The Ministry of Industry and Technology has introduced an income tax exemption for stock option benefits provided to employees of designated techno-enterprise companies. According to the regulation, stock options granted at no cost or at a discount to employees are exempt from income tax, provided their market value on the grant date does not exceed the employee’s annual gross wage for the given year. The details of this exemption were published in the Official Gazette on 27.09.2024, numbered 32675.
Key Points of the Income Tax Exemption
This exemption applies to stock options and benefits considered as wages under Turkish tax law. Below are the critical details:
Stock options provided to employees, whether free or at a discount, are treated as part of the employee’s wages and are subject to tax under the wage provisions of Turkish tax law.
- For shares given at no cost, the date the shares are transferred to the employee is considered the date the benefit is received.
- For shares provided at a discount, the benefit is considered to occur on the date the employee exercises their right to purchase the shares.
- For free shares, the market value at the time of transfer is treated as wages.
- For discounted shares, the difference between the market value on the date of purchase and the amount paid by the employee is treated as wages.
The exemption applies to the portion of the benefit (i.e., the market value of the shares or the difference between market value and purchase price) that does not exceed the employee’s gross annual wage for that year. This means that any stock option benefits up to this limit are exempt from income tax.
The market value of the shares will be based on their normal trading value on the grant date, as determined in accordance with Article 266 of Law No. 213.
The gross annual wage for the purpose of this exemption includes all taxable earnings from the employer, such as monthly salary, bonuses, social aids, and other continuous payments made in return for services. However, any stock options given for free or at a discount, as well as compensation for expenses, are excluded from this calculation.
Stock options provided before the enactment of Law No. 7524 are not eligible for this exemption and are still subject to wage taxation based on their market value.
Conditions for Benefiting from the Exemption
To qualify for this income tax exemption, the following criteria must be met:
Only employees of techno-enterprise companies, as defined by the Ministry of Industry and Technology, are eligible for this exemption.
The portion of the stock option benefit that qualifies for the exemption cannot exceed the employee’s gross annual wage.
Employees must hold the shares for a specific period after acquisition to maintain the tax-exempt status. If the shares are sold before certain time thresholds, the exempted tax amount will be reclaimed from the employer, as follows:
- If sold within three years: 100% of the exempted tax will be reclaimed.
- If sold within four to six years: 75% of the exempted tax will be reclaimed.
- If sold within seven to twelve years: 25% of the exempted tax will be reclaimed.
These taxes will be collected with default interest but without penalties for tax loss.
Additional Information
You can access detailed examples and further explanations about the application of this exemption via the link provided in the Official Gazette (in Turkish).
If you have any questions or need further clarification regarding how this exemption may affect your business or employees, please contact your customer representative for additional support.
