New reporting rules for share-based remune­ration

12.6.2018

As of 1 January 2019, a new Danish Tax Reporting Act will enter into force. The introduction of the new Act will result in an expansion of the previous rules on tax reporting obligations in respect of grants of shares, options, and warrants through share-based salary and incentive schemes.

The Bill

The Bill was proposed as part of the Danish Government's "Due Process Package III – Clear and Accurate Legislation" with the goal of improving due process by making the rules more manageable and easier to read for both citizens, companies and public authorities.

As further set out below the Bill includes two expansions of employers' obligation to report/register share-based remuneration to/with the Danish Tax Authorities. The below obligations previously applied only to share-based salary and incentive schemes compliant with the Danish 7P tax rule, under which taxation of an employee is postponed until the date of sale of the shares. The obligation will now apply to a broad range of share-based salary and incentive schemes granted to Danish employees. 

Registration system for agreements on the grant of shares, options, and/or warrants to employees 

The first expansion concerns the current registration system for agreements on the grant of shares, options, and/or warrants regulated under the favourable tax rule in section 7P of the Danish Tax Assessment Act. Under the current rules, a Danish employer has to register with the Danish Tax Authorities any agreement entered into on the grant of shares, options, and/or warrants under the 7P tax rule. With the new rules, the duty to register agreements entered into on the grant of options and/or warrants will also include agreements on the grant of options and/or warrants covered by the rule in section 28 of the Danish Tax Assessment Act, according to which taxation of an employee is deferred until the date of exercise of the options or warrants. 

Reporting on grant of shares or exercise of options/warrants

The second expansion concerns the reporting of the identity of the shares granted to the employees either directly or through the exercise of options or warrants. Under the new Act, companies that grant remuneration in the form of shares, or companies in which shares are acquired through the exercise of options or warrants, are obligated to report the employees' acquisition of the shares to the Danish Tax Authorities. The reporting must include the identity of the shares, i.e. the ISIN number (if applicable) and the identity of the issuing company, the number of shares, the date of acquisition and the purchase price. If the grant of shares is made by a foreign company, or if the options/warrants can be exercised for shares in a foreign company while the recipient is employed with a Danish company, the duty to report rests with the Danish company in which the recipient is employed. 

The Danish Minister for Taxation may specify further rules on the duties to report. 

Entry into force 

The new Danish Tax Reporting Act will enter into force on 1 January 2019 and will not apply to the reporting for the calendar year of 2018 or prior years, which is governed by the Danish Tax Control Act currently in force.