spain tax: Supreme Court of Spain Explains Personal Income Tax (PIT) Regulations about Stock Option Awards

Personal Income Tax Act of Spain allows a 40% reduction on stock option awards under certain conditions. In order to use this tax benefit, the income must be created in a time spanning at least 2 years, and the income must not be periodical in nature.

When performed on to stock option awards, the option award must have an exercise period of at least 2 years, and no annual stock option awards must be allowed the employer.

Stock options generally span over more than 2 years so there's no problem with that condition, but because employers likely grant stock option awards annually or quarterly, this results in breaking the second condition of the law which allows the 40% tax benefit.

The Supreme Court of Spain decided this April that the second condition of the law is against the law, and it is not relevant for deciding if the 40% reduction in tax should apply or not. Employees may now have the 40% tax benefit, without looking at if the income is annual or not unless the income is periodical.

Read more about Spanish Tax.