tax-exempt when the shares are listed on a stock exchange and the beneficiaries have agreed to make them unavailable for at least two years.

In addition, under certain conditions, when the employer transfers shares to employees at a discount of up to 20% of the fair market value or the normal issue price on the occasion of a capital increase, this reduction does not constitute a benefit in kind subject to ordinary social security contributions (subject to compliance with the conditions set out in Article 7:204 of the Companies and Associations Code).

There is no taxation of the capital gain (if any) generated subsequently when the shares are sold.

If the shares are granted by the foreign parent company to employees of the Belgian subsidiary, specific obligations apply (with regard to withholding tax, etc.).