Keywords: tax treatment, stock option plans

Such legal disposal aimed to rule the tax treatment applicable to services provided by employee remunerated through stock option plans, whereas amounts paid through stock option plansshall be added to the Corporate Income Tax basis in the same period when the expense was effectively incurred, or wherever the payment occurs from the cash account, or pursuant to the utilization of funds derived from other asset accounts, or after the stock's ownership is effectively transferred to the beneficiary.

Although the referred disposition did not set forth that every stock option plan payment shall be treated as beneficiary's remuneration, it is the first time that a legal disposition comprised the concept of remuneration inside of a disposition regarding the stock option plans in Brazil. Prior to the Law enactment, the relation between remuneration and stock option plans were solely foreseen in Accounting Rulings ("CPC") and the argument of the inexistence of a legal disposal was largely adopted by the taxpayers in order to sustain that stock option plans shall not be considered the beneficiary remuneration, submitted to the levying by the Social Security Contribution and to progressive rate of Individual's Income Tax ("IRPF").

It is worth to mention that, before the enactment of the Law 12.973/14, the tax treatment applicable to stock option plans was frequently challenged  by Tax and Social Security Authorities. Even though last former decisions rendered by the Tax Administrative Courts ("CARF") were controversial, its possible to verify the most relevant criteria relied by the CARF judges to decide on whether a payment occurred through a stock option plan shall be considered – or not – part of the beneficiary's remuneration and submitted to Social Security Contribution and IRPF levying. In the light thereof, it is also possible to verify a trend among the CARF judges, in order to disregard the stock option plans, without any risk for the beneficiaries, as it is inherent to other typical transactions negotiated in the capital markets.

The Tax Team of Tauil & Chequer in association with Mayer Brown LLP is paying attention to such legislative modifications and offers multidisciplinary counseling, with Labor and Corporate practices, in order to provide legal advisory to create and adapt stock option plans, aiming to mitigate the risk arising from the eventual challenging of Tax, Labor and Social Security Authorities.

Originally published on January 8, 2015

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Founded in 2001, Tauil & Chequer Advogados is a full service law firm with approximately 90 lawyers and offices in Rio de Janeiro, São Paulo and Vitória. T&C represents local and international businesses on their domestic and cross-border activities and offers clients the full range of legal services including: corporate and M&A; debt and equity capital markets; banking and finance; employment and benefits; environmental; intellectual property; litigation and dispute resolution; restructuring, bankruptcy and insolvency; tax; and real estate. The firm has a particularly strong and longstanding presence in the energy, oil and gas and infrastructure industries as well as with pension and investment funds. In December 2009, T&C entered into an agreement to operate in association with Mayer Brown LLP and become "Tauil & Chequer Advogados in association with Mayer Brown LLP."

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