Stock grants based on the shareholder's work effort

Beneficiaries of share awards, also known as stock grants, are responsible to account for transfer tax and pay it according to the value of the received shares. The rate of transfer tax is 1.6%. Transfer tax is 2% on a share award consisting of stock in a real estate holding company. Check the percentage rates of transfer tax.

The company paying out the share award can file and pay transfer tax on the beneficiary’s behalf. Follow the instructions below.

Instructions for payors

Share awards paid to a resident taxpayer

The company that pays the share award must fill out and sign a set of paper transfer tax returns on every beneficiary’s behalf. You can only file transfer tax for one beneficiary on one form. 

Payments of transfer tax must be made separately for every beneficiary, using their personal reference numbers for transfer tax. Beneficiaries are able to look up the reference numbers in MyTax. Alternatively, the company can call the Tax Administration’s telephone service.

The transfer tax on securities transactions must be reported to the Tax Administration and paid in 2 months from the date when the binding agreement over the transaction is made.

The employer-provided payment of transfer tax on the employee-beneficiary’s behalf is treated as wages for purposes of taxation. It gives rise to the payment of a health insurance contribution. The employer must submit a report to the Incomes Register, classifying the paid transfer tax as “other fringe benefits”. 

Payors must present an authorisation received from the beneficiary, which gives the payor permission to account for transfer tax return on the beneficiary’s behalf. This may be a free-text letter of authorisation (power of attorney) enclosed with the transfer tax return.

Share awards paid to persons with limited tax liability, non-residents

If the beneficiary is a non-resident, the payor company is under the obligation to collect and pay the transfer tax on to the Tax Administration. This means that the company must file and pay transfer tax. Companies have to fill out the transfer tax return in MyTax and pay the tax using the company’s reference number for transfer taxes. Every beneficiary of a share award must be accounted for in a separate transfer tax return. 

Frequently asked question

If the tax return is late or if there are errors and omissions, the Tax Administration will contact the beneficiary. Although the company that pays of the award may be the party that files and pays the transfer tax, the beneficiary of the award has the legal obligation to file and pay it. Accordingly, the tax and any consequences of late payment will be collected from the beneficiary.

The company that handles the payment, in this case, the securities trader, must file the return and pay the tax. Security trading companies are entitled to settle the total sum of all their submitted transfer tax returns in a lump sum.

If a share award is paid to a person with limited tax liability, i.e. a non-resident taxpayer, the company paying out the award must file a transfer tax return in the company’s name and pay the transfer tax using the company’s reference number for transfer tax.

When the company fills in the transfer tax return in MyTax, it has to provide sufficient information to identify the nonresident beneficiary. Accordingly, their foreign or Finnish personal identity code, date of birth and/or the person’s name must be provided. The beneficiary’s name is required. Companies are entitled to settle the total sum of all their submitted transfer tax returns in a lump sum.