As of 1 January 2021 employee share issue of a private company can be priced at net asset value without tax implications


As of 1 Jan 2021 Finnish tax legislation allows employees to subscribe for shares in their employing company at net asset value without giving rise to any tax liability on either employee or employer at subscription. The key requirement is that shares are offered to the majority of the employees and allocated amongst the employees based on each individual’s value added to the company.

This is a welcome change which will enable employee participation on affordable terms. The key tax benefit is the postponement until exit of taxation on the benefit received at subscription.


Prior to 2021 Finnish tax legislation required that employee share subscriptions were to be made at fair market value. Any discount was taxed as salary. Only where shares are offered to the majority of employees, can a 10% discount on the subscription price be applied on a tax exempt basis. The key downsides of previous legislation were that fair market pricing is often out-of-reach for many employees and the determination of fair market pricing has turned out to be subject to interpretation by the Finnish tax authorities.


As of 1 Jan 2021, Finnish tax legislation allows share subscriptions to be made at net asset value under the following criteria:

  • Shares subscribed in respect of private companies only
  • Share subscription has to be made available to the majority of employees excluding existing at least 10% holding individuals
  • Share subscription is available to direct employees only i.e. not to subsidiary employees and not to board members
  • The number of shares must be allocated between the employees based each individual’s added value to the company e.g. salary or other justified and objective criteria
  • Net asset value is calculated using latest financial statements taking into account certain tax adjustments and subsequent material changes

The advantages of the change are clear. Share subscription at net asset value should promote participation by an average employee as an affordable investment. In addition, the calculation of the subscription price should be much more easily determined, because the share subscription price can be based on the net asset value. This significantly reduces the uncertainty around share valuation under the previous regime.  With the tax benefit for key employees postponed until exit it allows employee shareholders to realise a gain and receive funds before tax becomes due, easing the financial burden on and removing one of the main barriers to employee participation. Employees are also able to become shareholders at a low value, but still receive partly tax-exempt dividends during the holding period. The applied discount at subscription tax is taxed fully as capital gain at exit and not partly as earned income at subscription.

This change is another welcome move by the Finnish tax authorities to make Finland an attractive location, especially for start-up and growth companies, and to find ways to make it easier for companies and their employees to share in the upside of successful growth.


Current net asset value 20
Current market value 100
Exit value in 2 years 150

Assuming an employee will subscribe for shares at 20.
Prior to 2021 an employee was taxed at subscription for 80 as earned income and 50 for capital gain at exit.
Under the new law, an employee is taxed for 130 as capital gain at exit, no tax at subscription.

For more detailed info please contact HPP’s tax team.

Jaakko Klemettilä
Special Counsel
+358 40 536 0963

Marko Koski
Senior Advisor
+358 44 758 2475



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