Sorainen assisted Intelligent Communications, developer of the ‘Trafi’ mobile application, a prominent Lithuanian start-up and leading IT and e-solution provider and a Norwegian company specialising in electronic manufacturing services and operating in Sweden, Lithuania, Germany, China and USA with more than 1,350 highly skilled employees.
Sorainen tax specialists advised several clients in structuring employee share option plans in order to meet the most advantageous taxation regime. Our advice included:
- structuring employee share option plans;
- advising on implementing the option plan and incentivising companies’ local managing directors;
- obtaining a positive ruling from the competent authorities, allowing companies to enjoy the most favourable tax regime.
These matters were challenging due to their cross-border nature, also because employee stock option plans themselves are rather new and unusual in Lithuania and thus not clearly regulated by law. Moreover, one assignment was particularly complex and unique – employees granted a stock option plan were actually working in a country with which Lithuania has no bilateral agreement to coordinate social security protection between countries. This meant potential double, even triple, taxation of the income of a Lithuanian tax resident working in China for the benefit of a Lithuanian company and receiving payment in the form of a stock option in the Lithuanian company’s controlling entity established in Norway.
Extensive communication with the tax authorities and efforts by the Sorainen team resulted in a positive decision from the tax authorities. This in turn led to the most favourable tax treatment of stock options plus removal of the risk of double taxation.