The practice of multinational companies to stimulate their employees with free benefits, i.e. preferential conditions for the purchase of securities (shares or stocks) of the company itself or its affiliates in the form of the so-called program employees investment participation programs in order to increase their motivation and responsibility, but also to help the companies themselves in the early phase of business, in recent years increasingly appears also in relation to the employees in the Republic of Serbia. This is especially the case when it comes to foreign companies, which are most often the parent companies, i.e. shareholders of domestic employers.
On the other hand, when it comes to investment programs of domestic employees offered by domestic business entities, Serbia is still at a low level given the fact that according to research data about 9% of companies place programs for allocating shares to employees (free or under preferential conditions), which is partly the consequence of unrecognizability, i.e. low recognizability of this institute in the regulatory framework.
In any case, in addition to the already recognized need for a special legal framework regulating the employee investment programs, the tax aspect of these programs is also very important since it indisputably influences the decision of both domestic and foreign companies to place and offer employees participation in investment programs so that they achieve the best possible results and thus at the same time increasing the company’s profit. On the other hand, the favorable tax treatment of such programs will certainly have an impact on the decision of employees to participate in them and take advantage of the offered opportunities.
Based on all the changes presented in this paper regarding the tax aspect of own shares that employees receive from the employer or its affiliate, it seems that in recent years the legislator in Serbia has achieved significant progress, at least when it comes to tax treatment of employees’ participation in investment programs. All this especially if we take into account that the Personal Income Tax Law explicitly prescribes that own shares acquired by an employee from an employer or its affiliate, starting from January 1, 2019, are not considered as taxable earnings, except in exceptional cases.
Aleksandra Stojanovic, PhD student at the Faculty of Laws in the University of Nis and Managing Associate at Doklestic Repic & Gajin law firm.
Full article available only in Serbian [click here].