Global Share Option Plans

Portugal

Securities laws and regulation

Red flags	Response
What are the key securities laws and regulatory obligations or restrictions in relation to granting options, exercising options, selling resulting shares or other relevant events? For example, would a prospectus or any filings be required?	Securities law filings: There are no general securities law filing requirements in relation to the grant or exercise of options, or the selling of resulting shares, provided these are not offered to the public. Prospectus: The grant of non-transferable options should not fall within the EU Prospectus Regulation.

Exchange control

Red flags	Response
Are there any exchange control restrictions, notification/filing, or approval requirements related to the exercise of options or sale of shares?	In Portugal, there are several exchange control regulations, notification/filing, and approval requirements to consider, especially in relation to the exercise of options or the sale of shares. Acquiring a significant stake in specific sectors might require prior approval from the respective regulatory authority.

Company law

Red flags	Response
Are there any red flag company law and corporate governance considerations, for example, shareholder approval requirements or financial assistance restrictions?	There are no specific Portuguese corporate law requirements applicable to share options. The company's bylaws and/or any agreement with shareholders/investors may require for certain consents or approvals to be given, prior to the granting and/or exercising of share options.

Employment law

Red flags	Response
Are there any material employment law issues to be aware of, for example the requirement to consult employees?	There are generally no employment law issues relating to the grant of options to Portuguese employees. There is no general requirement to consult employees on the terms of employee share schemes (subject to the terms of any works council agreement or similar). Companies may grant and administer options for Portuguese employees on a discretionary basis, provided such discretion is not applied in a discriminatory manner.

Red flags

Response

Are there any material employment law issues to be aware of, for example the requirement to consult employees?

There are generally no employment law issues relating to the grant of options to Portuguese employees. There is no general requirement to consult employees on the terms of employee share schemes (subject to the terms of any works council agreement or similar).

Companies may grant and administer options for Portuguese employees on a discretionary basis, provided such discretion is not applied in a discriminatory manner.

Plan communications

Red flags	Response
Are there any requirements for the communications, for example, a translation into any language(s), and if so, which?	There are no legal requirements to provide a document or information in a language other than English, but having a Portuguese version is recommended.

Data protection

Red flags	Response
What are the key data protection requirements, if any?	Employees should be informed of how their personal information is collected, processed and disclosed, in connection with an employee share plan. A privacy notice should be provided or a plan should include details on how to access a company's privacy notice and other data protection procedures and policies. There are wider data protection obligations, including reporting, data security, record keeping and Record of Processing Activities (RoPA) updates.

Red flags

Response

What are the key data protection requirements, if any?

Employees should be informed of how their personal information is collected, processed and disclosed, in connection with an employee share plan. A privacy notice should be provided or a plan should include details on how to access a company's privacy notice and other data protection procedures and policies.

There are wider data protection obligations, including reporting, data security, record keeping and Record of Processing Activities (RoPA) updates.

Governing law

Red flags	Response
Will governing law and jurisdiction clauses be effective?	In general, the governing law and jurisdiction clauses are likely to be effective, but the Portuguese courts may also claim jurisdiction over questions which relate to a Portuguese employment whenever work is performed in Portugal.

Tax treatment

Red flags	Response
What is the tax and social security treatment (including other employee and employer levies)? Are there any red flag issues, for example tax on grant, filings or notifications?	Tax on grant: The grant of options to Portuguese employees does not normally give rise to any Portuguese tax liabilities, nor is it subject to social security contributions. Tax on exercise: The exercise of options by Portuguese employees will generally give rise to an income tax liability, normally calculated by reference to the difference between the market value of the shares on the date of exercise, less any exercise price paid to acquire the shares, but will be exempt from social security contributions. Sale of shares: Any capital gains arising on a future disposal of the acquired shares are subject to taxation in Portugal at a special flat rate without prejudice to the ability for aggregation with other taxable income, in which case progressive tax rates will apply. The capital gains are assessed by the employee. Tax-favoured plans: Awards under share option plans may benefit from a special tax regime. It applies to share option plans implemented by entities which were considered in the year prior to which the share option plan is approved: Start-up companies, as defined under the Portuguese legislation. Small and medium-sized companies, as defined by Portuguese domestic legislation. Small mid-cap companies. Any other entity that develops its business through innovation, which is deemed to occur whenever an entity invests at least 10% of its costs or turnover in R&D, patents, brands, drawings, industrial models, or software. Under the new regime, employees who were granted share options and hold such rights or shares for a minimum period of one year are granted the benefit of applying a lower rate of tax levied on only 50% of the taxable amount. The tax liability will be deferred until the earliest to occur of: the sale or free transfer of the shares the loss of Portuguese tax residency. The tax liability will be calculated based on the difference between either the market value of the shares or the sale price (depending on the circumstance) and the exercise price. Reporting requirements: The employer must submit a compulsory declaration by 30 June of the following year in which the option plan was implemented and declare employment income paid to the employee on exercise of the option. Employment income and capital gains and losses must be declared in the employee's tax return (Declaração Modelo 3) in the respective year of exercise of the option or sale of the shares. Any gains from the sale of shares or the exercise of options are subject to Portuguese tax laws and must be reported in the employee's annual tax return.

Red flags

Response

What is the tax and social security treatment (including other employee and employer levies)? Are there any red flag issues, for example tax on grant, filings or notifications?

Tax on grant: The grant of options to Portuguese employees does not normally give rise to any Portuguese tax liabilities, nor is it subject to social security contributions.

Tax on exercise: The exercise of options by Portuguese employees will generally give rise to an income tax liability, normally calculated by reference to the difference between the market value of the shares on the date of exercise, less any exercise price paid to acquire the shares, but will be exempt from social security contributions.

Sale of shares: Any capital gains arising on a future disposal of the acquired shares are subject to taxation in Portugal at a special flat rate without prejudice to the ability for aggregation with other taxable income, in which case progressive tax rates will apply. The capital gains are assessed by the employee.

Tax-favoured plans: Awards under share option plans may benefit from a special tax regime. It applies to share option plans implemented by entities which were considered in the year prior to which the share option plan is approved:

Start-up companies, as defined under the Portuguese legislation.
Small and medium-sized companies, as defined by Portuguese domestic legislation.
Small mid-cap companies.
Any other entity that develops its business through innovation, which is deemed to occur whenever an entity invests at least 10% of its costs or turnover in R&D, patents, brands, drawings, industrial models, or software.

Under the new regime, employees who were granted share options and hold such rights or shares for a minimum period of one year are granted the benefit of applying a lower rate of tax levied on only 50% of the taxable amount.

The tax liability will be deferred until the earliest to occur of:

the sale or free transfer of the shares
the loss of Portuguese tax residency.

The tax liability will be calculated based on the difference between either the market value of the shares or the sale price (depending on the circumstance) and the exercise price.

Reporting requirements: The employer must submit a compulsory declaration by 30 June of the following year in which the option plan was implemented and declare employment income paid to the employee on exercise of the option.

Employment income and capital gains and losses must be declared in the employee's tax return (Declaração Modelo 3) in the respective year of exercise of the option or sale of the shares. Any gains from the sale of shares or the exercise of options are subject to Portuguese tax laws and must be reported in the employee's annual tax return.

Non-employee options

Red flags	Response
Are there any issues with granting options to non-group employees, eg advisers/consultants or PEO employees?	A non-employee should seek independent tax advice, as a tax liability can arise on the grant of options, depending on the circumstances and value of the options. Non-employees cannot be granted tax-favoured options.

Other

Red flags	Response
Are there any other red flags, for example, is a sub-plan required?	A Portugal sub-plan is recommended for Portuguese employees.

Securities laws and regulation

Red flags

What are the key securities laws and regulatory obligations or restrictions in relation to granting options, exercising options, selling resulting shares or other relevant events? For example, would a prospectus or any filings be required?

Response

Securities law filings: There are no general securities law filing requirements in relation to the grant or exercise of options, or the selling of resulting shares, provided these are not offered to the public.

Prospectus: The grant of non-transferable options should not fall within the EU Prospectus Regulation.

Exchange control

Red flags

Are there any exchange control restrictions, notification/filing, or approval requirements related to the exercise of options or sale of shares?

Response

In Portugal, there are several exchange control regulations, notification/filing, and approval requirements to consider, especially in relation to the exercise of options or the sale of shares.

Acquiring a significant stake in specific sectors might require prior approval from the respective regulatory authority.

Company law

Red flags

Are there any red flag company law and corporate governance considerations, for example, shareholder approval requirements or financial assistance restrictions?

Response

There are no specific Portuguese corporate law requirements applicable to share options.

The company's bylaws and/or any agreement with shareholders/investors may require for certain consents or approvals to be given, prior to the granting and/or exercising of share options.

Employment law

Red flags

Are there any material employment law issues to be aware of, for example the requirement to consult employees?

Response

There are generally no employment law issues relating to the grant of options to Portuguese employees. There is no general requirement to consult employees on the terms of employee share schemes (subject to the terms of any works council agreement or similar).

Companies may grant and administer options for Portuguese employees on a discretionary basis, provided such discretion is not applied in a discriminatory manner.

Plan communications

Red flags

Are there any requirements for the communications, for example, a translation into any language(s), and if so, which?

Response

There are no legal requirements to provide a document or information in a language other than English, but having a Portuguese version is recommended.

Data protection

Red flags

What are the key data protection requirements, if any?

Response

Employees should be informed of how their personal information is collected, processed and disclosed, in connection with an employee share plan. A privacy notice should be provided or a plan should include details on how to access a company's privacy notice and other data protection procedures and policies.

There are wider data protection obligations, including reporting, data security, record keeping and Record of Processing Activities (RoPA) updates.

Governing law

Red flags

Will governing law and jurisdiction clauses be effective?

Response

In general, the governing law and jurisdiction clauses are likely to be effective, but the Portuguese courts may also claim jurisdiction over questions which relate to a Portuguese employment whenever work is performed in Portugal.

Tax treatment

Red flags

What is the tax and social security treatment (including other employee and employer levies)? Are there any red flag issues, for example tax on grant, filings or notifications?

Response

Tax on grant: The grant of options to Portuguese employees does not normally give rise to any Portuguese tax liabilities, nor is it subject to social security contributions.

Tax on exercise: The exercise of options by Portuguese employees will generally give rise to an income tax liability, normally calculated by reference to the difference between the market value of the shares on the date of exercise, less any exercise price paid to acquire the shares, but will be exempt from social security contributions.

Sale of shares: Any capital gains arising on a future disposal of the acquired shares are subject to taxation in Portugal at a special flat rate without prejudice to the ability for aggregation with other taxable income, in which case progressive tax rates will apply. The capital gains are assessed by the employee.

Tax-favoured plans: Awards under share option plans may benefit from a special tax regime. It applies to share option plans implemented by entities which were considered in the year prior to which the share option plan is approved:

Start-up companies, as defined under the Portuguese legislation.
Small and medium-sized companies, as defined by Portuguese domestic legislation.
Small mid-cap companies.
Any other entity that develops its business through innovation, which is deemed to occur whenever an entity invests at least 10% of its costs or turnover in R&D, patents, brands, drawings, industrial models, or software.

Under the new regime, employees who were granted share options and hold such rights or shares for a minimum period of one year are granted the benefit of applying a lower rate of tax levied on only 50% of the taxable amount.

The tax liability will be deferred until the earliest to occur of:

the sale or free transfer of the shares
the loss of Portuguese tax residency.

The tax liability will be calculated based on the difference between either the market value of the shares or the sale price (depending on the circumstance) and the exercise price.

Reporting requirements: The employer must submit a compulsory declaration by 30 June of the following year in which the option plan was implemented and declare employment income paid to the employee on exercise of the option.

Employment income and capital gains and losses must be declared in the employee's tax return (Declaração Modelo 3) in the respective year of exercise of the option or sale of the shares. Any gains from the sale of shares or the exercise of options are subject to Portuguese tax laws and must be reported in the employee's annual tax return.

Non-employee options

Red flags

Are there any issues with granting options to non-group employees, eg advisers/consultants or PEO employees?

Response

A non-employee should seek independent tax advice, as a tax liability can arise on the grant of options, depending on the circumstances and value of the options. Non-employees cannot be granted tax-favoured options.