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employee securities benefit program

Under an employee securities benefit program (ESBP),the employer may grant employees securities (quota or shares) or rights of pecuniary value relating to these (right of purchase, subscription or other similar rights).  

 The main advantage of ESBP-s is that the security acquired qualifies as tax-exempt revenue. If the security is alienated after expiry of the compulsory retention period (of 2 years),tax is only payable on the difference between the original value of the benefit and the sales value in accordance with the rules applicable to capital gains, meaning that PIT and social contribution tax (up to the cap social contribution tax) is payable on the income. From 1 January 2015, the starting of such programs have to be announced (again) to the Hungarian Tax Authority.  

 The enterprise organizing an ESBP shall submit the information document or a copy of a similar prospectus that have been sent to the employees and executives to the tax authority until the 20th day of the month following  the start of the mandatory retention period.

 As securities issued in any member state of the EEA or OECD may be provided under an ESBP, foreign related parties of the ESBP organizer and their securities may also be involved in the program.  

 If the program organizer and its related party cease to be related parties, then after the termination of the affiliate, the tax liability that otherwise would apply to the program organizer in respect of its own employees and executives is met by the other enterprise that is subject to the program.

 The ESBP organizer must provide the data necessary for this purpose to the other enterprise and must cooperate with it in order to meet its tax obligations. Otherwise, the parties are liable for legal consequences on a joint and several basis.  

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