When receiving share-based payments don’t forget about taxation.

Nowadays, it is no surprise at all that an employer involves its employees in a corporate share option plan. More and more employees 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 are granted shares by a Hungarian-owned company, any tax liabilities will be deducted during the 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 (on a quarterly basis)?

-  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 89% of income in 2022 should be considered income and it also serves as the basis for the calculation of the corresponding public charges?

-   Did you know that this income should also be included in your annual personal income 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 recommended to consult a tax advisor as to what proportion of your income should become taxable in Hungary and what proportion should be abroad.

If you have received shares (share options), it is definitely recommended to check out the taxation rules and prepare your personal income tax return (or have it prepared by a tax advisor) in line with the effective laws.

23. March, 2023

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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