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Stock options are "salary" in Germany, and they get taxed at ~45%. --- In Germany, everything that a company gives an employee is salary. Company car? You hav

Stock options are "salary" in Germany, and they get taxed at ~45%. --- In Germany, everything that a company gives an employee is salary. Company car? You have to pay 1% of the listing price of the car _per month_ in taxes (that's 1000$ per month in taxes for the employee if their company gives them a 100k$ car..). Stock? The day you receive the stock, price is measured, and 45% you pay in taxes. Stock options? The day you receive the option, the price of the stock were you to exercise it right away is measured, and that's taxed with 45% (which kind of forces you to exercise at least some of the options to pay the taxes), etc. Otherwise companies could pay you by paying your whole life (car, house, etc.) to avoid taxes. BTW, this is also why startup culture in Germany sucks. Startups can't really pay people in stock options, cause they are super highly taxed, and they are hard to value. Worst case you end up paying a lot of taxes for something that ends up being valued == 0 the moment you can't sell it (startup dies).

foepys 5y ago
Correction, you have to declare (or whatever you call "anrechnen") 1% of the company car that you are allowed use in your free time, which often works out cheaper than a privately owned car. In the end you pay at max 45% of the 1% for it, although 45% only applies to every € over 250,000€/year. For every € between about 60,000€/year and 250,000€ you are taxed 42%.
- volta83 5y ago
  That’s correct, but if you want to actually not pay the 1%, you need to justify how much time you use the car privately or for work, and the way you do that is per km: by tracking all trips that you make in kms and tracking how many of those are private or work (car book). You can also pay 0% for the company car, but then you need to use it only for work, keep it parked at your employers, can’t use it for anything private, etc. What most people understand by getting a company car is “a car that you can use for whatever whenever and however you want” (it’s your car). If you do that, and only use it privately, then 1% is what you pay.
notanormalnerd 5y ago
That is just wrong. You have to tax the 1% of the list price, 0,5% for hybrid and electric and 0,1% for ebikes and bikes. Also you don't have to pay the 45%. That is the highest tax bracket in the progessive system. So you have to put the 1% (1000€ for a really expensive car you probably only get as a CEO) and assume that as payout. And then you tax that. For a good car you normally are in the range of 300-500€ a month for normal employees and then you can even pay the gas which is a bigger benefit for most people. Also you don't have to pay taxes on unrealised gains, that is just bullshit. You have to pay taxes only when you realise those gains, e.g. when you pull the option and sell or keep the shares. As long as it is just options you don't have to pay anything. But with your level of tax knowledge I would also be scared of the bad bad Finanzamt. OwO
- llampx 5y ago
  Sorry, the parent comment is completely correct. Yes, exceptions exist, such as someone making 32k€ and given a hybrid/EV or e-bike as company car will not pay as much as an engineer making 80k€ and a diesel Passat. Otherwise, the comment is correct. Taxes are kind of insane in Germany. Stock options (or crypto) counted as regular income _are_ taxed at your marginal tax rate, which, for anyone making above 55k€ or so is either 42% or 45%. Can't be bothered to look it up.
- volta83 5y ago
  I said: > You have to pay 1% of the listing price of the car _per month_ in taxes (that's 1000$ per month in taxes for the employee if their company gives them a 100k$ car..). You said: > That is just wrong. You have to tax the 1% of the list price, [...] so you have to put the 1% (1000€ for a really expensive car Either we both are wrong, or we both are right, unless you are somehow using language in a super subtle way. EDIT: you are right and I'm wrong, sorry, you get 1% of the list price as if it were income, so you need to tax that, i.e., what you said is correct, 1% of the list price is taxed per month. With a 45% tax rate, for a 100k$ car, you need to tax 1k$ per month, and at 45% means you pay 450$ per month in taxes. > Also you don't have to pay taxes on unrealised gains, that is just bullshit. I work in Germany. I get stock every month. I don't sell the stock (gains are unrealized). I have to pay taxes for all the stock I get. I do pay the taxes for all my stock (my employer declares it as part of my income). Also, I've interviewed and gotten offer for some SV startups and they would have allowed me to work from Germany. Talked with 3 financial and tax advisors here, and they all said the same: stock options are part of the income, and just like the stock, they get taxed with your income tax. > Also you don't have to pay the 45%. Right, you only pay that if you make more than 50k brutto per year or so. For example, in an entry level job right after the university, e.g., as a PhD student working on a publicly funded project, you have to pay 45% taxes. > But with your level of tax knowledge I would also be scared of the bad bad Finanzamt. OwO lol after reading my reply, read also the other replies to your comment Tax evasion is a crime that you really don't want to commit in Germany. Arguing that "you didn't know" isn't really a defense.
yladiz 5y ago
This isn't really the reason that they don't give stock options like they do in USA for startups, though. I think it's a little unfair to say that you're taxed at ~45%; as far as I'm aware exercised options are taxed as income at the value they have when you exercise, not at a flat rate like capital gains. Beyond that, companies probably don't really care about giving employees a big tax bill, and you would only get taxed 25% on the capital gains when you sell the stock you've gained from exercising (after some amount of time, I think 1 year). It's fine for early stage startups that have a low valuation, although for later stage startups and established companies it would lead to a larger initial tax bill. A bigger reason from the startup perspective as to why you don't give options to employees is because you become a voting member of the company and have to sign off on major changes (via a notary). Many startups skirt this issue by giving you "virtual options" which turn into money directly after some exit event, as if you got a bonus, and some startups let you pseudo-exercise by allowing you to put the exercised options into a pool controlled by a member of the board or company. It's a lot more restricted compared to USA (it would be nice to be able to exercise really early when the company is tiny so your tax bill is low, or do something like an 83B election) but it's not that onerous and there are ways to get around some of the worst of it.
- volta83 5y ago
  > nd you would only get taxed 25% on the capital gains when you sell the stock you've gained from exercising FWIW is true for all capital gains after taxes (doesn't matter how you got the stock). If you get stock as income, you pay first 45% tax on the stock, and then when you sell 25% tax on gains.

foepys 5y ago

Correction, you have to declare (or whatever you call "anrechnen") 1% of the company car that you are allowed use in your free time, which often works out cheaper than a privately owned car. In the end you pay at max 45% of the 1% for it, although 45% only applies to every € over 250,000€/year. For every € between about 60,000€/year and 250,000€ you are taxed 42%.

volta83 5y ago
That’s correct, but if you want to actually not pay the 1%, you need to justify how much time you use the car privately or for work, and the way you do that is per km: by tracking all trips that you make in kms and tracking how many of those are private or work (car book). You can also pay 0% for the company car, but then you need to use it only for work, keep it parked at your employers, can’t use it for anything private, etc. What most people understand by getting a company car is “a car that you can use for whatever whenever and however you want” (it’s your car). If you do that, and only use it privately, then 1% is what you pay.

notanormalnerd 5y ago

That is just wrong. You have to tax the 1% of the list price, 0,5% for hybrid and electric and 0,1% for ebikes and bikes. Also you don't have to pay the 45%. That is the highest tax bracket in the progessive system. So you have to put the 1% (1000€ for a really expensive car you probably only get as a CEO) and assume that as payout. And then you tax that. For a good car you normally are in the range of 300-500€ a month for normal employees and then you can even pay the gas which is a bigger benefit for most people. Also you don't have to pay taxes on unrealised gains, that is just bullshit. You have to pay taxes only when you realise those gains, e.g. when you pull the option and sell or keep the shares. As long as it is just options you don't have to pay anything. But with your level of tax knowledge I would also be scared of the bad bad Finanzamt. OwO

llampx 5y ago
Sorry, the parent comment is completely correct. Yes, exceptions exist, such as someone making 32k€ and given a hybrid/EV or e-bike as company car will not pay as much as an engineer making 80k€ and a diesel Passat. Otherwise, the comment is correct. Taxes are kind of insane in Germany. Stock options (or crypto) counted as regular income _are_ taxed at your marginal tax rate, which, for anyone making above 55k€ or so is either 42% or 45%. Can't be bothered to look it up.
volta83 5y ago
I said: > You have to pay 1% of the listing price of the car _per month_ in taxes (that's 1000$ per month in taxes for the employee if their company gives them a 100k$ car..). You said: > That is just wrong. You have to tax the 1% of the list price, [...] so you have to put the 1% (1000€ for a really expensive car Either we both are wrong, or we both are right, unless you are somehow using language in a super subtle way. EDIT: you are right and I'm wrong, sorry, you get 1% of the list price as if it were income, so you need to tax that, i.e., what you said is correct, 1% of the list price is taxed per month. With a 45% tax rate, for a 100k$ car, you need to tax 1k$ per month, and at 45% means you pay 450$ per month in taxes. > Also you don't have to pay taxes on unrealised gains, that is just bullshit. I work in Germany. I get stock every month. I don't sell the stock (gains are unrealized). I have to pay taxes for all the stock I get. I do pay the taxes for all my stock (my employer declares it as part of my income). Also, I've interviewed and gotten offer for some SV startups and they would have allowed me to work from Germany. Talked with 3 financial and tax advisors here, and they all said the same: stock options are part of the income, and just like the stock, they get taxed with your income tax. > Also you don't have to pay the 45%. Right, you only pay that if you make more than 50k brutto per year or so. For example, in an entry level job right after the university, e.g., as a PhD student working on a publicly funded project, you have to pay 45% taxes. > But with your level of tax knowledge I would also be scared of the bad bad Finanzamt. OwO lol after reading my reply, read also the other replies to your comment Tax evasion is a crime that you really don't want to commit in Germany. Arguing that "you didn't know" isn't really a defense.

yladiz 5y ago

This isn't really the reason that they don't give stock options like they do in USA for startups, though. I think it's a little unfair to say that you're taxed at ~45%; as far as I'm aware exercised options are taxed as income at the value they have when you exercise, not at a flat rate like capital gains. Beyond that, companies probably don't really care about giving employees a big tax bill, and you would only get taxed 25% on the capital gains when you sell the stock you've gained from exercising (after some amount of time, I think 1 year). It's fine for early stage startups that have a low valuation, although for later stage startups and established companies it would lead to a larger initial tax bill. A bigger reason from the startup perspective as to why you don't give options to employees is because you become a voting member of the company and have to sign off on major changes (via a notary). Many startups skirt this issue by giving you "virtual options" which turn into money directly after some exit event, as if you got a bonus, and some startups let you pseudo-exercise by allowing you to put the exercised options into a pool controlled by a member of the board or company. It's a lot more restricted compared to USA (it would be nice to be able to exercise really early when the company is tiny so your tax bill is low, or do something like an 83B election) but it's not that onerous and there are ways to get around some of the worst of it.

volta83 5y ago
> nd you would only get taxed 25% on the capital gains when you sell the stock you've gained from exercising FWIW is true for all capital gains after taxes (doesn't matter how you got the stock). If you get stock as income, you pay first 45% tax on the stock, and then when you sell 25% tax on gains.