Market Roundup: Are stock options salaries or business transactions?

Photo: Roman Samborskyi/Shutterstock

Brazil’s second-highest court may change its view on stock options

The Superior Court of Justice (STJ), Brazil’s second-highest judicial body, is about to decide whether stock options offered as benefits to executives should be legally interpreted as part of their salaries or as a parallel commercial agreement between them and the company.

The decision will serve as a reference for all litigation on the issue.. More than 500 lawsuits in various courts have been stayed pending the STJ’s decision.

State of play. The decision will determine how and when stock options will be taxed.

Up to 27.5 percent at the time the employee buys the shares, or at 15 percent and only when the shares are sold — in which case the tax would only be levied if there is a capital gain on the transaction (i.e., if the share value increases during the period).

Mixed signals. While the labor court system has a track record of favorable decisions for taxpayers — which read stock option plans as commercial transactions — the tax appeals court, Carf, has often ruled in the opposite direction.

Mariana...

Fabiane Ziolla Menezes

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.