Finnish Government Introduces Changes to the Tax Rules on Equity Incentive Schemes for Unlisted Companies

On 22 April 2026, the Finnish Government published the General Government Fiscal Plan setting out proposed amendments to the Finnish tax rules on employee stock options and providing more flexibility in the employee share issue rules.

The Government proposes revising the employee stock option rules so that the taxation is deferred until the disposal of the shares subscribed with the options, instead of upfront taxation upon exercise of the options. Based on the information provided, the employee stock options will remain subject to earned income taxation at progressive rates reaching above 50%.

As the reform was introduced under the title "Reforming taxation of employee stock options in growth companies", the new rules will only be applicable to unlisted companies, whereas the stock options in publicly listed companies will remain subject to the current regime.

With respect to the employee share issue regime that allows issuance of shares to personnel at the adjusted net asset value of the shares without triggering taxable income, the Government will revise the rules so that going forward, employees working in subsidiary companies may be issued shares in the group's parent company. Thus far, only the actual employer entity’s shares could be issued under the preferential regime.  

The Government published their mid-term plan in April 2025, according to which the Government would start looking into alternatives for creating "the best equity incentives in Europe". No reports have been published with respect to this investigation thus far, but the changes now proposed might reflect the outcome, given that the current Government term will end in April 2027. However, it is still expected that the report on further developments will be published during summer 2026.

A reform of the employee stock option rules has long been awaited. The current employee stock option rules, under which progressive earned income taxation is triggered upon exercise or disposal of the options, have been considered an ineffective and expensive way of incentivising key employees. The deferral of taxation upon disposal of the shares will tackle the difficulties related to the dry tax and payroll implications that the current regime involves.

Although a more comprehensive reform, such as enacting rules according to which the benefit arising from stock options could be subject to capital gains taxation, may have better reflected the ambitious objective stated in 2025, the revisions now proposed are a welcome change.

Further, the changes proposed to the employee share issue regime are much expected, as the rule according to which only the employer entity's shares are within the scope of the rules has limited the feasibility of the regime in practice. Hopefully, there would be room for some additional technical maintenance of the rules, as certain other prerequisites of the current provision have also proved ambiguous and have de facto unnecessarily limited the feasibility of the regime. It remains to be seen whether these issues will be addressed in the legislative drafting process.

More information on the newly introduced reform is expected to follow later this year when the Government’s proposals are issued. Borenius will continue monitoring the reform.

For further information on how these changes might affect your business, please reach out to us.