Employers can give employees options on the stock of their company or warrant plans as benefits in kind, according to the document, which was published on 29 November. So far, these options and warrants have been taxed at low levels and were open to misuse, which has raised criticisms.

“Since these types of option are, in many cases, not freely transferable, most of the time, they will not fall within the scope of the lump-sum valuation rules described in the circular,” Atoz, a tax advisory firm in Luxembourg, stated in a note to clients sent on 1 December.

Atoz stated that:

“The circular amends the rules applicable to the computation of the value of warrants (or any other freely transferable options). In the absence of a more precise valuation and subject to certain conditions, a lump sum valuation is allowed as follows:

•as from 1 January 2018, the value of the warrants will be deemed to be equal to 30% of the value of the underlying assets;

•the valuation at 17.5% (as applicable since 2013) will remain applicable until 31 December 2017.”

The report explained:

“The Circular specifies that the valuation at 17.5 or 30% cannot be applied when warrants are granted in lieu of a legal or contractual severance payment following the termination of an employment contract.

The Circular now clarifies that the lump sum valuation at 17.5 or 30% is only possible if the 3 following cumulative conditions are met:

•The value of the warrant should not exceed 50% of the gross annual remuneration (warrant included). This percentage has to be computed individually, i.e. for each of the participants to the warrant plan;

•The warrant plan can only apply to senior executives within the meaning of article L 211 -27 5 of the Labour Law (i.e. “cadres supérieurs”);

•The characteristics of the warrant plan have to be such that the price of the warrant cannot exceed 60% of the value of the underlying assets/index.

Should one of these 3 conditions not be met, the Circular states that the value of the benefit in kind subject to tax will be equal to the full allotment price of the warrant, meaning that the real value of the warrant will be taxed.”