You can definitely grant non-qualified stock options (NSO) to local residents in Poland. It’s a good way to incentivize your team members without too much hassle!

There will be no taxation before the time of exercise of the stock options.

NSO

At the time of exercise of the stock options, the tax treatment of the gain made upon exercise of the stock options is not entirely clear, as the spread (i.e. the difference between the fair market value (FMV) of the shares at the time of exercise and the exercise price paid by the grantee) could either be taxed as “other sources of revenue” or as employment income.

• If the spread is taxed as “other sources of revenue”, then no social security would apply, and there would be no withholding obligation for the local subsidiary, so the grantee will be responsible for reporting the taxes. No social security contributions would apply.
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• If the spread is taxed as employment income, taxes must be withheld by the local subsidiary, like it would do with any salary income. Social security contributions would apply.

At the time of sale, the gains will be subject to capital gains tax at a rate of 19% without any social security charges.

NSO

You can grant non-qualified stock options (NSOs) to local residents employed via EoR in Poland.

At the time of exercise of the stock options, the tax treatment of the gain made upon exercise of the stock options is not entirely clear, as the spread (i.e. the difference between the fair market value (FMV) of the shares at the time of exercise and the exercise price paid by the grantee) could either be taxed as “other sources of revenue” or as employment income.
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• If the spread is taxed as “other sources of revenue”, then no social security would apply, and there would be no withholding obligation for the Employer of Record (EoR), so the grantee will be responsible for reporting the taxes.
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• If the spread is taxed as employment income, then the EoR will have to withhold taxes, like it would do with any salary income. Social security contributions would apply.
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At the time of sale, the gains will be subject to capital gains tax at a rate of 19% without any social security charges.

NSO

You can grant non-qualified stock options (NSOs) to local residents employed as contractors in Poland.

Since the grantee is a contractor, he/she will be responsible for all tax payments and declarations so the company won’t legally have anything to do during the entire lifecycle of the stock options.

The tax treatment of the gain made upon exercise of the stock options is not entirely clear, and could depend on the type of agreement that the company has with the contractor (and the entity the contractor works for):

• If the contractor works under a B2B contract: there is normally a taxation at the time of exercise, even though there are some arguments to state that taxation should only occur at the time of sale (but that’s something the grantee should check with his/her personal tax advisor at the time of exercise)

• If the contractor works under a civil law contract: there’s a legally foreseen tax-favored scheme potentially postponing the taxation to the time of sale of the shares which may be available!

If the contractor works under a B2B contract, or if the contractor works under a civil law contract but that the tax-favored scheme doesn’t apply, then chances are that there will be a taxation at the time of exercise of the stock options. What would happen then is that the spread (i.e. the difference between the fair market value of the shares at the time of exercise and the exercise price paid by the grantee) would likely be taxed as “other sources of revenue”.

At the time of sale, the gains will be subject to capital gains tax at a rate of 19% without any social security charges.