The regulation was included in a package of changes to the secondary regulatory framework relating to tax and customs. In particular, it contains provisions on the determination of income tax liabilities in the case of participation by employers and employees. These changes will be considered at a government meeting in the near future.
According to the draft, stock option plan is aimed at stimulating productivity and loyalty of employees through granting them options to purchase employer’s shares on favorable terms. De facto, it is a long-term financial incentive provided to employees and/or administrators of companies to motivate them to participate in increasing their value.
The draft prescribes that the procedure for implementing the program will be set out in the regulations of the legal entity itself, approved by the general meeting of the company’s participants/shareholders. And the rights, obligations and conditions of participation of beneficiaries will be established on the basis of a special agreement concluded with them.
The document also stipulates that the participation shares issued by the company under the Stock Option Plan may not exceed 25% of its authorized capital in relation to all its participants. And the right to participate in it is granted to individuals who meet several mandatory criteria. They must be natural persons – residents of Moldova in accordance with Art. 5 p. 5) of the Tax Code, who have the status of employee or administrator of the legal entity, have at least 3 years of work experience in the company on the date of granting participation shares, fulfill the requirements and indicators established in the labor contract or other internal rules, and are not in a situation of conflict of interest with the legal entity.
The program provides for a minimum period of 3 years between the time of granting the right to acquire/receive securities (participation shares) and the time of exercising this right. The granting of the right to acquire shares may be made at a preferential price or on a non-refundable basis. It is envisaged that the company will have the right to buy back shares at market value.
At the same time, the regulations will not allow deduction of expenses incurred by a legal entity for the purpose of redemption/cancellation of options from the program. And the rights received by the beneficiaries under the program in the form of equity securities, from the moment of granting, will be considered sources of income not subject to income tax and state social insurance contributions. It is also important that the rights received by the beneficiaries under the Program cannot be transferred to other persons.
Beneficiaries of participation shares issued by an enterprise under the Program will be able to exercise an option to purchase them at a preferential price or free of charge upon maturity. After exercising the option, the beneficiaries will be able to sell the participation shares.
It is proposed that the capital gain or loss on transactions involving participating interests acquired at a preferential price or free of charge under the program will be determined as the difference between the sale price (amount received/income received) of the interests and their cost base, which will be the preferential purchase price established at the grant date. For participating shares (participatory interests) acquired on a non-refundable basis, the cost base will be considered equal to zero.
Specialists welcome the development of the regulation, but so far have refrained from commenting, preferring to study its impact as it is applied.
