Stock options, RSUs and phantom shares: Spanish income tax

Signing the plan does not generate tax. Neither does the grant letter. Personal income tax arises on the day you receive something real, and that day is different for each instrument.

Stock options: the income arises on the day you exercise the purchase option, provided the options are not transferable between living persons, which is the norm. The amount imputed to you is the difference between the market value of the share on that day and what you pay for it (the exercise price). This is the criterion that the Directorate General for Taxation repeats in its rulings.

RSUs: the income arises on the day of vesting, when the restrictions fall away and the shares become yours unconditionally. It is not the day of the grant, no matter how many years ago the letter was signed. As you normally pay nothing, you are imputed the full market value of the shares on that day.

Phantom shares: the income arises on the day you receive the money. There are no shares here, just a right to receive a cash amount calculated on the value of the share, and that is pure cash remuneration.

In all 3 cases it is employment income and goes to the general base, which is taxed at the progressive scale. Your final rate depends on the bracket and the autonomous region where you had your tax residence on 31 December. Each region approves its own regional scale, and the Basque Country and Navarre apply their own regional regulations, not the state ones. If the share is listed in dollars or pounds, the amount is converted to euros at the exchange rate on the day the income arises, not the day you sell.

The personal income tax law exempts the delivery of shares or participations of the company itself to active employees up to €12,000 per year per employee. It is not automatic. The plan must meet 3 conditions. The offer must be made under the same conditions for all employees of the company (or the group, within its general remuneration policy). You, adding your spouse and relatives up to the 2nd degree, must not hold more than 5% of the company. And you must keep the shares for at least 3 years.

In startups, the exempt amount rises to €50,000 per year and the uncomfortable requirement drops. It is no longer necessary to offer it to the entire workforce under the same conditions, it is enough that the delivery is made within the general remuneration policy of the company. If the shares come from the exercise of a purchase option, the requirements are checked at the time the option was granted, not at the time of exercise.

Being a startup is not just saying so. The company must meet the full package of requirements (be newly created, with a maximum of 5 years since its incorporation or 7 in certain sectors, not have distributed dividends, have a headquarters or permanent establishment in Spain and at least 60% of the workforce with an employment contract in Spain, among others). Managora checks if your plan fits before applying anything.

Phantom shares are left out of both exemptions. As it is money and not shares, neither the €12,000 nor the €50,000 will help you. This is the number 1 mistake of those who receive a phantom share and expect the same treatment as their colleague with RSUs.

Be careful with the 3 years. If you sell the shares earlier, you lose the exemption and that year must be regularised, with late payment interest. The regularisation is filed in the period from the day you breach the requirement until the end of the declaration period for the year in which the breach occurs.

Yes, if the income has been generated over more than 2 years, counted from date to date, and is imputed to you in a single financial year. In that case, 30% of the full income is reduced. The reduction is applied to a maximum of €300,000 of income. Anything exceeding that figure is not reduced.

The generation period is counted from the grant until the exercise of the option or until the vesting of the RSUs. A plan with vesting at 3 or 4 years qualifies without a problem. A vesting at 18 months does not.

Now the filter that almost no one sees coming. You cannot apply the reduction if in the previous 5 years you already applied it to other income generated over more than 2 years. This hits hard anyone who vests RSUs every year, because in practice you only use the reduction once every 5 years. Choosing which year to apply it is not a detail, it is money.

There is 1 exception still alive. Stock options granted before 1 January 2015, exercised after more than 2 years from the grant and which were not granted annually, can apply the 30% even if you had already applied it in the previous 5 years.

The company does not always apply this reduction when calculating the withholding tax, and the tax return draft arrives with whatever the company has declared. Reviewing it is part of the job. Managora checks this before filing your form 100.

Yes. This is the most useful piece of Ley 28/2022 (the Spanish Startups Act), and it answers the classic problem. You are given shares that you cannot sell and Hacienda (the Spanish tax agency) asks you for money for them.

Whatever exceeds the exempt €50,000 is not declared in the year of delivery. It is imputed in the year in which 1 of these 3 things happens: the company goes public or joins a multilateral trading facility, Spanish or foreign; you sell the shares or they leave your estate by any means; or 10 years pass since the delivery without either of the previous 2 having happened. In that 10th year you must declare, even if you still cannot sell.

The valuation is also special. The value of the shares subscribed by an independent third party in the last capital increase carried out in the year prior to the delivery is taken. If there was no capital increase, it reverts to the market value.

The deferral does not erase the tax, it postpones it. It is advisable to keep the documentation of the capital increase and the plan from day 1, because when the year of imputation arrives, the value will have to be justified. Managora prepares that calculation and adds it to your tax return.

You pay again, but only for what the share has gone up since it was yours. That 2nd taxation is a capital gain or loss and goes to the savings base, which has its own scale and is usually cheaper than the general one.

The acquisition value is the value taken when receiving the shares, that is, the market value on the day of exercise or vesting, plus what you paid for them. And this also applies to shares whose delivery was exempt. Even if you were not taxed when you received them, their acquisition value is the market value of that day, not 0.

If you have been receiving shares in several batches and sell a part, the ones you acquired 1st are considered sold. That is why the order of the vestings matters to calculate the gain.

If you sell in a foreign currency, both the sale price and the acquisition value are expressed in euros at the exchange rate of their respective dates. And if you sell at a loss, that loss is offset 1st against other savings capital gains of the same year. If there is still a negative balance, it is offset in that same year against the positive balance of movable capital returns (dividends, interest and similar) with a limit of 25% of that positive balance, and whatever is still left over is carried forward to the following 4 years.

The savings scale shown below is that of the common territory. In the Basque Country and Navarre their own regional scale applies, which is not a bonus but different regulations, and the figures do not match.

The 1st question is not how much, but who. If you are a tax resident in Spain in the year the income arises, you are taxed here on your worldwide income. If you are not, Spain can only tax the part corresponding to the work performed in Spanish territory, and that part is declared through the Impuesto sobre la Renta de no Residentes (Non-Resident Income Tax), not through the standard income tax return.

When the generation period is spread over several countries, the income is apportioned by the days worked in each one. A 4-year vesting, 2 of them in Dublin and 2 in Madrid, is not taxed in full in Spain. The Directorate General for Taxation admits proportional distribution, and to support it you need the days and the contracts, not an estimate.

If you were a resident in Spain and moved to work abroad, the exemption for work actually carried out abroad may come into play, with a limit of €60,100 per year and its own requirements, including that the work is provided for a non-resident company or a permanent establishment abroad.

Who taxes each tranche is decided by the double taxation agreement with the other country, and the distribution is not the same in all of them. Furthermore, many bilateral agreements have been modified by the Multilateral Convention, so the article to read is the current and consolidated text, not the original one. Managora reviews the agreement applicable to your case before calculating anything.

If on 31 December the total of your securities located or deposited abroad exceeds €50,000, yes. Form 720 is filed between 1 January and 31 March of the following year, and you pay nothing to file it. It is an informative declaration, not a tax.

There is a nuance that saves many people the paperwork. If the shares of the foreign company are deposited in an entity established in Spain that already reports them to the Tax Agency, there is no obligation to declare them on form 720. The determining factor is where they are deposited, not where the issuing company is located.

Once filed, you only have to repeat it if that block of securities increases by more than €20,000 compared to the last declaration or if you cease to be the owner of something you did declare.

The fines for not filing it or filing it incorrectly are now the general ones of the Ley General Tributaria (General Tax Law). The special regime, with its disproportionate fines, was deactivated following the ruling of the Court of Justice of the European Union of 27 January 2022 and the reform that followed it. Even so, filing it late has a cost, and filing it on time has none.