A recently announced Future Financing Act bill provides significant improvements for employee equity ownership in startups. Bitkom president Achim Berg explains: “The changes that have now been announced are really good news for our startup scene and for Germany as a technology location. With a financially more attractive employee participation, German start-ups can finally move on equal footing in the international competition for the best specialists.”
It is now crucial that no more time is wasted and that government factions swiftly initiate the change of the law. “Then soon many other startup employees will be able to benefit from the company's economic success,” says Berg.
Instead of after twelve years, unsold shares will only have to be taxed after 20 years, explains the president of Bitkom. Above all, there is no taxation if you change employer, at least if the startup voluntarily assumes responsibility for guaranteeing the tax claim. This significantly alleviates the so-called dry income problem, “which means that employees have to pay taxes on the shares transferred, even if they have not yet sold them themselves – or have been able to”.
According to Berg, it is also good that the payroll tax which is already due at the time of the share transfer can be deferred in several companies. Fast-growing and internationally expanding startups as well as research-intensive startups that need more time have particularly benefited.
“Until now this was only possible in companies with up to 250 employees and an annual turnover of 50 million euros, but the limit will be doubled to 500 employees and 100 million euros. Furthermore, companies can benefit up to 20 years after their foundation, not just twelve years as was the case previously”, Berg lists other advantages.
Furthermore, a transitional period of seven years applies if a startup exceeds the new thresholds. This way, German startups would continue to be supported on their way to becoming European champions.
The coalition also wants to make employee equity participation in other industries more attractive, for example by introducing a flat rate of 25% for employee equity participation in the future and increasing the tax relief from 1,440 to 5,000 euros. “However, other countries are much more ambitious here, in Spain the exempt amount was recently set at 50,000 euros,” notes Berg.