Recently, the Brazilian Superior Court of Justice (STJ) ruled that stock options – purchase options offered by companies to their managers and employees – should not be treated as compensation for purposes of Personal Income Tax (IRPF).
This decision is favorable for both the Brazilian companies and employees involved in such plans. As the ruling was made under the repetitive appeal system, its application will be mandatory for all courts in the country.
Until now, the Federal Revenue Service had understood that, at the time of purchasing the shares, companies should withhold IRPF, claiming that it was “indirect compensation,” regardless of whether there was an immediate sale of the shares. However, the STJ determined that stock options do not constitute indirect compensation but are instead a commercial contract.
Thus, income tax will only be levied as a capital gain when the employee decides to sell the acquired shares.
With this decision, there is increased legal certainty for the use of stock option plans, which enhances talent retention strategies in companies and contributes to business relationships in the country.
