It is important to pay attention to taxation when receiving share-based payments

Nowadays, it is no surprise at all that an employer involves his or her colleagues in a corporate share option plan. More and more employees are already receiving regular share benefits from their employer's parent company or being offered share options or share appreciation rights. But what do you need to pay close attention to in such cases?

In order to protect yourself from tax risks, the following tax issues should be considered:

- If you receive income as share options or granted shares from a Hungarian-owned company, the liabilities to be deducted after the bonus will be deducted during payroll process, so you have no further action to take.

- However, this is not the case for share options or granted shares received from a parent (foreign-based) company, in which case the individual is responsible for calculating and paying taxes and contributions to the Hungarian tax authorities.

> Did you know that these obligations should be paid during the year (quarterly)?

> Did you know that you need to pay attention to this not only when you sell shares, but when the shares (share options) are credited to your account?

> Did you know that in this case you also have to pay the social security tax during the year?

> Did you know that 87% of income in 2021 should be considered income and it also serves basis for the calculation of the corresponding public charges?

> Did you know that this income must also be included in your year-end tax return?

In addition, the situation may be even more complicated if you have also worked abroad on an assignment in the meantime, or if you were assigned to Hungary when you received the shares (share options). In such a case, it is definitely worth consulting a tax advisor as to what proportion of your income becomes taxable in Hungary and what proportion abroad.

If you have received shares (share options), it is definitely worth checking out the taxation rules and preparing your personal income tax return accordingly.

2 February, 2022

* * *

Should you have any questions regarding this newsletter, the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice