• Service: Tax
  • Type: Newsletters
  • Date: 12/20/2012


Claude Poncelet


Tel. +352 22 51 51 - 5567


Pierre Crasquin


Tel. +352 22 51 51 - 5470

Luxembourg Tax News - Issue 2012-12 

December 2012

New Tax Circular on Stock-Options


On 20 December 2012, the Tax Authorities issued a new circular (LIR n° 104/2) on the taxation of stock option plans. This circular will be applicable as from 1 January 2013 and will replace the old circular from 11 January 2002. 


Taxation of the benefit in kind


Based on the articles 104 and 108 LIR, a promise made by the employer to the employee that he would receive a benefit under certain conditions, does not constitute a taxable employment income. The promise to obtain an asset becomes taxable for the employee only when the asset is put at disposal of the employee.

Based on prevailing case law and doctrine, a distinction is to be made between transferable (quoted or not) and non-transferable (including phantom) stock options. 

Transferable stock options


  • The employee is regarded as receiving a benefit in kind at the date of grant of the stock option,
  • The taxable benefit is equal to the difference between the quoted or estimated sales value of the stock option at the date of grant and the price paid by the employee for this option,
  • The estimated sales value may be calculated by the Black-Scholes method or another comparable financial method or in absence of application of such a method be fixed at 17.5% of the value of the underlying stock at the moment of the granting of the option,
  • The implementation of a stock option plan has to meet a reasonable condition test. 


Non transferable stock options


  • The employee is regarded as receiving a benefit in kind only at the date of exercise of the stock option, 
  • The taxable benefit is equal to the difference between the quoted or estimated sales value of the stock and the exercise price paid,
  • In presence of a clause of inalienability of the stock bought in the framework of such stock-option plans, a tax reduction equal to 5% per year of the stock value is granted (with a maximum of 20%).

Taxation of capital gains on the disposal of options or shares


The benefit (previously taxed as employment income) is added to the acquisition cost when computing the taxable gain on the ultimate disposal of the option or share. Basically, capital gains are only taxable under: 


  • Art. 99bis (speculative gain-detention period of less than 6 months)
  • Art. 100 (gains on substantial participations and detention period exceeding 6 months).


The tax circular foresees that a disposal of shares within a period of 7 days following the date of exercise of the option is taxed as if the option was disposed of. 


Tax qualification of the benefit in case of options granted to shareholders


The benefit in kind may be taxable as employment income, if in essence employees that are not shareholders have similar benefits, otherwise this benefit should be regarded as a dividend if it is granted to a shareholder in respect of his shareholder status. 


For further information, please do not hesitate to contact us.





The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


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