New / amended German tax rules aim at avoiding “dry tax” on employee shares in young / small companies. In a nutshell (latest status as at 6 June 2024):

• New rules as of 2024.
• Qualifying “start-up” companies = max. 20 years old and meeting further conditions (number of employees, revenues / balance sheet).
• Benefits if qualifying: Income taxation not at share allocation but deferred until the earlier of (i) sale, (ii) termination of employment, or (iii) “long-stop” 15 years. Even at “long-stop”, taxation can be further deferred until sale of shares, if and provided that the employer voluntarily and irrevocably declares to be fully liable for any wage taxes due on the sale of the shares.
• International set-ups with German employees acquiring shares in a foreign (e.g., Swiss) parent company: Currently not within the scope (as per BMF circular letter dated 1 June 2024), but a revised version of the tax law is already a work in progress and might be implemented soon, with retroactive effect as at 1 January 2024. The draft revised law also includes a “group clause” under which international setups might qualify for the deferred tax treatment. Potentially interesting for young Swiss-based companies with German participants in employee share plans. Stay tuned for further updates.

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