Stock Options in Italy: Italian Parliament Confirms Repeal of Stock Options’ Tax Exemption Regime

On August 5, 2008, the Italian Parliament confirmed Law Decree No. 112 of June 25, 2008, which, as illustrated in our previous e-mail communication of June 26, repealed any benefits still available for stock options with immediate effect upon its publication in the Official Gazette. Pursuant to the new rules, starting from June 25, 2008, the difference between the fair market value of the shares delivered upon the exercise of options and their strike price (such difference, the “Gain”) is subject to ordinary taxation for personal income tax and social security purposes.

During the confirmation procedure, Parliament approved an amendment partially mitigating the harshness of the new regime. In particular, the final version of Law Decree No. 112 provides that the Gain would be exempt from social security charges while still subject to ordinary personal income taxation.

The newly enacted social security exemption would apply to any shares delivered as of the date following the publication on the Official Gazette of the law confirming Law Decree No. 112. The confirmation law also clarified that employers and beneficiaries will not be eligible for a refund for any social security charges paid with respect to options exercised from June 25, 2008 through the date of publication of the law confirming Law Decree No. 112, which is expected to occur shortly.

Should you have any questions regarding the above, please contact Vania Petrella or Gianluca Russo  in our Rome office.